Silver Leading The Way Up

Summary

  • You can only suppress the intrinsic value of an asset for so long. The pressure builds up. Gold and silver are reaching the point where they are about to explode.
  • We are running out of silver supplies, especially for industrial uses.
  • Gold and silver prices are being shorted by hedge funds on the paper market many times over the size of the physical market.
  • Given the massive short position in the silver market, the Reddit crowd appears to be testing the new lows and getting on the long side of silver against the short sellers.

Fundamentals

We are still having issues with unemployment. U.S. economic data, which was supportive for gold yet negative for industrial metals demand and silver prices, included the unexpected +13,000 increase in U.S. weekly initial unemployment claims to a four-week high of 861,000, showing a weaker labor market than expectations of a decline to 773,000.

The stock market (E-mini S&P) is coming from a high of 3959.25 at the weekly average. We are at about 3897. Trading below 3897 will activate the weekly Variable Changing Price Momentum Indicator (VC PMI) levels of 3859 to 3839.

Fundamentally, gold and silver should be much higher. Since the start of the year with the new US administration, we have heard stimulus talk. But we only saw one package and it has not yet made an impact. Unemployment is still high and the 10-year note, which is the short end of the yield market, is starting to increase.

Gold traders see the relationship as bearish for gold. This is new territory. We have never had negative interest rates, if you take inflation into account. Europe is lowering interest rates as low as possible. The Commitment of Traders report shows that there is a large number of positions shorting gold and silver.

All of the stimulus is, in the long run, inflationary, which we already are seeing in grains and other commodities. Soybeans are at $14.36. Wheat is at $6.93. This is just the beginning. Main Street has yet to be affected by the increase in prices in the food sector. Crude oil is at $60 a barrel, up from minus $37 just last year. We are up more than $90 a barrel from the lows. Therefore, there is an anomaly between the physical and paper markets in gold and silver.

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Disclosure: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned ...

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