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Gold and Silver Investor Sentiment Sours Exactly when a Turnaround is Imminent

Gold and Silver Investor Sentiment Sours Exactly when a Turnaround is Imminent

Gold and Silver Sentiment Sour? A Turnaround is Imminent!

So here we are once again, at the tail end of a grindingly-protracted gold and silver market correction that has led a lot of people to give up altogether and exit their longs in the futures markets or even sell their mining stocks. Speculators have become highly pessimistic about the precious metals.

Silver prices under $16 – a “once-in-a-decade opportunity”

Silver isn’t likely to offer a great return this year but at under $16 an ounce, investors can afford to stock up on the precious metal ahead of what at least one analyst believes will be a “once-in-a-decade opportunity.”

Futures prices for the white metal, based on the September contract SIU7, +1.17% settled at $15.425 an ounce on July 7 after a short-lived selloff analysts referred to as a “flash crash.” That was their lowest finish since early April of last year.

Taki Tsaklanos, lead analyst at Investing Haven, told MarketWatch back in late April that silver prices likely peaked for the year at $18.514 an ounce on April 17—and so far, it has.

“We are bearish for 2017,” he said recently.

“But essentially, we see a once-in-a-decade opportunity in the gold and silver market,” Tsaklanos said. “2016 was great in the first months but we believe that, after the ongoing selloff in precious metals, 2017 will be setting up for a long-term bottom and, hence, a great buying opportunity.”

A yearly decline in silver production for the first time since 2002 and a supply deficit over the last four years, are also likely to contribute to a bounce back in prices.

“Now that we have fallen below $16, we are back in what I believe is an extremely attractive accumulation zone,” Peter Spina, president and chief executive officer of, told MarketWatch.

He said prospects for silver are “looking significantly stronger” in the second half of the year.

Commercial traders such as banks have engaged in “huge short covering,” moving into more bullish positioning, according to Commodity Futures Trading Commission data, he said. Meanwhile, “the more momentum-driven funds have sold off a large chunk of their paper silver to them,” he said. “History has shown this to be a bullish indicator for the coming reversal in silver prices.”

Spina said he doesn’t expect silver to “do anything big,” like climb above $20 this year, but it could “easily jump a few dollars from here, which is quite significant in percentage terms.”

Silver prices could still “dip briefly to low or sub-$15 on a final wash out,” warned Spina. “But the risk/rewards here favor adding to physical silver positions and adding to some of our favorite silver miners.”

“The bullish price scenario for silver keeps growing over time and within the next couple of years, I believe we will see silver prices target the mid-$20s, with a possible spike towards $30,” said Spina.

Taking gold’s lead

Gold prices have climbed so far this year, but the rally was trimmed in recent months, taking silver with it.

Silver has posted a decline of 1.7% so far this year, compared with a year-to-date gain of 5.7% for gold GCQ7, +0.78%

Silver tends to trade in tandem with gold, but its moves are often much more exaggerated given the fact that it’s a much smaller market, making it a lot more volatile.

Increases in U.S. interest rates and expectations for higher global rates have “combined to keep a lid on precious metals prices,” said Chris Gaffney, president of EverBank World Markets. Silver prices, in particular, first turned lower for the year on July 5.

Gaffney said silver could “easily see” $14 in the near term.

Still, silver’s recent declines are particularly surprising, Gaffney said, given “multiple geopolitical risks,” especially North Korea, which would be “expected to generate some safe-haven buying.”

“Perhaps the big moves in cryptocurrencies could have something to do with the loss of interest in the precious metals as speculators have turned to cryptocurrencies for alternatives to traditional ‘fiat’ currencies,” he said.

Fundamental support for silver prices

Fundamentals for silver, meanwhile, hint at the potential for higher prices.

Silver supply in 2016 was at its lowest since 2013, silver production was down last year for the first time in 14 years, and the market saw a supply deficit for a fourth year in a row in 2016, said Julian Phillips, co-founder of Gold Forecaster, citing data from the Silver Institute.

Silver “ignores its fundamentals or it would be now climbing,” he said.

Mine supplies may get even tighter after Tahoe Resources Inc. TAHO, +0.34% earlier this month said it halted operations at its Escobal Mine in Guatemala, one of the largest silver mines in the world, after its license to run the mine was suspended in a dispute with an anti-mining organization.

Whether that impacts the silver market will depend on the length of the suspension, said Gaffney. If the closure drags on to the end of the year or longer, “then it could have more of an impact as this mine represents about 8% of the total global mine output,” he said.

For now, however, analysts aren’t too upbeat on silver’s prospects overall for this year.

Gaffney expects precious metals to recover a bit through the end of 2017, with end-of-year returns in the “mid-single digits.” – Myra Saefong

Silver Undervalued Against Everything Now!

