• "Spreading the ideas of freedom loving people on matters regarding high finance, politics, constructionist Constitution, and mental masturbation of all types"

Silver

dpong

Gold Member
Gold Chaser
Joined
Jan 11, 2012
Messages
1,992
Likes
1,655
BTW, this is the best thread on GIM2, as far as I know.
 

dpong

Gold Member
Gold Chaser
Joined
Jan 11, 2012
Messages
1,992
Likes
1,655
Look, it has been at least a half-hour, or more rightly over an hour since I posted a controversial position on this thread. Only Shortstack and Strawboss have even bothered to challenge it.

Nobody cares about silver anymore.

Either everyone hates silver and doesn't care anymore, or GIM2 is no longer a site where you go to judge sentiment. I don't know which one. Do you?
 

southfork

Mother Lode Found
Mother Lode
Site Supporter ++
Joined
Mar 31, 2010
Messages
16,127
Likes
15,200
RSI on silver is currently at 80 on the daily.

Silver is very much overbought at this juncture. Now - whether silver can bleed off its overbought condition without being smashed remains to be seen.

I suspect that this is a short covering rally - it has all the indications of being such...

What I will be looking for is for silver to make a higher high (after a short correction) but where the RSI peaks at a lower number than present. That would create a negative divergence and be a sign that the short covering has exhausted itself...

Now - just because that is what i am looking for doesnt mean that is what is going to happen...Silver could fly straight to $26 for all I know. I highly doubt it...but, with silver anything is possible.
I thought about a short covering rally also Boss, but why now when silver appears to be flat, it would be easy for the majors to drive it much lower even though short positions are I believe at a record high, perhaps the recent fake shipment of gold to Asia or the discovery of the non existing commodities pledged for loan collateral, no doubt this exists with silver and gold also and there could be those in the know getting in while silver still cheap, just cant call it anymore but I do know when the game of musical chairs ends I wont be scrounging to find 100 ounces of metal.
 

southfork

Mother Lode Found
Mother Lode
Site Supporter ++
Joined
Mar 31, 2010
Messages
16,127
Likes
15,200
Look, it has been at least a half-hour, or more rightly over an hour since I posted a controversial position on this thread. Only Shortstack and Strawboss have even bothered to challenge it.

Nobody cares about silver anymore.

Either everyone hates silver and doesn't care anymore, or GIM2 is no longer a site where you go to judge sentiment. I don't know which one. Do you?
People care pong but a lot have thin skin and don't want to get beat up like HS did on his upward calls, too many pots calling the kettle black just like with the Tulving debacle.
 

dpong

Gold Member
Gold Chaser
Joined
Jan 11, 2012
Messages
1,992
Likes
1,655
I agree. The scourge against HS was brutal. Uncalled for. Wrong is not the same thing as evil! (It should have been 'managed'.)

I still don't know the bottom, but I still "feel" that the hatred for silver is perhaps legendary.

Kind Regards,
dpong
People care pong but a lot have thin skin and don't want to get beat up like HS did on his upward calls, too many pots calling the kettle black just like with the Tulving debacle.
 

southfork

Mother Lode Found
Mother Lode
Site Supporter ++
Joined
Mar 31, 2010
Messages
16,127
Likes
15,200
And you know what they say, the time to buy is when people are selling fear, as said , to the risk takers go the rewards. You know as well as I do it's easier to scare someone into selling than to convince them to buy.

I agree. The scourge against HS was brutal. Uncalled for. Wrong is not the same thing as evil! (It should have been 'managed'.)

I still don't know the bottom, but I still "feel" that the hatred for silver is perhaps legendary.

Kind Regards,
dpong
 

jelly

Silver Miner
Seeker
Joined
Dec 6, 2010
Messages
869
Likes
641
Actually, the option seller was betting silver wouldn't go above $20 by January, 2016. I paid 1.65 per share meaning that I bet that silver WOULD trade above 21.65 by January Freaking-2016.

