Many times over the last three years we’ve seen shortages develop in the precious metal sector, especially in the silver market. Just recently the US mint ran out of silver coins again. This has happened multiple times over the last several years.
So let me ask this question: Has there ever been a shortage in the oil market? Copper market? Grains market?
No of course not. Why? Because price automatically adjusts to maintain equilibrium and prevent a shortage from ever occurring.
Gold has gone through bear markets before. It had a secular bear market from 1980 to 2001. To my recollection there was never a shortage during that time. As the new bull market started from 2001 till 2007 I don’t recall ever seeing a shortage during that period either. Why? Because price rose along with demand, automatically preventing any shortages from developing. Heck, even during the last big surge from 2008 to 2011 I don’t ever recall seeing a shortage in either of the metals markets.
However, since 2013 not only have we seen multiple shortages, but during this period we have seen regular attacks on the gold market with dumps sometimes it as large as 20,000 contracts, usually in the middle of the night. Again I never saw anything like this prior to 2013.
So my question is: If gold & silver are trading freely, and this is a natural bear market, then how in the world are shortages developing? In a free market, and in every other commodity market in the world, shortages are impossible. They simply never happen. They didn’t occur during the last bear market. Price automatically adjusts to prevent it.
Based on standard regression to the mean principles, this should mean that when the market finally breaks free the rally will be much larger and more aggressive than it would have been naturally, if the metals market had been allowed to trade freely.