Weak Demand & Record Shorts – Best Indicator of a Massive Rise in Silver Prices
– Rajesh J. Shah
Weak physical silver demand has been seen starting 2016 & is taking larger proportions. It seems that the “Cartel” is gaining success in its silver market (and gold) manipulation schemes from both ends. The Cartel has been quite successful in manipulating silver prices (and gold) down on all occasions ever since 2011. Every major rise has been slammed with unimaginable record paper shorts ever since. The “TRUE Measure” of the Cartel’s success at manipulating the bullion markets is that it has now succeeded in manipulating the minds of the physical gold and silver investors. They have made sure that these investors believe that more sharp declines in gold and silver prices are imminent. After all these (over 5 years) of die-hard price manipulation to the downside, these investors (after having seen their optimism being smashed multiple times) seem more inclined to now “Sell” at all rises. Some prefer not to buy at all, even at dirt cheap rates. Their affinity seems to have shifted to being sellers after having accumulated massive loses by being buyers.
PERFECT! Well Done! Now with the Cartel “on the ropes” (read – amidst what appears to be the nuclear phase of their “200 day moving average war” with the physical gold and silver markets), they may be soon be playing the other side of the markets. These manipulators that, till now, needed buyers for each of their rate slamming operations (while the cartel buys at sharp sell-offs), will now need sellers at every major rise. After-all, if all are on the buying side, how will the trade be executed. This mind-manipulation was a necessity & they seem to have played their cards pretty well – at least up till now. The majority of analysts expect a physical run on the COMEX, which may trigger a massive rise in gold and silver prices. While that may eventually come true, the Cartel will have made massive gains playing both sides till then. Who is to stop them? None, none at all.
Weak gold and silver demand is not just a North American phenomenon as higher prices and market regulation take their toll on demand in India and China. Weak bullion demand is one of the major reasons investors remain bearish on gold and silver. Silver demand was weak in February, with sales of American Eagle Silver bullion coins falling to their lowest levels since December 2015, with the U.S. mint selling 1.215 million one-ounce silver coins, down more than 74.5% compared to sales seen last year.
Gold and Silver coin sales go soft in March
Surging gold prices since the start of the year created significant weakness in the physical market, with bullion coin demand falling to its lowest levels in 14 months, according to the latest sales data from the U.S. Mint.
Sales of silver American Eagle one-ounce bullion coins were weak in March, but not quite as weak as the month before. The Mint’s Authorized Purchasers acquired 1,615,000 silver Eagles. This figure is 400,000 higher than the 1,215,000 taken in February. In comparison, January monthly sales totaled 5,127,500. For the first quarter of 2017, sales were down by 46 percent. Buyers took 7,957,500 coins compared to 14,842,500 in the same period of 2016.
March numbers for gold American Eagle bullion coins continued their decline. The U.S. Mint’s records show that it sold 27,500 ounces of gold in various denominations of American Eagle gold coins, its lowest sales record since December 2015, when the Mint sold 500 ounces of bullion. Gold coin sales fell 67% compared to sales seen in February 2016.
A total of 21,000 ounces were sold in March compared to 27,500 in February and 117,500 in January. The sales total for the first quarter of 2017 is 166,000 ounces, down 32 percent from the first quarter of 2016.
Though the Mint sells four sizes of gold American Eagles, most of the precious metal is sold in the form of the one-ounce coin. Sales in the first quarter totaled 123,500 pieces. In the first quarter of 2016, the number was 185,500.
Here is more proof on the Cartel’s mind manipulating game….
A Record Number Of Investing Pros Are Betting Against Silver
– Dana Lyons: Commercial hedgers have never had a larger net short position in silver futures. We talk about investor sentiment fairly often in these pages. Of course, sentiment analysis is well known for its “contrarian” nature, i.e., that “fading” the crowd often ends up being the correct move. What folks often get wrong with sentiment indicators, however, is that going with the prevailing opinion is usually the right play – until the opinion becomes too widely accepted. That is, sentiment-based indicators only become contrarian when they become extremely one-sided. Based on one measure, we are seeing extremely one-sided sentiment in the silver market.