WTF?
I agree completely. I purchased several $24 Jan 2016 calls a few days ago, and needless to say, I'm already up nicely. Its a no brainer. I don't know why others aren't doing the same.
 

jelly

Silver Miner
Seeker
Joined
Dec 6, 2010
Messages
869
Likes
641
I've only been in this market since 2005, so not as long as many on these forums. However, the current situation reminds me of the 2008 bottom. Many of the PM bulls were saying it would go lower. Even the well-respected, and very profitable traders who posted on GIM1 at the time were saying we were going to go lower. But instead it turned around and kept climbing higher. I had sold out of several of my long-term holds, and was left waiting for lower prices that never materialized.
I think that's where we are right now. People are expecting silver to fall some more, but it will likely do the opposite, and keep climbing higher. I learned my lesson hard from the previous corrections in the gold/silver market. I'm not going to be stuck on the sidelines watching mining shares that I USE to own double...then triple...then quadruple...then hit 700%. I learned that lesson well. I'm buying heavily here, and am in for the long haul - not for trading. I will be, and already am, rewarded handsomely. I have one miner that has already doubled, and the real moves haven't even begun yet.

Just personal opinion. However, I do believe the mining stocks are proof that the bottom is in, and that this rally is real. They are NOT acting like they would in a bear market.
 
Joined
May 23, 2014
Messages
142
Likes
150
Look, it has been at least a half-hour, or more rightly over an hour since I posted a controversial position on this thread. Only Shortstack and Strawboss have even bothered to challenge it.

Nobody cares about silver anymore.

Either everyone hates silver and doesn't care anymore, or GIM2 is no longer a site where you go to judge sentiment. I don't know which one. Do you?
I was on GIM 1 too back in the day under a different name. I remember those days, especially '08-'09 and there was plenty of activity.

No, it's just that all PM discussion forums - and I know just about all of them - have become ghost-towns, with the exception of the hard-core/oldtimer bugs and smattering of PM newbies (who've come in and out of the PM scene the last 3 years mostly getting burned).

The government kicked the can down the road and it's lasted longer than many of us thought it could. But the proverbial chickens are coming home to roost - sooner or later. I think later has come. It has been and is unwinding.

The forums are as ghost-towny as ever and that's good sign. Seasoned bugs are doubting the action this week and even today and that's a good sign. Quad G (if anyone knows who he is, oldschool bug chartist) today was asking the fellow bugs on his new PM forum "what's the sentiment out there and in the PM blogosphere?" to get a feel. That's a good sign.

I have again recently begun (the last 3-4 months) quietly watching the political/economic clime and studying charts and news and lurking at PM forums again, and what I have seen has been enough for me to start quietly buying again over the last month, little by little.

Like Strawboss (who's been here forever and is one of the top contributors of GIM - I look at his silver thread first for any new postings), there are many oldtimer bugs on these forums who are questioning the action this week and today as well they should.

Myself, I think it's finally up from here (with natural pullbacks here and there, of course).

Also, for me, this is not about getting rich. It's about insurance.
 
Last edited:

dpong

Gold Member
Gold Chaser
Joined
Jan 11, 2012
Messages
1,992
Likes
1,655
Damn, jelly. I don't even remember a 2008 bottom. But that sounds about right to me. No refund to you if I'm wrong, by the way.

I've only been in this market since 2005, so not as long as many on these forums. However, the current situation reminds me of the 2008 bottom. Many of the PM bulls were saying it would go lower. Even the well-respected, and very profitable traders who posted on GIM1 at the time were saying we were going to go lower. But instead it turned around and kept climbing higher. I had sold out of several of my long-term holds, and was left waiting for lower prices that never materialized.
I think that's where we are right now. People are expecting silver to fall some more, but it will likely do the opposite, and keep climbing higher. I learned my lesson hard from the previous corrections in the gold/silver market. I'm not going to be stuck on the sidelines watching mining shares that I USE to own double...then triple...then quadruple...then hit 700%. I learned that lesson well. I'm buying heavily here, and am in for the long haul - not for trading. I will be, and already am, rewarded handsomely. I have one miner that has already doubled, and the real moves haven't even begun yet.

