Key Takeaways
- 1The gold/silver ratio is ~80:1 vs the historical average of 15:1 and geological ratio of 17:1.
- 2Large banks hold massive short positions on COMEX that suppress silver prices.
- 3Silver is the only commodity trading below its 1980 inflation-adjusted price.
- 4Industrial demand treats silver as a cost to minimize, not value to maximize.
- 5Central banks don't buy silver (unlike gold), removing a major demand source.
- 6Paper silver trades at 300:1 ratio to physical silver, allowing price suppression.
- 7When manipulation ends—and it will—silver could surge 3-5x or more.
The Question Everyone's Asking
"Why is silver so cheap?" It's the most common question we get from precious metals investors. And it's a fair one.
Consider the fundamentals: Silver has been in a supply deficit for 6 consecutive years. Industrial demand from solar panels is growing 25% annually. COMEX inventories have been drained to multi-decade lows. Gold has hit all-time highs.
Yet silver trades around $30-35, barely higher than it was a decade ago. By every normal market metric, silver should be much higher. So what gives?
Rich Dad Insight
Reason #1: The Gold/Silver Ratio Is at Extremes
The gold/silver ratio tells you how many ounces of silver it takes to buy one ounce of gold. It's currently around 80:1. That means gold is 80 times more expensive than silver, ounce for ounce.
But historically, this ratio has been much lower:
| Period | Gold/Silver Ratio | Notes |
|---|---|---|
| Roman Empire | 12:1 | Set by decree |
| US Constitution (1792) | 15:1 | Legal tender ratio |
| 1900-1970 Average | 35:1 | Pre-Nixon shock |
| 1980 Low | 15:1 | Hunt Brothers era |
| 2011 Low | 32:1 | Post-financial crisis |
| 2020 High | 125:1 | COVID panic peak |
| Current (2026) | 80:1 | Still extremely elevated |
What Should Silver Be Worth?
With gold at $2,600/oz, here's what silver would cost at different ratios:
Silver in the Earth's crust exists at roughly 17:1 to gold. For thousands of years, this informed monetary ratios.
If the ratio merely reverted to 40:1—still double the historical norm—silver would be $65/oz. At the traditional monetary ratio of 15:1, silver would be over $170/oz. That's not speculation; that's math.
Reason #2: Bank Manipulation (Yes, It's Real)
This isn't conspiracy theory. This is documented fact. Banks have been caught and fined billions for manipulating precious metals prices.
JPMorgan Chase: $920 Million Fine (2020)
JPMorgan paid the largest CFTC fine in history for "spoofing" gold and silver markets from 2008-2016. Their traders placed fake orders to manipulate prices, then canceled them.
Deutsche Bank: Settlement (2016)
Deutsche Bank settled silver manipulation lawsuits and agreed to help expose other banks involved in the scheme. They literally turned state's evidence.
Multiple Banks: London Fix Manipulation
The "London Fix" price-setting mechanism was found to be rigged, leading to its complete overhaul in 2014. Banks were colluding to set benchmark prices.
How the Manipulation Works
Silver (and gold) prices are primarily set in the paper futures market (COMEX), not the physical market. This creates an opportunity for manipulation:
- Paper silver vastly exceeds physical: The ratio of paper silver contracts to actual deliverable silver is estimated at 300:1 or higher. Banks can sell unlimited paper contracts without ever having to deliver real metal.
- Concentrated short positions: CFTC data shows that just 4-8 large traders hold massive short positions—sometimes representing over 200 days of mine production. This allows them to cap rallies.
- Spoofing: Traders place large fake orders to move prices, then cancel them. JPMorgan's traders did this thousands of times.
- Waterfall attacks: During low-volume periods (often overnight), massive sell orders hit the market, triggering stop-losses and crashing prices. This happens repeatedly on days silver might break out.
The $920 Million Question
Reason #3: Industrial Users Want Low Prices
Unlike gold (which is primarily monetary), silver is an industrial metal. About 50% of silver demand comes from industrial uses—electronics, solar panels, EVs, medical devices.
Industrial users don't want high silver prices. They want low prices to keep their production costs down. This creates perverse incentives:
- Apple, Tesla, First Solar: They need cheap silver for their products. High silver prices hurt their margins.
- No hoarding: Industrial users consume silver; they don't stockpile it for investment. They're sellers, not holders.
- Price inelastic demand: These companies will pay whatever it costs because they need silver—but they don't bid prices up voluntarily.