That measure is the positioning among Commercial Hedgers in silver futures, which is now at the largest net short position (-112K contracts) on record, going back to 1986 (according to the CFTC’s Commitment Of Traders report).
Why is this significant? Commercial Hedgers are often considered the “smart money”. Again, this isn’t because they are always right. They take positions opposite trend-following Speculators, e.g., hedge funds, etc. Therefore, during long trends, they can be on the wrong side for awhile. However, at important junctures and turning points, when positions typically become extreme, they are almost always correctly positioned.
Of course, we always have to add the disclaimer that these positions can certainly get more extreme – and more wrong, temporarily – before they start paying off. Indeed, last spring, we noted that the Hedgers’ net short position in silver futures had reached a record then. After a brief dip, silver prices proceeded to tack on about another 15% over the next few months while the Hedgers’ net short position grew even more extreme. Eventually, silver prices would tumble some 25%, rewarding the Hedgers’ positioning.
Likewise, silver prices could possibly continue higher in the near term while the Hedgers’ record net short position continues to grow even larger. However, one of the disturbing things for silver bulls must be that, despite the record bullish sentiment (e.g., speculator longs), prices are still well below last summer’s peak. Thus, in our view, the eagerness of the crowd to adopt such a bullish stance relative to the moderate gains in the commodity is a bit unsettling.
Will silver continue higher in the face of this record positioning? It is possible in the near-term. However, to adopt that stance is to join an already unprecedentedly crowded position. Historically, that is when one should be fading the crowd.
Charts Spelling ‘Big Trouble’ for Silver
Silver’s latest charts show that it is set up for a potentially severe decline, says technical analyst Clive Maund.
Silver’s latest charts show that it is set up for a potentially severe decline, a situation that is aggravated by its latest COTs and Hedgers charts showing record extreme readings, which mean BIG TROUBLE for silver. Now, you might think, like so many traders did on Friday morning, that with Cruise Missiles flying around the Mideast, the outlook for the Precious Metals couldn’t be better, but the charts are saying that this is an opportunity—on the short side—dressed up in a crisis that will soon ease.
Action in silver on Friday was very bearish as we can see on its 6-month chart below—it tried to break higher in the morning but the breakout attempt failed and it dropped back, zig-zagging around and leaving behind a high volume “Spinning Top” candlestick on its chart, so that it looks like it is about to break down from a Double Top with its highs of late February.
The 1-year chart shows silver perched on the edge of a cliff, at the top of a big expanding downtrend channel with no relief in sight until it reaches the support level shown, and COTs and Hedgers charts show that it could drop much further—to the lower boundary of this expanding channel.
The risk of silver tipping into a potentially severe decline from here is amplified by its latest COT chart readings, which show that Commercial short and Large Spec long positions have risen to at least one-year extremes. This is viewed as meaning BIG TROUBLE for silver.
The gravity of the situation facing silver is made even more clear by the latest Hedgers’ chart, which shows that Hedgers’ positions are at all-time bearish extremes. This chart makes it extremely unlikely that silver will or can advance from here—more likely is a severe decline back towards the lower boundary of the expanding channel shown on silver’s 1-year chart above. Needless to say, the grim outlook for silver set out here also has bearish implications for gold, where the COT and Hedgers’ charts are nowhere near as decisive.
CRITICAL SHORT-TERM SILVER PRICE TREND: Put into Perspective
– SRSroccoreport: The current silver price trend is once again at a critical juncture. It has been four years since the price of silver crossed an important trend line. However, the present setup will result in either another correction lower, or a much higher price.
This is a ten-year chart which shows the current trading setup for silver:
The blue line represents the 50 month moving average,and the red line, the 200 month moving average. Since the price of silver fell below the blue line at the beginning of 2013, its support has been the red line. It did not fall below the red line at its low in the beginning of 2016 and has bounced twice off the blue line, which is now acting as resistance by traders.