Just personal opinion. However, I do believe the mining stocks are proof that the bottom is in, and that this rally is real. They are NOT acting like they would in a bear market.
 

Ahillock

A nobody
Mother Lode
Joined
Apr 30, 2013
Messages
12,478
Likes
12,026
Location
GIM2 server bay #5
For me, I don't play the paper market. I also can't predict what will happen next week, month or quarter. As a result, my policy has always been to buy slow and steady. I'm not one for trying to guess these so called bottoms. Can end up guessing and guessing, waiting and waiting and missing things all together. Slow and steady wins the race imo.
 

CrimsonGuardJay

Silver Member
Silver Miner
Joined
May 16, 2014
Messages
1,768
Likes
1,221
GIM2 is a place full of veterans of the PM price wars. Many of us have been here for years and years and have seen this sort of thing over and over and over again... A one day event doesnt do much for us...

We all have our physical stash in addition to whatever paper positions (if any) we may have. If the price continues to rise...GREAT. Looking forward to it. If it crashes and burns...I wouldnt be surprised. I still think $14 is a distinct possibility. It doesnt HAVE to drop to $14 - I am just saying I would not be surprised if it did over the next several months to about a year from now...
I've been watching the pm markets for less than one year now, and even I've seen it go up and down. Part of me was disappointed to see gold hit 1320, because I was hoping for a better entry point, but the adult in me, and modestly experienced man can just say "give it some time. Who knows where it's going next."
 

jelly

Silver Miner
Seeker
Joined
Dec 6, 2010
Messages
869
Likes
641
Damn, jelly. I don't even remember a 2008 bottom. But that sounds about right to me. No refund to you if I'm wrong, by the way.
I guess what I'm saying is, regardless if silver or gold have actually bottomed or not, the miners have, and they are behaving as such. And believe me when I say the gains to be had coming out of the bottom in the miners are going to be truly impressive. You dont' even have to know what you're doing to pick a 5 bagger. If you have a clue about what makes a mine profitable you can find the 10-baggers. And if your good you can find the 20 and 100 baggers.

This correction is much worse than the 2008 correction, and the HUI/Gold ratio is currently the same as when the bull market in gold began around 2000. You do NOT want to miss what's coming. Get an early seat - you will be rewarded.
 
Last edited:

jelly

Silver Miner
Seeker
Joined
Dec 6, 2010
Messages
869
Likes
641
To suite the bears case, the premium on the Sprott physical silver trust has decreasing on this rally. Which is not a good sign - typically the premium increases on the rallies. It was over 3% a week ago. Now its only at 1.79%. Investors are selling this rally.

http://sprottphysicalbullion.com/sprott-physical-silver-trust/net-asset-value/

It would be healthy to have a pullback here to let off steam. How the miners react to the pullback will tell us a lot about whether it was a bear or bull move.
 
Joined
May 23, 2014
Messages
142
Likes
150
To suite the bears case, the premium on the Sprott physical silver trust has decreasing on this rally. Which is not a good sign - typically the premium increases on the rallies. It was over 3% a week ago. Now its only at 1.79%. Investors are selling this rally.

http://sprottphysicalbullion.com/sprott-physical-silver-trust/net-asset-value/

It would be healthy to have a pullback here to let off steam. How the miners react to the pullback will tell us a lot about whether it was a bear or bull move.
I dunno, COMEX/NYMEX open and no major push either way yet. It looks like it's coiling for a move though and often this is been happening around 10am EST:

15min:

June20-2.jpg

30min:

June20-1.jpg

Even hourly, MACD looks like it just could turn up:

june20.jpg

edit: I wouldn't be surprised to see another move up before a pushback. I have 20.58ish and then 20.50ish as support. Resistance at 20.90.
 
Last edited:

jelly

Silver Miner
Seeker
Joined
Dec 6, 2010
Messages
869
Likes
641
Nice charts. Based on those charts, it looks like we could/should have another $1 up move. Which would etch in stone the beginning of the next wave in the bull market. We could move past $25 in a matter of weeks once people realize the lows are in fact in, and the bull has resumed.
 
