News, analysis and commentary for gold traders and investors

"Be Right - Sit Tight"

Jesse Livermore
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Gold Market Wire

News, analysis and commentary for gold traders and investors

Silver Market Update

Weekend Rumors Stalk the Metals Markets

February 15, 2021 - (Gold Market Wire) - One of the fundamental tenants of trading is not to get caught up in the hype, and, to be sure, there is so much hype in the metals market you could walk across an ocean on it. The reason is fairly obvious: The retail participation in the metals markets, mostly comprised of screen jockey day traders and "preppers" who sit at home with three 1 .oz Kruggerands, waiting for the Zombie apocalypse, hound the internet 'airwaves' and scheme every possible scenario. Amongst a veritible litany of haigiography, one of the most recurrent is how Silver ETFs are about to fail to deliver metal, due to shortages. Alongside of this on is the infamous "COMEX is about to be over-run by physical delivery demands, the contract will be novated"...and as a result...(you guessed it) Silver is going to go to (pick a number over $100 here) an ounce any day now.

The only problem with that, is that thousands of metals promoters have been hyping these scenarios for about 15 years now - and it STILL hasn't happened. If trading is about timing - and it is - then these types of prognostications are truly the cant of loser-dom. But if you don't believe/subscribe to that hype, then you are in consort with the Devil (evidently). This weekend was an exemplary case. The internet was ablaze and frothing at its digital mouth about the complete and total lack of physical Silver available anywhere. Yeah, like the people who sell coins and bars don't know that turning off their on-line sales (claiming lack of supplies) for a day isn't the best promotional tool on earth?! But people will believe what they want. We at GMW find it strange that every time we are told retail physical is lacking - we seem capable of finding it with a phone call or two. What's interesting is that the low premium items (1 kilo and above) are always "out of stock" - while the high premium items, 1 oz. coins are readily available...at a spot +50% mark up. That should tell you a lot.

Could ETFs "fail on physical"? Sure they could. But if you 'back up the truck' and leverage up and/or pay ridiculous premiums for anything other than "survival money", you not going to win in the trading arena. And the TRADING ARENA, is what concerns us here at GMW. If you want to feast on hype - there are plenty of places on the internet for you to do that.. But if you're interested in trading, as in, being able to be long or short, being prone towards spread trading and arb...being able to take profit, and being able to stand aside from the market, then, this should be a place of interest for you.

At the end of last week we laid out Silver's downtrend and the challenge presented by it...and sure enough, our resistance at $27.32 is exactly where we stopped (ok-$27.29 - to be precise). The downtrend we are working with is still in play, and while some spirited attempts to get over it have been mounted - there hasn't been any success to date.

Back in the real world - not Alice's world of hype - we are still trying to get through resistance.

If we zoom in the challenge is more granular:

five attempts to close above...all failed... next time the charm?

And that is the story of Silver - for traders. If you want run down the street screaming about the end of the world and the (always) imminent failure of SLV (or some other ETF) that is fine. But here in the real world of metals trading - we are still trying to better the downtrend. Will we succeed this time? Of course no one knows the answer to that, but we would comment that it is looking increasingly likely. The reason is to be found in the opening thesis of this article. Silver is getting pushed hard in the marketplace. Hype is absolutely streaming over the Silver market, and that market is small, and unlikely to be able to withstand even a modest buying wave, without surging higher. That is why the sharks of the trading world love to trade this instrument. The public feasts on Silver - and trading against the public is where the money is. So we are long this European a.m., because we are fading the hype.

Above and beyond the hype, the Gold/Silver ratio has taken a real beating, and looks ready to make another significant move down. We could be approaching another inflection point for the ratio. That ratio has been a field day for the pros - who are pushing it on the back of retail Silver demand, and we have no intention of standing in the way of that freight train....in fact we are passengers on it. Indeed, the ratio is setting itself up to be the premier trade in the Metals market for the first half of the year. In the current environment, we don't see the ratio doing much except working its way lower - and that is how we are positioned, for the trading book. The metals market, for us, is pivoting around this ratio, and the thin-ness of the Silver market is a perfect set-up for it. We prefer size to be positioned on the ratio, rather than taking a flyer on simply buying Silver. That is the position we are holding and adding to.

doesn't come much more bearish

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