Silver experts, regional economists and stock brokers are discounting reports that an engineered “squeeze” on silver supply was behind the recent 9-year high in silver prices.
On the other hand, they suspect rumors of a class-action lawsuit against unnamed “squeezers” is what toppled silver, which has dropped about 90 cents from its Dec. 24 high of $6.40.
According to the Bloomberg Financial Service, Martin Armstrong, chief market analyst for the Princeton Economics Institute, said an unidentified law firm has asked him to determine if grounds exist for legal action against investors who have stockpiled silver to manipulate prices. Armstrong estimated speculators may be holding up to 500 million ounces of silver worth as much as $2.7 billion.
But Jeffrey Christian, managing director of the CPM Group, called Armstrong’s claim “garbage” and went on to question both his credentials and his credibility.
“I’ve had conversations with Marty about this and I don’t see any evidence in the real market or in the real world that an engineered squeeze is going on,” said Christian, whose group is recognized as an expert resource on silver prices and supply-and-demand trends.
Christian, who described Armstrong as “a floor trader who likes to play economist,” said the analyst has chosen to cry conspiracy rather than admit his institute missed the call when dwindling silver supplies pushed prices upward through December.
Supply data from Comex, a New York commodities exchange market, continues to chart a 12-year low for inventories. Armstrong said that indicates silver has been shifted to European vaults, creating a false shortage.
R. Ashley Lyman, a University of Idaho associate professor of economics who specializes in demand analysis, said Armstrong’s conspiracy theory doesn’t hold up under economic scrutiny.
“We’re talking about markets that are global in nature, markets that are too large to corner,” Lyman said.
“The Hunt brothers spent a lot of money trying to do that same thing,” he added, referring to the Texas billionaires who went bankrupt in 1979 trying to manipulate the price ratio between silver and gold.
Ron Nicklas, broker at the Pennaluna & Co. stock brokerage in Coeur d’Alene, said his experience with Princeton Economics Institute makes him wary of the lawsuit rumors.
“I used to receive some of their stock picks,” Nicklas said. “They’re not exactly the Wall Street Journal.”
Although the Bloomberg report quotes Armstrong as saying the rapid rise and fall in silver prices over the past four weeks “sticks out like a sore thumb as manipulation,” Nicklas believes whispers about litigation halted the increase.
“This kind of rumor does more to manipulate the market than anything else,” the broker said.
“The thing that was behind the pop to $6.40 was a growing realization that the fundamentals for silver are positive,” said Christian. “What drove the price down is rumors of this lawsuit - nothing else.”
And when the rumor blows over?
“Prices will spring right back,” he said.
The Commodity Futures Trading Commission declined to say whether it is investigating the silver market, Bloomberg reported. Armstrong said he was asked not to name the law firm contracting his services.
New York spot silver closed Tuesday at $5.51, down 16 cents from Friday’s close.
Local journalism is essential.
Give directly to The Spokesman-Review's Northwest Passages community forums series -- which helps to offset the costs of several reporter and editor positions at the newspaper -- by using the easy options below. Gifts processed in this system are not tax deductible, but are predominately used to help meet the local financial requirements needed to receive national matching-grant funds.
Subscribe to the Coronavirus newsletter
Get the day’s latest Coronavirus news delivered to your inbox by subscribing to our newsletter.