Joined
May 23, 2014
Messages
142
Likes
150
Nice charts. Based on those charts, it looks like we could/should have another $1 up move. Which would etch in stone the beginning of the next wave in the bull market. We could move past $25 in a matter of weeks once people realize the lows are in fact in, and the bull has resumed.
The coil has broken the pennant to the upside, now past resistance at 20.90. Selling is being bought.

Up we go. I am seeing next fibonacci resistance 21.50?

Wheee....

June20-3.jpg
 
Last edited:

dpong

Gold Member
Gold Chaser
Joined
Jan 11, 2012
Messages
1,992
Likes
1,655
I see it too. I slipped into MVG at just under $9 using P&F analysis. But now I'm just talking my book. :cool:

I guess what I'm saying is, regardless if silver or gold have actually bottomed or not, the miners have, and they are behaving as such. And believe me when I say the gains to be had coming out of the bottom in the miners are going to be truly impressive. You dont' even have to know what you're doing to pick a 5 bagger. If you have a clue about what makes a mine profitable you can find the 10-baggers. And if your good you can find the 20 and 100 baggers.

This correction is much worse than the 2008 correction, and the HUI/Gold ratio is currently the same as when the bull market in gold began around 2000. You do NOT want to miss what's coming. Get an early seat - you will be rewarded.
 

jelly

Silver Miner
Seeker
Joined
Dec 6, 2010
Messages
869
Likes
641
I see it too. I slipped into MVG at just under $9 using P&F analysis. But now I'm just talking my book. :cool:
I agree with you on MVG. I've been eyeballing MVG for several years, and finally bought into MVG at $5.30 last August. Its been my best performer so far. However I have other shares that in my opinion should outperform it once silver gets heading back to around $40.
 
Joined
May 23, 2014
Messages
142
Likes
150
Silver finding footing (again) on what WAS 20.90 resistance (now support?). Not much higher and will also breach through top of this channel I have and possibly keep going this time:

Hourly:

up1.jpg

If it's deflected again by top of channel I expect a decent pullback, which would be otherwise healthy.

on edit: I would not want to be short going into the weekend, especially with all this escalating Iraq and Ukraine crap. Any other time (considering the last 3 yrs) it might be good shorting opportunity.
 
Last edited:

jelly

Silver Miner
Seeker
Joined
Dec 6, 2010
Messages
869
Likes
641
The coil has broken the pennant to the upside, now past resistance at 20.90. Selling is being bought.

Up we go. I am seeing next fibonacci resistance 21.50?

Wheee....
Unfortunately, it looks like the miners are saying we take a break now. The day's not over yet, so we will see...
 

jelly

Silver Miner
Seeker
Joined
Dec 6, 2010
Messages
869
Likes
641
MVG took a big hit right at the close to keep it under $10. Today was options expiration day, so someone obviously didn't want the lose money on the calls they sold.

Small proof that the markets ARE manipulated. And also that you can't do anything about it.
 

dpong

Gold Member
Gold Chaser
Joined
Jan 11, 2012
Messages
1,992
Likes
1,655
I saw it too, jelly. At the close it's been sitting on 10.23 for a while with little tick by tick volatility, then about 2 or 3 minutes after close.... BOOM.. They made it paint 9.95. Bummer.
MVG took a big hit right at the close to keep it under $10. Today was options expiration day, so someone obviously didn't want the lose money on the calls they sold.

Small proof that the markets ARE manipulated. And also that you can't do anything about it.
 
Joined
May 23, 2014
Messages
142
Likes
150
Comex Silver Futures Open Interest Is Equal To Total Silver Produced In 2013

June 17, 2014

David Kranzler

The short position in Comex silver futures alone is almost equal to all the silver mined in a year - James Turk, King World News

I knew the silver futures open interest on the Comex was somewhere in the vicinity of the total amount of silver produced globally in a year. But when I saw Mr. Turk’s comments, I wanted to calculate it out for myself.

