A Veblen effect is when the demand for a good increases as the price increases, in apparent (but not actual) contradiction of the law of demand, resulting in an upward-sloping demand curve.
My guess is the we are about to witness the Veblen effect impact the price of silver. The price is rising and an increase in demand seems likely. And given that some sources indicate that the silver market is expected to record a supply shortfall of 20 million ounces in 2022. (source - The Silver Institute), it would not require too many whales to drain silver from the market by adding to their portfolios for the supply to go into a significant deficit. Thus, a short squeeze could be in the offing. (Further, the abysmal failure of crypto to move higher in response to the Ukraine invasion crisis theoretically should lead to a reallocation from crypto to precious metals)
Investment demand for silver has been in the doldrums the past few months as the paper price has been sinking. The Comex warehouse inventory of registered silver is marginally higher than it was at the close of 2021. The Sprott PSLV inventory of physical ounces of silver is only up be 100,000 troy oz since the close of 2021.
Conclusion
Time will tell whether investment demand and/or the price of silver moves higher. But my guess is that we are about to experience a real world example of the Veblen effect.
