Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Silver Shorts Get Squeezed Hard… What’s Next?

Commodities / Gold & Silver 2020 Aug 12, 2020 - 06:09 PM GMT

By: MoneyMetals


The extraordinary run up in precious metals markets continues as silver makes some truly epic percentage gains while gold pushes further into record territory.

As of Friday morning, gold prices had pulled back but are still up 3.1% for the week to trade at $2,044 per ounce. Gold is advancing now for the ninth consecutive week, with the biggest pops occurring over the past three.

Silver, meanwhile, is going nearly vertical, today’s pullback to $28 notwithstanding. This week alone, the white-hot metal shot up a staggering 18% through Thursday’s trading to close at over $29 an ounce.

So, what’s behind the big moves in precious metals? A number of factors are combining to create a sort of perfect storm.

First and perhaps foremost, the Federal Reserve is embarking on an unprecedented campaign of currency creation with the explicit goal of raising the inflation rate. Jerome Powell and company at the Fed now want to see consumer price levels rise at a rate of greater than 2% for an indefinite period.

At the same time, they are holding their benchmark short-term rate at zero and pursuing yield curve control to suppress longer-term rates. Earlier this week the 10-year Treasury yield fell to a record low of 0.52%.

U.S. dollar assets are simply becoming less and less attractive. The U.S. Dollar Index has been sliding as both international and domestic investors seek alternatives.

The dramatic ascent of precious metals markets reflects what could be just the start of a longer-term decline and fall in the Federal Reserve Note’s value and status.

The gold and silver markets are tiny compared to global currency and bond markets. It only takes a small proportion of investors and institutional asset managers allocating some new capital to metals to drive prices significantly higher.

There just isn’t that much gold and silver to go around. On the COMEX futures exchange, there has been something of a run on the bank as large numbers of paper contract holders have been demanding physical delivery. Sellers dread having to fulfill that obligation to buyers, especially in an environment of extreme price pressure to the upside and abnormally high premiums on large, investment-grade bars.

The speculative short sellers have been squeezed and want out at any price. As a result – especially in the silver market – the run up has exceeded the near-term expectations of even the biggest bulls. Silver sliced right through the $21 and $26 levels along with other potential overhead resistance levels like they didn’t even exist.

This pace of uninterrupted gains will finally reach a level where it can no longer sustain itself. A smash down precipitated by commercial traders getting aggressively short again is almost certain to follow.

The risk for investors who are trying to enter this volatile market now is that it could reverse sharply to the downside any day.

The opportunity is that silver’s major bull market likely has much further to go. The possibility of a major top shouldn’t even be considered until after silver has joined gold in hitting all-time highs.

The pullback that is coming – and there will inevitably be one of some magnitude – could allow investors to obtain more bullion at relatively more attractive prices. Unfortunately, we don’t have a crystal ball so we can’t advise anyone on timing their purchases -- other than to say if you don’t yet have ANY precious metals of your own, you are highly exposed.

And we can encourage investors to never let go of a core long-term physical position based on near-term market action. When markets do get extended to the upside, it’s useful to keep some powder dry for future bullion purchases in case better buying opportunities present.

Now isn’t the time for euphoria, but it is a time for bullion holders who have been through a lot of tough times in these markets to take some satisfaction in their decision.

You may have even been derided or laughed at for owning gold. But now that gold prices are in uncharted territory, the naysayers aren’t laughing anymore.

You may have at some point scratched your head and wondered if silver would ever come around. Up until this summer, the silver market left many longtime investors feeling frustrated, even defeated.

But those who threw in the towel because they believed silver prices would continue to be suppressed at every turn missed out on silver’s biggest surge since 2011.

And it the massive surge occurred within a matter of weeks – the type of violent move over a very short period of time that we have been forecasting right here for quite some time now. Well, it appears to be upon us, and we likely haven’t seen the end of it yet.

Where silver prices may ultimately head in a bull market that could last for years to come, we can only guess. But the prospect of seeing a spot price of $50 and then triple-digit silver at some point after that isn’t far-fetched.

By Mike Gleason

Mike Gleason is President of Money Metals Exchange, the national precious metals company named 2015 "Dealer of the Year" in the United States by an independent global ratings group. A graduate of the University of Florida, Gleason is a seasoned business leader, investor, political strategist, and grassroots activist. Gleason has frequently appeared on national television networks such as CNN, FoxNews, and CNBC, and his writings have appeared in hundreds of publications such as the Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2020 Mike Gleason - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2022 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in