As it turns out, the amount of paper silver open interest based on yesterday’s total silver futures open interest of 163,592 contracts is nearly 818 million ounces of silver (Comex link). As you can see from the table below from The Silver Institute, total silver mined globally in 2013 was 819.6 million ounces:

Untitled10.png

With scrap recycling, total silver supply in 2013 was 978 million ounces. So, the Comex paper silver futures equals 83% of the total amount of silver available for industrial users, jewelry buyers and investors.

Does this make sense?

To add to the absurdity of the Comex operations, as of today there were 57 million ounces of silver registered for possible delivery to holders of silver futures contracts. Yet, for the next big delivery month of July, there’s a total of 348 million ozs worth of open interest. That’s 6 times the amount of silver registered for possible delivery. There’s 176 million ounces of total silver on the Comex.

In theory, if ALL of the July silver longs stood for delivery, there’s enough silver to fill half of them.

Up to this point in time, there’s no risk to the sellers of the silver futures that anywhere close to the amount open interest right now will stand for delivery. That doesn’t mean that it can’t happen.

The point of this is to highlight just how fraudulent the Comex is. There is no other commodity market in the world that allows the futures open interest in relation to the available underlying deliverable commodity to get anywhere close to the ratio that exists in Comex gold and silver. When oil and gas get a bit out of whack, the CFTC cracks down on the “manipulating” bank.

This will eventually resolve itself with much higher prices for gold and silver. Mining stocks will go parabolic. To see a couple of good ideas to take advantage of this market dislocation see this link: Stock Research Reports. I will be adding a least one more this week. AAU in particular has a heavy concentration of silver in its big Mexico mine project.

The Comex is is emblematic of the extreme fraud and corruption that is now endemic to U.S. political and economic system. The people who are really in control of our system have lampooned it into a complete joke.

This will not end well for most of us…

http://investmentresearchdynamics.c...erest-is-equal-total-silver-produced-in-2013/
 

Strawboss

America...Love it...or GTFO
Gold Chaser
Site Supporter
Joined
Mar 31, 2010
Messages
4,479
Likes
7,365
Location
Metro Detroit area
I dont very often publish links to other silver commentary...mostly because most of it is garbage or self serving...

So - with that as the background - I would highly recommend reading this article - 2 or 3 times if that is what is necessary for the information to really be digested...

http://www.zerohedge.com/news/2014-06-23/silver-headfake-report-22-june-2014

This author does a very good job of explaining what I have been trying to say - but, does it much better than I could.

Sorry I was too lazy to post the whole article (someone else could feel free to if they dont mind...). Definitely worth the read.
 

AgAuGal

Founding Member
Founding Member
Site Mgr
Site Supporter
Joined
Mar 28, 2010
Messages
3,581
Likes
1,487
I thought silver options expiry was june 27th?..

usually see downward pressure until after expiry or flatline.

My expectations, wishful thinking about the direction of silver prices I have learned are irrelevant. As has been said this beat down has lasted a lot longer than I would have expected. I can only imagine how frustrated people are with their choice of 'investing' in silver equities or bullion especially if they entered these markets in 2011.

I also consier this insurance and due to unexpected circumstances I now have to cash in my 'policies', I was hoping to do this at $30 as support not $19 something.

such is our manipulated lives....stil glad to have the insurance than not and would like to see more postings of rockets because the price is rising. That said we have all seen that chart that describes the up and down entry points, just hope the oltimers here dont see the same number we came in at. I did the oposite of GP, I came in at about 4.50 and waited on gold (I wish I had taken his approach before the price of au got too much gor me).

even at low entry point this type of market can ware on a person even if it was bought for insurance. I needed to go the option route but never felt confident in my underdtandi g of yhe process and risks. My lyme brain kept me from trying stuff like that since my memory affected, wooried I would miss getting out before expiry.

all said would be nice to see some upward movement instead of summer doldrums market. Lot of cheerleaders calling for run up so im skeptical or maybe im just cynical.
 

southfork

Mother Lode Found
Mother Lode
Site Supporter ++
Joined
Mar 31, 2010
Messages
16,127
Likes
15,200
I dont very often publish links to other silver commentary...mostly because most of it is garbage or self serving...

