Hey gang, just wanted to provide a quick update on whats happening in Silver.
SLV 9/18 24.5C – 79
SLV 9/30 26C – 30
SLV 12/31 27C – 25
***Required Prerequisite Reading*** https://www.reddit.com/r/wallstreetbets/comments/i5m4ri/real_talk_slv/g0qcer1?utm_source=share&utm_medium=web2x
Happy Sunday ladies, get ready for Futures Open in 7hrs.
Trump turned the Money printer on yesterday, again. $400/wk (states have to pickup 25% of it) – You don’t have to pay rent/mortgage, electricity bills, or student loans through EOY. Also, he enacted a payroll tax cut that will be come a grant IF he becomes re-elected. So inflation will continue to rise, oh and the Fed is capping interest rates on bonds.
2) Metals compete DIRECTLY with REAL (inflation adjusted) interest rates. As a foundational bedrock investment of Pensions, Mutual Funds, and general portfolios – people have traditionally held long term bonds. Metals are a 0% thing, you can’t eat them and they are basically a pet rock – but they are stable at 0% forever, as metals were the ORIGINAL money. If you take the current bond rate, and subtract the inflation rate, you get -1.1%. This is causing MASSIVE moves in the market as people leave bonds and crowd into metals, as 0% beats the hell out of negative REAL rates. Currently Gold is at 2100, if we go to -2% REAL rates, Gold will be 2500.
3) Learn about Rehypothecation here (https://www.investopedia.com/terms/r/rehypothecation.asp#:~:text=Rehypothecation%20is%20a%20practice%20whereby,or%20a%20rebate%20on%20fees.). For obvious reasons, this is why housing blew up in 2008. The exact same thing is happening in Silver, but inversely. Silver has been abused for so long, but it REALLY started in 2011. The “classic” (meaning the mined ratio, or the ratio at which they pull this shit out of the ground) is around 16:1. In 2005, the ratio was 60:1. On Friday’s close, the Silver/Gold ratio was 79:1. Silver has a LONG way to catch-up. At CURRENT levels, Silver SHOULD be (assuming a 60:1 ratio) ~ 35ish. So when you look at the fact that Silver has been abused for so long that its undervalued, coupled with the Massive run on metals due to negative REAL rates, Silver has massive upside. The amount of fund inflows into Silver ETF’s is another leg up on silver as well – they eventually are going to have to officially re-value silver to reflect fund inflows and sentiment. Who knows what the new Silver/Gold ratio could end up as…but I’m betting its a LOT lower than 60:1.
4a) Banks will continue to fight us on silver, but they are losing as they were massively short, and the world blew up in their face. HSBC lost $200M in a single day, and closed their industrial metals business around 6 weeks ago ( https://www.kitco.com/news/2020-07-03/HSBC-closes-its-industrial-metals-business.html ). Soctiabank also closed down its metals trading desk around 4 months ago ( https://www.reuters.com/article/us-metals-bank-of-nova-scotia-exclusive/exclusive-scotiabank-to-close-its-metals-business-sources-idUSKCN22A2ZC#:~:text=%E2%80%9CScotia%20had%20a%20global%20call,said%20one%20of%20the%20sources.&text=A%20spokeswoman%20for%20Scotiabank%20declined,around%20the%20beginning%20of%202021. ) This means the ONLY one left is JPM, and they are still trying to fight us, but are losing and continuing to wind down shorts.
4b) The $1.5 drop we saw Thursday night was exactly this – banks reloading shorts to try and fight us, but there is a big difference. An ALL TIME RECORD amount of shorts were opened on the Comex on Thursday, around 350k contracts….a RECORD amount…and all it did was $1.50 in damage….so that should tell you where sentiment and price action is. https://www.youtube.com/watch?v=VLHLEAbZUA8&t=1s
5) Silver is about to go parabolic and nothing is in it’s way. The fed is printing money (driving inflation), people are already crowding metals, banks are unwinding their short positions (or closing their metals trading desk all together), and there are HISTORIC inflows into Silver – which will eventually cause a revaluation to the upside. I’m an EE and I love Technical Analysis, but this is 100% fundamental driven.
A retired energy trader once told me “Fundamentals will tell you why something is happening, TA will tell you when”. TA is broken on metals right now and all its doing is making algos and morons try to load shorts. Multinational global banks are literally leaving the idea of shorting metals, so maybe follow suit? These are some of the smartest people on earth and I hate bankers, but they aren’t dumb.
Have a great week.