The Price of Silver in
Age of Broken Promises
By Dr. Jeffrey Lewis
The price of
silver remains at the mercy of the big banks that make of the majority of the
short side at COMEX — which is still the primary paper pricing mechanism for
prices go above $50 and beyond this year — and then perhaps retest $50 as a
Remember that it
is the concentration that matters most for the price of silver. It does not
matter if those large silver short positions are hedged or if a long exists for
every short, since that is a fundamental aspect of market driven pricing.
All that matters
is that one or two entities hold the majority of that short position and
therefore they can and do influence prices. This is the same story that has been
told over and over by
Ted Butler and
GATA for decades.
purposes, and even when the concentration is calculated without removing swaps,
the current level of short market concentration eclipses the amount of silver
which the Hunt brothers held long so many years ago and were subsequently
Major Moving Averages
dominating banks decide to let silver prices run through the closely watched
technical moving averages — which it looks like they might — they could achieve
this simply by covering their short positions. Such buying would push the market
considerably higher and signal numerous weak longs to enter. The market could
get to $50 in hurry.
The price of
silver has already broken above its 200 day moving average and is now trading
just below its 100 day moving average. A break above the 100 day MA would
typically be considered a bullish technical signal.
severely undervalued and has been cheap for decades. Nevertheless, silver has
continued its managed retreat from its April 2011 high of $49.77, although it
has repeatedly held its value in the $26 region.
If silver’s next
move up through $35 is shorted the entire way up by the big bullion banks —
which will be clearly documented by the COT report — then the market will
probably remain within the relatively tight $26-$37.50 trading range that it has
been stuck in since September of 2011.
Silver Rally is Difficult
challenging to time any of the silver rally scenarios or guess about when macro
issues will finally start to affect the market price of silver, but higher
prices for silver do seem more likely than not over the medium and long term.
The silver market
has one or two concentrated shorts trading against a heterogeneous group of
longs in the world's primary silver pricing mechanism. This seems both
irrational and illegal, and it creates price moves contrary to where technical
indicators say the market should trade.
can become aware of the macro set up, the precariousness of the U.S. Dollar
Ponzi scheme, and the competitive currency devaluations occurring around the
world. It seems that central banks must print to save themselves, and this
factor will continue to fuel investment demand for silver, despite deflationary
will fuel demand, but there were two lines in front of many coin shops during
silver’s dramatic run up in 1980, with plenty of people in each line — as equal
numbers bought and equal numbers sold.
term price has become a result of the COMEX shenanigans, while long term demand
results from basic monetary flaws in the paper currency used to measure silver’s
Debasement War Brightens Silver’s Future
possible that if and when the currency debasement war picks up, it could trigger
a sharp upside blow off event in silver. Furthermore, the path to this rally is
fairly certain. World governments are on a race to debase their currencies,
which are essentially debt tickets or promises to pay with no intrinsic value.
Filling the world
with these broken paper promises destroys faith, erodes savings and undermines
the overall economic structure. The bust seems inevitable at some point, but the
challenge lies in predicting when that will occur.
This makes long
term price of silver forecasting rather difficult - outside of measuring
relative purchasing power.
price manipulation discourages silver investment and the convenience of holding
paper derivatives beckons, when the music stops, nine tenths of the law is
possession. Having physical metal under your control then becomes the ultimate
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