So - with that as the background - I would highly recommend reading this article - 2 or 3 times if that is what is necessary for the information to really be digested...

http://www.zerohedge.com/news/2014-06-23/silver-headfake-report-22-june-2014

This author does a very good job of explaining what I have been trying to say - but, does it much better than I could.

Sorry I was too lazy to post the whole article (someone else could feel free to if they dont mind...). Definitely worth the read.

Home » Blogs » Monetary Metals's blog
Silver Headfake Report: 22 June, 2014
Monetary Metals's pictureSubmitted by Monetary Metals on 06/23/2014 02:50 -0400

BackwardationBondMoving AveragesPrice ActionTwitterTwitterVolatility

.

inShare.2
.
by Keith Weiner



Something extraordinary occurred this week. On Wednesday, the Fed made a routine announcement. That day, the price of silver was rising, but not out of the normal. Fireworks began on Thursday, and in 6 hours, the price of silver skyrocketed by 5%.

We have never before changed the headline or format of the Supply and Demand Report. However, it is warranted under the present circumstances.

The Fed’s announcement was mundane. It will continue tapering its bond purchases, from $45B monthly to $35B. It will continue its low interest rate policy. It cut its growth forecast. This was all expected except, arguably, the cut in the forecast.

Some pinned this move on the unwinding of the Chinese commodity finance scheme. That unwind will involve selling metal and buying futures. The impact of this is a rising basis, but probably not a rising price.

Many said that that the Fed was to blame (or credit). One commentator even said that gold had now become an inflation hedge. Apparently it wasn’t last week, but now it is. We respectfully suggest that he step back and take a deep breath.

Looking at a price chart, the action is pretty obvious. This candlestick chart is not the standard chart format we normally use in this Report.

Silver Chart
Silver Chart

The blue line shows support around $19, going back 7 months. In the last few days of May, the silver price broke below that line. But by June 10, the price broke out through the line sharply. The breakdown at the end of May was a false breakdown.

Thursday’s price move also drove above the 100-day and 200-day moving averages (not shown). In March, silver had dropped below both averages, which have been falling for a long time.

There are other ways of analyzing the silver price chart, though that is not our focus here. No matter how you look at the price chart, the sharp spike in the silver price appears very bullish.

We therefore want to look at another chart, showing the silver basis and cobasis. Think of them as measures of abundance and scarcity, respectively.

We’re going to skip the gold graph this week. Silver did what gold did, and more.

The Silver Basis and Cobasis and Price
The Silver Basis and Cobasis and Price

Normally in the Report, we include a long period of time (e.g. October 2013 through June 2014, or 8+ months). This week, we zoom in to see detail. The graph begins on May 27, which is when the silver price broke down below $19. We can see a decrease in abundance (blue line) and an increase in scarcity (red line) through June 4.

Then the price begins to rise, and with it abundance. Scarcity drops. The basis and cobasis made large moves. For clarity, the zero line has been drawn in heavy black and the region above is shaded light blue.

From its low, the basis rises from -0.24% to +0.35%. The basis is the carry you can earn in silver. To carry is to buy the metal and sell a futures contract. The annualized profit on a trade with less than 3 months to maturity is 35 now basis points. That’s a lot. The 3-Month Treasury bill, for comparison, earns 2 basis points.

So what is this telling us?

Silver futures were heavily bought. While there are other buyers of futures (e.g. electronics manufacturers who plan for their needs in advance), such a sharp change is generally driven by speculators.

Why do speculators buy silver futures? They anticipate a rise in the price, from which they hope to profit. They can drive the price up with their buying, as we see yet again this week, but they don’t tend to sustain big price moves. When we say they anticipate, we really mean front-run. They are expecting, rightly or wrongly, that real physical demand is coming. They want to buy ahead of it, and sell into it.

This week, their expectations of hoarders changed significantly. Speculators now believe demand from hoarders will rise.