Yes, the Trump Jr. “news” provided the catalyst for Precious Metals’ long overdue bottom.  Likely, as the COMEX “commercials” were aggressively covering additional shorts – starting with what in hindsight can be viewed as “Operation July 4th week silver slam.”  During which, gold and silver prices were mauled – starting on the painfully thin July 3rd half-day, amidst a veritable tsunami of PiMBEEB news, with no other market materially moving.  To that end, I’m looking forward to Friday’s COMEX COT, or Commitment of Traders report, which will show us just how much more (naked) short covering was done amidst Monday’s paper carnage.  Not to mention, Thursday night’s silver “flash crash”; Friday’s post-NFP PM bashing; and Monday morning’s ugly early action.  When, following the 192nd “Sunday Night Sentiment” raid of the past 202 weekends, silver opened paper COMEX trading at a year-plus low of $15.20/oz.  This, during a week of particularly bullish physical PM news, such as India’s massive May gold purchases; seven percent of the entire COMEX registered gold inventory being withdrawn in a single day; and the world’s second largest silver mine, Tahoe Resources Escobal Mine in Guatemala, being shut down indefinitely.

On a morning when Janet Yellen is scheduled to give her semi-annual “Humphrey-Hawkins” Congressional economic testimony – in which the only material “news” is the city of Hartford, Connecticut being downgraded to junk status (get ready Chicago and Trenton, you’re next!) – I wanted to revisit my December 2016 article, “silver fundamentals versus the base metal bubble.”  The reason being, that if the dislocation between base metal and silver prices was egregious then, it’s far more so now.  In fact, comparing the financial landscape then – just after the election, when the newly fabricated “Trump-flation” meme was driving “markets”; not to mention, the equally fallacious premise that higher inflation is bad for Precious Metals; silver has not only become significantly more undervalued relative to base metals, but EVERYTHING ELSE!

Yes, the entire Precious Metal space has become – care of historic manipulation, such as the “Operation July 4th Week Silver Slam” – as undervalued as at any time in memory, with only the (Cartel-promulgated) spike-bottom low as the 2008 Financial Crisis commenced being comparable.  However, in silver’s case, the “historic valuation anomalies” I wrote of earlier this month are even more pronounced – given that they are not only relative to the broad markets, but other Precious Metals, too.

Here’s a table comparing silver with a variety of other markets.  In the first column are values at the time of December’s “silver fundamentals versus the base metal bubble” article.  I mean, just how ridiculous can this dislocation be!

For one, base metals have been flat to higher – despite not only plunging economic data, but a 10% decline in the broader CRB Commodity Index!  The dollar has been slaughtered; interest rates are unchanged; and economic data – including housing starts, a major component of base metal demand – has significantly weakened.  And yet, base metals are higher, and silver – of which, nearly three-quarters of mine supply is utilized for industrial purposes – 5% lower?  In fact, the only “improvement” since early December is in the blatantly rigged “Dow Jones Propaganda Average”; as, per what I discussed last month, “unfathomably bald-faced lies depict a Fed desperate to promulgate a dead meme”; and consequently, put off the “most overdue financial crisis in history.”  Which includes lying through its teeth about the “recovery” that doesn’t exist – even in its own economic reports; and relentlessly propping the Dow, via the ubiquitous “dead ringer” algorithm, during its 10:00 AM “open market operations.”

Otherwise, essentially all political, economic, and monetary news flow suggests higher silver prices; let alone, now that the shutdown of the world’s second largest silver mine ensures the production decline that commenced last year will accelerate.  Not to mention, versus gold – as unfathomably, during a period in which base metal and gold prices rose, silver declined 5% – resulting in a dramatic increase in the gold to silver ratio, from 70 in December to a nearly all-time high 77 today.  I mean, the only other times the gold to silver ratio has traded this high since the Precious Metal bull market commenced at the turn of the century were in the 9/11 aftermath; the height of the 2008 Financial Crisis (when physical silver prices were nearly twice the Cartel-suppressed paper prices); and the sector’s likely ultimate bottom at the end of 2015.

My friends, we are on the cusp of an historic inflection point in history – politically, economically, and monetarily.  Fraudulent memes are rapidly dying, regarding a great many things – from the omnipotence of Central banks, to the power of governments, the stability of “money,” and the ability to mask irreversible economic rot with money printing, market manipulation, and propaganda.  Let alone, in physical markets like Precious Metals and commodities; the former of which, are amidst chronic supply deficits; and the latter, chronic oversupply.

Consequently, the urgency to PROTECT your assets has never been stronger; and in the case of silver, not only is it as undervalued as ever on a nominal basis, but relative to essentially everything else! – Andrew Hoffman


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