In contrast, gold is primarily bought as money/investment. Buyers actively want higher prices (it validates their thesis). Silver is caught between two worlds—industrial cost vs. monetary value—and industrial pricing dominates.
Reason #4: Central Banks Don't Buy Silver
Central banks have been buying gold at record rates—over 1,000 tonnes per year recently. This buying puts a floor under gold prices and signals that even the money printers don't trust their own currencies.
But central banks don't buy silver. Why not?
- Storage issues: Silver is bulky. The same dollar value in silver takes 80x more storage space than gold.
- Historical demonetization: Silver was phased out of monetary systems in the late 19th century. Central banks never rebuilt reserves.
- Market size: The silver market is too small for central banks to invest meaningfully without moving prices dramatically.
This removes a major demand source that supports gold. Silver relies entirely on industrial and retail investment demand, which is more fragmented and less consistent.
Reason #5: Paper Trading Dominates Physical
The silver price you see quoted is the paper price—set on COMEX and other futures exchanges. Physical silver transactions are priced off this benchmark.
The problem? Paper silver trades at an estimated 300:1 ratio to actual physical silver. For every ounce of real metal, there are 300+ ounces of paper claims.
Paper vs Physical Silver
If even 10% of paper holders demanded delivery, the COMEX would default. This is why prices can be suppressed—most paper never converts to physical.
This creates a situation where the physical market is tight (premiums over spot are high, delivery times are long), but the paper price stays suppressed because traders are settling in cash, not metal.
Understand the Game. Position Yourself.
Silver is cheap because of manipulation, not fundamentals. When the dam breaks, you'll want to already be positioned.
Find Your MatchWhat Could End the Suppression?
Manipulation can't last forever. Here's what could break the paper market's grip on silver prices:
Physical Demand Overwhelms Paper
If enough investors demand physical delivery, the paper market breaks. India's 2024 import surge and retail stacking are moving in this direction.
Industrial Supply Crunch
If solar manufacturers can't get enough silver, they'll bid prices up regardless of paper market shenanigans. Physical scarcity trumps paper.
Monetary Crisis
A dollar crisis, debt default, or banking emergency could trigger a rush to hard assets that overwhelms the paper short sellers.
Short Squeeze
The massive concentrated short position is a coiled spring. If prices rise fast enough, shorts will be forced to cover, accelerating the move.
Rich Dad Insight
Why Is Silver Cheap: FAQ
Why is silver so cheap compared to gold?
Silver is cheap relative to gold due to: 1) Massive short positions by large banks on COMEX that cap price rallies, 2) Industrial users wanting low prices for their products, 3) No central bank buying (unlike gold), 4) A 300:1 paper-to-physical trading ratio that allows prices to be set by paper speculation rather than physical supply/demand. The gold/silver ratio at 80:1 vs the historical 15:1 suggests severe undervaluation.
Is the silver market really manipulated?
Yes, this is documented fact. JPMorgan paid $920 million in 2020 for manipulating precious metals markets through "spoofing." Deutsche Bank settled manipulation lawsuits and provided evidence against other banks. CFTC data shows concentrated short positions by a few large traders. The London Fix was overhauled after collusion was discovered. Multiple banks have been fined for precious metals manipulation.
What should the silver price be based on fundamentals?
Based on different metrics: At the historical gold/silver ratio of 15:1 (with gold at $2,600), silver would be $173/oz. At the geological ratio of 17:1, silver would be $153. Even a modest return to 40:1 would put silver at $65. Adjusted for inflation since 1980, silver would need to be over $180 to match its all-time high. Current prices around $30-35 appear extremely undervalued by historical standards.
Will silver manipulation end?
Manipulation typically ends when physical demand overwhelms paper supply. Potential triggers include: a physical delivery crisis (too many holders demanding real metal), industrial supply shortages forcing manufacturers to bid up prices, a monetary crisis driving safe-haven buying, or a short squeeze as concentrated shorts are forced to cover. Many analysts believe current physical tightness (COMEX inventory drawdowns) suggests we're approaching this inflection point.
The Opportunity of a Generation?
Silver is cheap because of manipulation, not because it should be. When the manipulation ends, early investors could see extraordinary gains.
Thomas Richardson
Former wealth manager turned Gold IRA researcher. After 20 years in finance, I got tired of watching scammers prey on retirees. Now I investigate companies and publish what I find—good or bad.