Hoarders are, in many ways, the opposite of speculators. They do not use leverage. They do not buy with the intention of selling soon. They are not necessarily thinking of profits when they buy. They are thinking about preserving wealth, perhaps for the next generation. They take metal out of the market for the long term.

It is the hoarders that speculators are trying to front-run.

Clearly, speculators this week expect a growing demand to hoard. That’s probably what that analyst meant when he said that gold became an inflation hedge this week.

The speculators may even turn out to be right. It is possible that real demand for physical metal, which does not exist in the market today, will begin ramping in the coming week. Perhaps this time the speculators know something that the hoarders don’t yet know. There is a first time for everything, and this could be the first time that speculators jumped the gun on a Fed announcement and beat the hoarders to buy at the last of the lower prices.

We wouldn’t bet on it.

And that’s the whole point, isn’t it? The silver longs are indeed betting on it. When they use 4:1 (or greater) leverage to buy a silver future at $20.86, they are hoping to be able to sell it soon at $21.86, $31.86, or $186.

I had a brief twitter exchange with someone this week. He said that the basis is not a good indicator of timing. He added that the there was a collapse of the cobasis in January followed by a long rally.

He is correct that the basis does not give timing. It is entirely possible that the silver price chart now looks so tempting, that more traders will pile in to the metal this week. However, he is not quite correct about the “long” rally. It lasted for about two weeks, and took the price from $19.15 to $21.89. By the end of March, half the gain had been given back, and by the end of April all of the gain was gone.

Let us all recall for a moment the long rally from August 2010, to April 2011. The silver price rose from $18 to $49. That was a long rally, in terms of time, over 8 months. More importantly, it was a long rally in terms of price action: 172%. In that long rally, by the way, we observed backwardation in contracts dated out to 2015. That simply is not the case today.

Here is a graph showing the basis graph from January and February of this year, overlaid with price.

The Silver Price and Cobasis Jan-Apr
The Silver Price and Cobasis Jan-Apr

This shows the basis for the July contract, which is around half a year from expiration in this time period. Being farther from expiry, it doesn’t yet undergo the higher volatility of the March and May contracts that we showed in the Reports of that time period. Being farther from maturity, it is not directly comparable. An apples-to-apples comparison shows that the drop is much bigger this month than it was in January.

There is a negative feedback in a rising price with rising basis. Silver is a monetary metal. This means that it’s unlike other commodities in that it is accumulated without any particular limit. The ratio of stocks to flows (i.e. inventories divided by annual mine production) is measured in decades for silver. For normal commodities, the ratio of stocks to flows is a few months—a fraction of one year’s production.

This means, among other things, that the supply of silver to the market need not come from the mines. All existing stocks of silver are potential supply, under the right conditions, and at the right price.

A rising basis combined with a rising price means that demand for futures is exceeding demand for metal. With rising prices, the demand for metal drops while the supply rises. Unlike in other commodities, existing inventories add to supplies.

With a high basis, the marginal demand for metal is to go into the warehouse, to go into carry trades. When the basis is rising, then warehousing is rising as well.

The problem is that, eventually, what goes into carry positions must eventually come out. The warehouse, formerly the marginal demand for metal, becomes the marginal supply. Down comes the price, perhaps more quickly than it went up.

There is one final thing worth looking at. Commodities went up at the same time as silver. Here is a picture of the prices of silver, lumber, and cattle.

The Price of Silver, Lumber, and Live Cattle
The Price of Silver, Lumber, and Live Cattle

Lumber and especially live cattle are not for hoarding. They are for consumption, and of course for speculating (everything is for speculating in the regime of zero interest). We would not expect hoarding demand for silver to coincide so neatly with rising real demand for wood and meat. But on the other hand, speculative demand for silver can perfectly coincide with speculative demand for wood, meat, and all sorts of other things. Why shouldn’t traders bet on a rising silver price and a rising beef price?

Whatever it may mean, that traders bought these three things at the same time, we doubt it is that demand for hoarding silver is on the rise. While it may be different this time, the most likely outcome is that silver speculators will drown in a deluge of metal coming to market.

