Hi ElPrimero!

I have heard the theory expressed by others as well that it is the Chinese that are behind most of the silver trading. It would account for the divergence between silver and gold, which often trade in different directions even though they are driven by similar fundamentals.

You may remember a few years ago that a spike in copper spot prices were blamed on a rogue trader in China that was caught offside on a big copper short. Again, the theory has some logic, but overall it does not explain why copper prices have remained firm long after that blip was resolved.

My feeling is that the Chinese are shrewd traders and will not hesitate to create situations that can be exploited to their profit. This is also something they are capable of accomplishing given that Chinese consumption is the driving force on world demand for most metals. It would be a simple task to allow their own traders to front run when the country steps up on buying, or backs off, and play the long or the short trade along the way.

I think China is part of the story, but I also think the bullion banks and large specs in the US are also a big factor. The one critical factor that it all boils down to is that the traders are just trying to make a buck, but the end consumers of the metals are going to fight to get supply at any price if they must. Demand will over ride any short term trading scams in other words. Investment demand, or dishoarding for that matter, may contribute the intensity of the trend, but it is still industrial consumption that accounts for most of the silver produced in the world.

If the Chinese have an endgame to lock up world silver stockpiles and remonetize the metal, that will just put further stress on what limited stockpiles are left above ground.

cheers!

mike