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Real world on silver (from IKN649)

For those wondering how this desk sees the metal and its prospects, please find below the intro op-ed from IKN649 dated October 31st, i.e. two weeks ago. The only editing out is the name of the silver trade we currently have open (in which I am long, strong and not selling soon) and, for what it’s worth, that trade is 36% 37% 38% (EDIT: having a good day) up since coverage started in IKN648 three weeks ago. It’s all well and good to spout and pontificate on silver, what matters is buying low and selling high. The IKN Weekly is good at that and has 12 years of successful publication to prove it.

Isn’t it about time you thought about the silver market the way adults do and leave the sophomore stupidity to Twitter Morons? Read on:

Real world on silver

Before we immerse this edition in copper (once again), a few slightly overdue words on the house position for silver going forward and for the TL:DR, as silver doesn’t look like going any lower than the bottom of its current trading range, we can expect a constructive price market and eventually, a price breakout when demand finally meets expectations. We begin with a silver chart:

The long-term chart takes in the breakout moment we called badly in mid-2020, but since then the house position on silver has improved:

  • We rightly mocked the “silver squeeze” nonsense in early ’21, an episode that exposed several self-styled market gurus to cruel reality.
  • We correctly forecast a tight trading range for the metal in the Biden era. The focus is of course gold and how that would revolve around U$1,800/oz as long as Jay Powell considered MMT successful . So far so good on that, but its natural leverage aside the same has applied to silver. It too has kept in a tight price range in the last six months, in-line with house expectations.
  • Best of all, in (EDIT) last week I’ve snagged an excellent trade on the metal, my purchase coinciding with a near-term ebb in the price of silver.

So with credentials suitably franked (by me :-)), today’s opening op-ed now explains why silver isn’t going any lower and let’s begin by agreeing that “they” run the metal’s price so hey, why not use that fact to your advantage for once? We know “silver is manipulated” on the futures market, we also know prices are kept on a tight rein around expiries. Therefore and by definition, until we get a sea-change in its market fundamentals that shows at Comex levels, it’s going to trade technically and inside a range that suits its controllers best. We can also state that below U$22/oz on the above chart is a bad place, if silver breaks lower it means a lot of other things do at the same time. Therefore, if you believe a recession signal is likely in the near-term you should short silver but for the rest of us, silver looks to me as in the bottom quartile of its multi-tested trading range and recovering nicely.

Looking further out, at some point I agree that real demand for silver will exceed supply. At that point the stubborn U$30/oz line might even be in-play, but it’s tough to put a date on the move as sentiment would have to build beforehand. As for breakdowns on the fundamentals of supply and demand for silver, we’ve been over data on several occasions and speculative hoarding aside, we are yet to see the type of new real-world demand that changes the future markets. For sure, pages of The Silver Institute tell us demand for photoelectrics and the fast growing solar power generation industry will need a lot of silver, but on this point, The IKN Weekly has also made the right call over time: Yes demand moves up but to date, rosy forecasts have exceeded reality and the silver supply landscape has had no issues in supplying its new customers (mostly because silver layers are made thinner). That might not be what your online Twitter guru said would happen to silver prices, but virtual reality is exactly that.

Fact is, we won’t see the paradigm price shift for silver in the real world until real supply into Comex cannot cover real contract demand, by which I mean you must phase out the noise and consider only the ~0.1% of contracts that mature to delivery. So wash your neurons of the bunkum the Weimar Preachers Of Hyperinflationary Doom tell you about open interest on Twitter (the world simply doesn’t work that way so leave others to their fantasies) and look for the signal the futures contracts will eventually offer. At some point, Ag will see the collar taken off the current price deck and the price allowed to trade higher by market that’s in control of silver and wants to remain in control.

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