There are some people that make statements that are far more profound than many of us realize when we first hear them.

One such example would be from Rick Rule- a well-known metals investor. In an interview I heard many years ago he said that “The cure for low prices in commodities is always low prices. The cure for high commodity prices is high prices.”

When we think about this for a moment, we can realize that when prices are artificially low (likely manipulated that way by traders for their own benefit) it leads to a situation where the commodity cannot be produced for a profit so new projects are postponed or cancelled. This ultimately leads to a lack of production and a lack of supply going forward.

At some point demand overwhelms supply and prices rise.

A perfect example of this would be silver. The price has been artificially suppressed probably for decades but certainly since 2011 when the suppression became easy to spot. In the past few years, the amount of silver produced both by mining and scrap has lagged demand by millions of ounces.

According to the silver Institute, demand for silver in 2023 was 1.24 BILLION ounces. The total supply between mining and scrap was just over 844 million ounces. This means that 396 MILLION ounces more were needed than were produced. This number has been growing year after year. As a matter of fact, Keith Neumeyer (CEO of First Majestic- Silver miner) said that in July the deficit for 2024 was 215.3 million ounces-up 17% from the prior year.

My guess is that there is a LOT of pressure being put on silver by China- who needs massive amounts of silver for their buildout of solar, electric vehicles, military uses and electronics. Most people have no idea that in every Tomahawk missile (USA) has five hundred ounces of silver in it. Yes, silver is in most all appliances, but war is another major factor in the demand equation for silver.

We know that JP Morgan and other major banks have actively kept the price suppressed for years.

As unusual as it may seem the “market” is being made in the paper realm rather than the actual supply and demand that would lead to a fair price.

How do they do it? It is called naked shorting. You or I would be in jail, but the banks pay a fine and keep right on going. Basically, they are selling assets that they do not own. This gives the illusion of FAR more supply than actually exists and fools the algorithms and traders into selling-driving the price lower- as anyone who holds a short position wants to see it go.

Just how big is the illusion? Annual mine supply is 844 million ounces. Short positions at the Comex- while down substantially year over year are still 98.3 million ounces. (19670 5000oz contracts on 2-4-2025) Source: Y Charts. The short positions at the LBMA are reported to dwarf the shorts at Comex by almost 5:1. There have been many days when the entire yearly mine supply has been traded. Of course, this is only paper changing hands and influencing the price of the actual ASSET. The exact opposite of how almost all other markets operate.

As you can clearly see this is nothing but a fraud on the producers so that those that want to amass the silver can do it at a steep discount.

One thing that I have said many times is that each fraud has its own demise built in. This one is no different. The price suppression has been so great that new projects have been shelved. The shortage of silver is up 17% year over year and getting worse. I believe it is a matter of time until the price explodes so that more product can be brought to market. Already China is going straight to the mines in South America and bypassing the usual protocols to procure the silver they need. This means there is even more demand than is being recorded.

This has been going on for so long that most people cannot fathom the power that will be expressed to the upside when reality strikes and demand overwhelms supply. Actually, it already has been for years, but we are just waiting for that one snowflake to cause the avalanche.

This leads me to another famous quote by Warren Buffett “Price is what you pay- Value is what you get.” Another good one is BUY LOW- SELL HIGH. There are VERY few assets that could be deemed LOW in price at this time. As I look at things most commodities can be called LOW in price versus paper assets. In particular those that are most manipulated like gold and silver appear to offer a massive upside and with money “printing” of fiat currencies and central banks buying all the gold they can get their hands on. The downside looks like the floor may not be much further down than where we stand right now.

Keep in mind the #1 performing asset class (Bitcoin excluded) since the year 2000 is gold. Silver has lagged gold- my guess is that gold is a tier one asset for central banks-which means they need to hold the real stuff-not paper. Since silver has not been classified as a tier one asset far more paper games are still being played.

It appears to me that we are very near a breaking point, particularly in silver, where demand will overwhelm supply and lead to FAR higher prices.

There could be a few years of mania actually. Then, refer back to Rick Rule. Many will pile in; supply will ramp up and prices will likely pull back again.

Buckle up! Changes are coming.

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct.

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