Silver Prices Explosion: Reason #2 To Buy Silver Bullion Now

Silver value today Silver value today is not consistent with its underlying fundamentals of supply and demand. The high demand and strictly limited remaining supply of silver both above-ground and below-ground are going to ignite a silver prices explosion in the near future. This article explains one of the six primary reasons silver prices are about to undergo a tremendous increase.

Over the last 20+ years, many central banks leased out their silver holdings as a hedging strategy and to generate revenues. As with anything leased, the legal intention is to eventually return the leased, or borrowed, asset. However, hundreds of millions of ounces of silver were actually used up in industry presumably with no real intention of returning the leased silver. As a result, most, if not all, of the leased silver bullion can not be returned.

However, as silver becomes more scarce, and hence more valuable, some of these central banks may demand a return of their leased silver bullion. If this occurs, the increased demand for silver assets will further push silver prices upward.

Unlike the Short Squeeze in the futures market, however, demand for returned leased silver bullion will require the return of actual physical silver. Thus, the impact will be even greater than the upward pressure from the Short Squeeze.

Most likely, silver bullion will be too scarce and too expensive to return to the central banks, so a cash settlement will most likely be the end result. However, if even just a few (maybe even just one) central bank demands the return of the actual silver bullion, this alone could push silver prices into the realm of several hundred dollars per ounce.

If this trend begins, many of the borrowers (i.e., miners, businesses, bullion banks, etc.) may start trying to acquire silver in case their lease is called, which will drive silver prices up. Alternatively, the borrowers may be forced out of business which will have trickle effects throughout the rest of the economy.

This is a dangerous scenario if central banks actually try to call the leases (i.e., demand the return of silver bullion). Of course, it could be these so-called leases were really open market sales disguised as leases and may never be called … however, it only takes one central bank to hold the borrowers to the actual legal terms of the agreement to start this snowball rolling.



Written by Dr. Bryan Stoker
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