Hope is Fear Gone Bad
for Paper Silver Shorts
By Dr. Jeffrey Lewis
pattern in silver and gold remains intact. It shows that each time these
precious metals are pushed below a key technical moving average, new buyers come
into the market.
Most are weak
hands, speculators or amateur traders who have fallen in love with the idea of a
futures contract, although the original longs have still refused to trade their
valuable metal for intrinsically worthless paper dollars.
Open Interest on the Comex silver futures contract rose again on Friday, which
is astounding. This demonstrates that while the professional traders switched
to the short side in gold, the silver longs have not yet capitulated. They are
taking the shorts head-on.
A massive short
covering rally that sends the price of silver and gold rocketing higher could
well be lurking just around the corner, as the professional traders cover their
gold shorts and the central planners controlling the paper market rush for the
exits to cover their silver shorts in a panic. The hope is that no one notices
this increasing risk.
In the silver
market, fear stems not so much from the big bullion banks — who have the deepest
pockets and virtual immunity to prosecution across a broad range of financial
fear, or the hope gone bad, is from the new investor who, cloaked in a short
term swing trader mentality, wants to pick the bottom or catch the top.
As an example,
relatively new silver investors typically quiz market analysts about the 'real’
value of silver, but then they ask questions about where to put in their stop
loss orders. Stop levels typically matter little to a person contemplating a
long term investment or rather using silver as an inflation hedge or a disaster
No one can know
the real value of silver, which is its true purchasing power. Nevertheless,
manipulation to keep the price of physical silver artificially low has resulted
in a situation where the actual value of silver is much higher than its current
price in paper currency terms.
The true market
for silver has been shut out for decades, while still appearing to behave
according to technical signals — until they fail, of course — and also providing
paper profits for the very few who are truly capable of trading these markets.
Frustrations of Trading Silver
silver market profitably is nearly impossible because the short term price is
actively managed by the big players to the detriment of the smaller speculator.
The price point
in the short term actually matters very little, especially given how much room
the market has to the upside. Even if you waited to invest until silver bottoms
and then starts moving up, your investment would probably be sound.
most people enter the silver market as traders, and they soon also exit this way
— typically disgruntled and murmuring to themselves about conspiracies or
The Case for
Precious Metals Remains Strong
challenges involved in owning the precious metals like silver and gold, the case
for doing so as a long term investment remains intact. Central bankers
worldwide have become the lenders of last resort for nations that have virtually
exhausted their borrowing capacities.
Very little has
changed since the financial crisis of 2008, when the global financial system
stood at the brink of collapse. Furthermore, unsustainable national debt levels
continue to increase, even as the capacity to service that debt diminishes.
silver now looks like an excellent investment to have made ten years ago at a
mere $4 per ounce, and it will very likely look like an excellent purchase at
today’s prices ten years from now for those investors brave enough to buy and
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