Interventions in the Silver Market

When one examines the interventions in the gold market, the question arises what the situation with gold’s ‘little brother’, silver, is. What is specifically of interest is whether there are independent price manipulations in silver, if silver is deliberately suppressed, or if there are only parallel price declines due to the high degree of correlation between gold and silver. In order to establish a better understanding of the situation, we will first take a look at the differences and commonalities between the two metals. Similar to gold, silver is a store of value. However, it is, to a larger extent, also a consumption good. Moreover, the above-ground stock of silver relative to annual mine supply and consumption is markedly smaller. The importance as a store of value is, thus, less pronounced in silver than in gold. From the point of view of a central bank it can, nevertheless, make sense to keep the silver price from rising. Similar to gold, this would scare additional investment demand off. It would prevent its use as a store of value increasing again. This would be even more problematic with silver than with gold, as the market’s size is much too small to sensibly fulfil this role. The small market size plays another role too.