Two articles about silver over at Zero Hedge caught our eye.
The first suggests that silver is undervalued by 25 to 30 percent. Stefan Weiler, originally writing at goldmoney.com says,
“Silver prices are trading almost 25% below the values predicted by our price model. This is the largest downside deviation we have seen in over 25 years. We believe this is the result of massive short selling in the futures market. In order to maintain this downward pressure on silver, speculators would have to continue to sell over 500 million ounces of paper silver per year. A reversal of this positioning could lead a >30% rally in silver prices in our view.”
It’s a long article but worthwhile if you are interested in the technical side of the silver market.
More digestible is John Rubino writing at dollarcollapse.com who suggests we might be seeing the emergence of a “short squeeze” in silver.
“This is almost unprecedented, and implies that a short squeeze – in which speculators are forced to cover their short bets by buying silver futures, thus forcing the price sharply higher – is a real possibility.
What does this mean going forward? Based on the extremes in the paper market the incipient short squeeze has a little longer to run. The next COT report comes out on Friday and will show where the speculators were on Tuesday. We can infer from today’s action that since Tuesday they will have closed a lot of shorts, which means we’ll have to wait for the following Friday’s report to know how many.
Longer term, this is the kind of attention-getting action that puts an asset back on the radar screens of non-true-believers. As hard as it is for us gold-bugs to imagine, the vast majority of people aren’t watching precious metals and have no idea why silver matters.
They do, however, notice when the price of something jumps.”
Much as we would love to see silver and gold start climbing upwards, I have been hearing about short squeezes and technical reasoning in the silver market for at least a decade. The one thing required for a real jump in the silver price is a public perception of erosive inflation. For all that the professional investors play in the silver market, for silver to take off you need Mr. and Mrs. Frontporch to spook at the collapsing buying power of their paper dollars. While there are plenty of reasons to suspect that collapse is just around the corner (giant deficits, ballooning national debt…) it is not here yet. In fact, the success of Trump’s tax cuts, deregulation and business-friendly stance has likely pushed that day off for at least a couple of years.