Silver - A Classic "Run on the Bank" is Underway! Silver Prices May Triple!

Silver prices have surged dramatically, sparking excitement and concern among investors. The recent adoption of international Basel III regulations has played a key role in this price explosion. These new rules now classify gold and silver as "Tier 1" assets, requiring banks to back futures contracts with actual physical metal. This change has created a scramble for real silver, exposing a significant gap between paper contracts and physical supply. If you hold silver investments tied to paper promises, you face MASSIVE risks as the market adjusts to a new reality - reality where the paper contracts are worthless, and the price of real silver could triple from here!

What Basel III Rules Mean for Silver Investors

Basel III, led by the Bank of International Settlements (or "BIS", the "bank for central banks"), is a global regulatory framework designed to strengthen bank capital requirements and risk management. A recent update under these rules has elevated gold and silver to "Tier 1" asset status. This means banks must hold the actual metal to back any futures contracts they issue, rather than relying on paper claims alone.

Before this change, banks could issue silver futures contracts without holding the equivalent physical silver. In other words, they can write a contract to promise 100oz of silver, and never actually have the silver, promising something they don't have! The belief of course is that they can go into the market and buy if they need to. The issue is that the promises were to deliver 100oz when silver was at say $60/oz. If they now have to pay $90/oz or $100/oz for the actual silver to deliver it, the banks owing on these contracts face significant losses! The bank owing most of these contracts is JP Morgan Chase, and many other international banks such as HSBC and Bank of America are right there with them! To manipulate the price lower, the banks typically issued a new futures contract to pay for the old futures contract so they don't have to actually deliver the silver. With the issuance of additional paper contracts last year, they could hold the real price of silver down because the Commodities Exchange in New York (the COMEX) does not distinguish between the paper price of silver and the price of the physical metal. China however DOES! Their exchange only prices the real metal, which is now over $100/oz and rapidly climbing! The $90 price in New York is and has been a lie! Because of Basel III rules, banks must now secure the real metal when issuing a contract, which has created a sudden surge in demand for physical silver. This shift has exposed a critical problem: the amount of silver contracts far exceeds, by over 10x, the available physical silver! And the holders of these bank promises are now realizing the banks cannot deliver!

This is a classic run on the bank, where under a gold/silver standard, the dollar bill supposedly backed by gold or silver was in fact not backed by gold or silver! What the bank did was print bank notes, and not actually have the gold to do this.... a "feature" of fractional reserve banking. A fraudulent feature, but a feature nonetheless.

Impact on Paper Silver Investments

Many investors hold silver through paper-based instruments such as:

• Silver Exchange Traded Funds (ETFs) like SLV

• Silver futures contracts

• Other financial products promising silver delivery

  
  

These paper assets depend on the bank or fund’s ability to deliver physical silver when required. With the new Basel III rules, banks must hold real silver, but the supply is limited. This mismatch means most of the contracts will be impossible to fulfill, causing the paper price of silver to diverge from the actual price of physical silver.

This past week, the U.S. Treasury, which mints U.S. Silver Eagle coins attempted to buy silver at the false New York COMEX price of roughly $90/oz. There was no silver available at that price, and U.S. Mint was forced to stop sales of the American Eagle coins for over a day. This morning, the American Eagle silver coins are again available..... at roughly $170/oz! Clearly the U.S. Treasury had to pay significantly higher market-based prices to obtain the metal!

Why Silver Prices Are Likely to Triple

The shortage of physical silver combined with increased demand has created strong upward pressure on prices. Several factors contribute to this trend:

• Banks scrambling to acquire real silver to comply with Basel III

• Large purchases by China and Russia, who are stockpiling silver as a strategic asset

• Wealth funds globally accumulating silver to hedge against paper market risks

  
  

These buyers recognize that paper silver may not be reliable. As a result, the physical silver market tightens, pushing prices higher. Analysts predict silver prices could triple from current levels if this trend continues.

Silver, when priced fairly, typically trades at 1/20th the price of gold. This is because in the ground, there is about 16x more silver ore than there is gold ore, and after refining and minting both into a bar or coin, the actual cost of labor and materials is about 20 to 1. This explains why in the 1800s, a 1oz gold coin was priced at $20, and a 1oz silver coin was priced at $1.

With gold currently trading at (the COMEX paper price) $4600/oz, silver should be priced at roughly $230/oz, or 1/20th the price of gold. That said, gold is also a tier-1 asset now and subject to the same squeeze as silver! So gold is also currently underpriced, and we can see this by the shortages at the bullion dealers, and the price of gold American Eagles at the U.S. Mint! The real price of gold is much higher than the quote, being over $5000/oz!

Risks for Investors Holding Paper Silver

If you own shares in silver ETFs or futures contracts, you face several risks:

• Delivery risk: The fund or bank may not be able to deliver physical silver when redemption is requested. This means the actual price of your contract is ZERO!

• Price divergence: The market price of paper silver may not reflect the true value of physical silver, leading to potential losses.

• Liquidity risk: In a crisis, selling paper silver may become difficult or result in steep discounts.

  
  

Investors should carefully review the terms of their silver holdings and consider the possibility that paper silver may not be fully backed by physical metal.

How to Protect Your Silver Investment

To reduce risk, consider these strategies:

• Buy physical silver: Bars or coins held in secure storage THAT YOU OWN provide direct ownership of the metal.

• Use reputable dealers: Purchase from trusted sources with transparent inventory.

• Diversify holdings: Combine physical silver with other precious metals or assets.

• Stay informed: Monitor regulatory changes and market developments affecting silver supply and demand.

  
  

Physical silver ownership eliminates counterparty risk and aligns your investment with the real metal market. As the old saying goes, "If you don't hold it, you don't own it!". This is more true now than ever!

What This Means for the Silver Market Going Forward

The Basel III rules have exposed a fundamental weakness in the silver market: the disconnect between paper contracts and physical supply. This gap is unlikely to close quickly, meaning volatility and price spikes may continue.

In fact, I would go further than calling it a "disconnect". I am going to call it what it is: FRAUD! How is it even legal that a bank can promise something it doesn't have, and never intends to have, all while collecting massive trading fees on paper promises it never has to honor?

Countries like China and Russia increasing their silver reserves suggest a long-term strategic shift toward physical metals. This trend could reshape global silver markets and investment strategies, not to mention the global financial markets! In fact, we may be looking at the early end signs of debt-driven fiat currencies and a restoration of a gold standard.

Investors should prepare for a market where physical silver commands a premium and paper silver may trade at a discount or become illiquid.

Silver is no longer just a commodity; it is becoming a critical financial asset with real backing requirements. Understanding these changes can help you make informed decisions and protect your investments. For more information, this very recent video on YouTube offers more detailed insight: BREAKING: Fed Opens $25B Emergency Silver Facility (Banking Crisis Confirmed)