Silver: Not Time to Worry

April 21, 2016

As Bill Holter says, “Last Friday we got horrifying (from a contrarian standpoint) COT numbers with nearly record numbers for commercial shorts. With history as any guide, gold and silver should have already been slaughtered, they have not been.”

From Steve St. Angelo: “Why are the Chinese Stockpiling Silver? Big Price Move Coming?”

From Gary Savage:

“There is one reason and one reason only why gold generated a massive bear market. The Fed needed to do QE3 and keep the stock market inflated. They didn’t however want that liquidity to flow into the commodity markets, spike inflation, and destroy the global economy, as happened in 2008.”

And, with a little help and an over-bought condition, gold and silver were smashed from 2011 – 2015.

“But by the fall of last year the energy industry was in trouble and on the verge of triggering another financial crisis and many over-leveraged energy companies were on the verge of going under. The Fed desperately needed some commodity inflation.”

And, with a little help and an over-sold condition, gold and silver have rallied nicely since their lows in December 2015.

From Tom Cloud (via email):

“The Chinese have opened their physical gold and silver markets TODAY. [April 19] China will have a lot of control in pricing, thus hurting the companies that have been shorting the market.”

“Physical delivery of silver from the COMEX could cause defaults [including cash settlements].”

“The dollar is down 5% in just three months. I believe that the dollar will have a significant drop before the end of the year.”

“…I believe silver will do as well [in 2016] as it did in 2010 when it went from $17.20 per oz. to $30.60 per oz.”

“Currently there is not a more important investment in the world than silver. If things deteriorate in world economies it is the ultimate safety vehicle.”

Watch his video on silver!

Silver prices should rise, but as we know from watching markets for the past 30 years, futures and derivatives can distort markets, both higher and lower. Never underestimate the craziness of politicians or central bankers regarding what they will do to retain power and influence. But most of what they must do to inflate stock and bond markets – print various currencies – will drive currencies lower and push silver and gold prices higher.

ONE HUNDRED YEARS OF HISTORY – simplified version:

Central bankers want more debt, more currency in circulation, and mild to moderate inflation. Politicians want to spend more, buy votes, receive payoffs, and take care of their friends. The military wants another war. That triumvirate of money interests, politicians, and the military practically guarantees more debt and higher prices. Examine the following chart of US national debt (in $ millions) and average annual silver prices – both on log scales:

J-100Nat_Debt

Note that debt and silver prices clearly increase exponentially. The dashed lines show Excel calculated exponential trends. More debt means higher silver prices – on average. Given our triumvirate above, we will have more debt and much higher silver prices in the next decade.

Examine the same data over the past 30 years. Debt and prices increase exponentially and silver is due to rally for several years. More wars, debt, social programs, and desperation will accelerate the rise.

J-30Nat_Debt

QUESTIONS TO ASK:

Would you rather hold – for the next ten years – $20 bills in cash, a ten year T-Note yielding next to nothing, a Japanese ten year note guaranteeing negative interest, or silver coins in safe storage outside the banking system?

Would you prefer to believe 100 years of history (increasing debt and prices) or the promises of politicians in an election year?

Do you trust the global financial system with roughly a 1,000 $ trillion in derivatives, massive leverage, less than honest reporting, and a history of screwing the people … or silver coins?