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Silver as a strategic commodity

Silver has suddenly become a strategic commodity, but the real story stretches back decades. Since the advent of the futures market in 1982, silver’s price has been subject to manipulation. Major bullion banks, especially JPMorgan, have wielded significant control from the beginning—and still do today. Just observe Jamie Dimon’s words and then watch his actions.

For decades, JPM has supported silver’s price with large short positions that would have caused them, along with SLV investors, considerable pain. The recent surge to $90, driven by thin trading during the Christmas holidays when Western markets were closed, exposed these massive short positions that couldn’t be closed. The true catalyst for the squeeze, however, has been a soaring demand for physical silver—an essential material in power generation, defense, chip manufacturing, along with the short covering needed for futures settlement.

Adding to the complexity are export restrictions from China and the US, as well as unrest in Venezuela.

Why does this matter? China has heavily invested in Latin America, securing raw materials for processing into silver at its vast refineries. The recent extraction of Maduro to New York to face charges of corruption and drug smuggling has sent a warning to other South American nations: ship your metals to the US for refining, or face similar repercussions.The announcement of a new smelter in Tennessee—the first in 60 years—will only heighten tensions.

Will China and Russia quietly accept this? Unlikely, given their history. So far, responses from China, Russia, the EU, and the UK have been muted or weak—fueling my suspicion that the US will safeguard its hemisphere, while China and Russia manage their own interests in the East. I wouldn’t want to be in Taiwan or the Ukraine right now or did you think the West had the upper hand in both jurisdictions?

The strategic importance of physical silver is not to be underestimated. The same can be said for silver mines in countries with a strong rule of law, Canada, the US and perhaps Mexico, that have access to refineries in those same countries. China has an overwhelming grip on the processing of the world’s commodities from raw material to finished product. They can switch off the flow whenever they choose.

This story has only just begun.