This is a good opportunity to reiterate our long-standing advice. Never naked-short a monetary metal.
 

jelly

Silver Miner
Seeker
Joined
Dec 6, 2010
Messages
869
Likes
641
I'd like to know where that supposed "deluge of metal" onto the silver market will be coming from. Since early 2013 silver has been slowly drying up, so unless the author knows of a secret stockpile somewhere going to be dumped on the market, it ain't gonna happen.

In my opinion, the only thing that could take silver down to new lows would be a tanking stock market.
 

tradeshack

Seeker
Seeker
Joined
Dec 6, 2011
Messages
178
Likes
101
Can anyone help me understand why the author would advise us not to naked-short a monetary metal if a deluge of the metal is coming to market?
 

Strawboss

America...Love it...or GTFO
Gold Chaser
Site Supporter
Joined
Mar 31, 2010
Messages
4,479
Likes
7,365
Location
Metro Detroit area
Because naked shorting a monetary metal is simply a bad idea...under any circumstances.

For example...when a government wants to devalue their currency...they usually do it all of a sudden - unannounced...usually overnight. So...you go to bed one night with your short positions on gold and silver and you fall asleep feeling pretty good about yourself...and then you wake up the next day to financial ruin because they devalued the currency and gold/silver responded...



Can anyone help me understand why the author would advise us not to naked-short a monetary metal if a deluge of the metal is coming to market?
 

Strawboss

America...Love it...or GTFO
Gold Chaser
Site Supporter
Joined
Mar 31, 2010
Messages
4,479
Likes
7,365
Location
Metro Detroit area
Short silver $21.06. Stop at $21.25.

Lets see how this turns out...
 

dpong

Gold Member
Gold Chaser
Joined
Jan 11, 2012
Messages
1,992
Likes
1,655
Good luck sincerely!
 

Strawboss

America...Love it...or GTFO
Gold Chaser
Site Supporter
Joined
Mar 31, 2010
Messages
4,479
Likes
7,365
Location
Metro Detroit area
The below chart is a monthly view of silver. I have highlighted various things that I see...

1. Price is pushing against the downtrend line from underneath. That is bearish until proven otherwise.
2. Horizontal support at the $20 level has been holding price for the past several months. Price cant seem to stay below that level. That is bullish.
3. The leading edge of the cloud is looking to fall downwards. That is bearish.
4. Price is below the cloud. That is bearish.
5. RSI is higher than its been since spring of 2013. That is bullish.
6. Stochastic is rising. That is bullish.
7. MACD is showing a positive histogram bar in the making with an upside crossover looking imminent...from the lowest levels seen since the bull market began almost 15 years ago. That is bullish.

Silver monthly.jpg

Overall its a mixed bag in terms of the technicals. No matter which way you are leaning - silver offers something to support your position.

Armstrong foresees a depressionary cataclysm coming which would drive the dollar much higher. That would make it very difficult for commodities to rise...Not impossible - but, difficult. He has also said that gold (and silver?) needs to rise WITH the rise in the dollar. So - even that isnt clear. I have respect for his views.

Lots of uncertainty in both directions...
 

Strawboss

America...Love it...or GTFO
Gold Chaser
Site Supporter
Joined
Mar 31, 2010
Messages
4,479
Likes
7,365
Location
Metro Detroit area
Armstrong is projecting that the economy is going to turn down...hard...after about Sept 2015. Lots of loans will be defaulted upon. Leverage will be unwound. These things are depressionary...and if it plays out the way his projections are suggesting...will strengthen the dollar significantly.
 

southfork

Mother Lode Found
Mother Lode
Site Supporter ++
Joined
Mar 31, 2010
Messages
16,127
Likes
15,200
Armstrong is projecting that the economy is going to turn down...hard...after about Sept 2015. Lots of loans will be defaulted upon. Leverage will be unwound. These things are depressionary...and if it plays out the way his projections are suggesting...will strengthen the dollar significantly.
I find it hard to believe in the dollar getting stronger under any circumstances, the rest of the world is quickly moving from the dollar as a means of trade.