Currently, the silver price is hitting up against the 200 month moving average blue resistance line. If the silver price breaks above and closes above it, we could see a much higher silver price. However, if does not, then we could experience another short-term correction.
Looking at the current silver COT REPORT, there is a record commercial short position against silver. The Commercial short positions are from the large bullion banks:
The red lines at the bottom of the chart represent the total Commercial net short positions in silver. As we can see, it is at a record high. This high Commercial net short silver position normally means the silver price will likely head lower…. over the short term.
That being said, I have become less concerned about the SHORT-TERM silver price movement. While some investors are able to trade and make money trading silver, I am not one of them. My focus on silver is to hold onto it for the LONGER-TERM. Short term silver price movements are not a concern when we focus on the disintegrating energy and economic fundamentals.
Some precious metals investors have become frustrated or complacent due to the low silver price. This is understandable because some may have purchased silver at a higher price and feel as if they made the wrong investment decision. However, acquiring physical silver should be done over a period of time and be held as a SAFE HAVEN for the future…. just like any other retirement plan.
The BIG difference between owning physical silver and most paper retirement plans, is that the value of most retirement assets will most certainly plunge in value in the future while the price of silver will likely be much higher. Unfortunately, most investors are either too impatient, fickle or lack the ability to understand this LONG-TERM fundamental setup.
Lastly, if Americans who are mainly invested in STOCKS, BONDS and REAL ESTATE, diversified into a small 2-5% allocation of physical gold and silver, it would totally overwhelm the market…. forget about the rest of the 7 billion people in the world.
Which is precisely why the MANIPULATION of gold and silver has been done mainly through psychology, rather than price. Why? Because the current algorithm pricing mechanism for gold and silver is based on their cost of production. So, to see a current $18 silver price and $1,275 is not that ridiculous if it is based upon what it cost to produce them.
But, gold and silver behave much differently than most commodities, energy, goods and services. While most commodities and energy are consumed, a lot of gold and silver are saved. So, gold and silver must be valued differently. If individuals realized the dire energy predicament we are facing in the future, they would realize it would be prudent to own some physical gold and silver. However, they are being mislead by the Mainstream media, so they cannot really be blamed.
When the markets finally crack…. the Fed and Central Banks may have one last RABBIT to pull out of the hat, and that would be a HYPERINFLATIONARY event. Unfortunately, this will not last long and will end quite badly.
Thus, when we reach this point… there is NO GOING BACK. The United States and world will look like a much different place and at that point, it will be too late to sell paper and buy gold and silver.
Geo-Political Effects on the Short Term Outlook in the Silver Prices
Starting with the developments of the past 24 hours, news that the US and Japan are strategizing military options against North Korea, should China fail to reign in the rogue state, has impacted the markets widely. Notably, safe havens such as gold and silver have spiked significantly and, in both instances, this has erased the effects of last week’s US employment data. Technical bias in silver is highly supportive of ongoing gains which may mean that it is now poised to make that final push towards the $19 handle. Less than a week ago the US struck a blow against the Syrian Regime in response to their use of chemical weapons in the ongoing crisis. Trump-era foreign policy seems to have no qualms with the use of force to project its ideals and protect its interests. Nevertheless, this in of itself is adding to the overall political risks buoying silver prices as the tangled web of alliances in Syria put the US in danger of sparking a conflict with an increasingly firm-handed Russia.
Given there is no shortage of fundamental momentum behind silver, the metal may finally be able to recruit the support needed to push past the 18.47 handle that has, until now, capped upsides. If this is the case, the broader ABC wave should complete which would be in line with the highly bullish moving average bias and the neutral RSI readings. Additionally, that MACD signal line crossover that had some traders worried yesterday looks as though it may be a little bit of a false flag and can likely be ignored.
Ultimately, the combination of the fundamental and technical biases should see gains extend over the coming weeks. Indeed, should the state of global politics not improve in the medium to long-run, this rally could push beyond even the $19 handle that has been forecasted on a technical basis.