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Silver Poised to Surge
Zeal LLC
Adam Hamilton
3/20/2015
Excerpt:
Silver is scraping major support again, after a rough couple months where speculators left it for dead. But today’s brutal lows and extreme universal bearishness are the perfect breeding ground for silver’s next big rally. Investors are very underexposed, while speculators have big short positions that will have to be covered. So as gold reverses decisively and paves the way, capital is going to flood back into silver.
Silver’s great allure today when it is down and out is hard for most to understand. That’s because most traders mistakenly make linear assumptions in a nonlinear world. They expect today’s market conditions to persist indefinitely. But that’s not the way markets work, they are forever cyclical. The best times to buy low before later selling high are when assets are universally despised and trading at super-low prices.
And once silver inevitably reverts back to bull mode, the gains to be won by brave contrarians are vast. Between November 2001 and April 2011 in its last secular bull, silver skyrocketed 1105% higher! Over that same 9.4-year span, the benchmark S&P 500 stock index merely gained 20%. Ever since, silver has been trapped in a brutal bear that saw it collapse over 68% at worst. So it’s obviously deeply out of favor.
As a small market, silver prices are utterly dominated by investment and speculative capital flows. When traders return, their buying catapults silver higher. These characteristic sharp gains attract in even more traders, and their aggressive buying becomes self-feeding. The spark that ignites these wildly-lucrative silver surges is the price of gold. Gold prices drive silver prices, since traders look to it for their silver-trading cues.
And gold itself is due for an imminent major new upleg. As the euphoric overvalued and overextended US stock markets inevitably roll over, alternative investments that move counter to stocks will return to favor. And this coming gold buying will really be amplified by the overdue correction in the parabolic US dollar. Once gold’s rallying convinces traders it’s righteous and sustainable, they are going to rush into silver.
While there is always a fraction of contrarian investors eager to buy physical silver bullion, that is just a secondary driver of silver prices since that process unfolds slowly. Silver price action is largely fueled by inflows and outflows from two great pools of capital, the American stock markets and American futures markets. And one of the main reasons silver looks so bullish today is because both have great room to buy.
Stock-market capital flows into and out of physical silver bullion via the flagship iShares Silver Trust silver ETF, which trades under the symbol SLV. Its mission is to track the price of silver, and that is only possible if differential buying and selling pressure on SLV shares can be quickly equalized into the underlying metal itself. SLV effectively acts as a conduit between stock-market capital and silver bullion.
When stock traders buy SLV shares faster than silver itself is being bought, this ETF’s price threatens to decouple to the upside. To prevent it from failing to mirror the metal, SLV’s custodians have to shunt this excess demand into silver itself. So they issue enough new SLV shares to meet demand and keep SLV’s price in line with silver’s, and then they plow all this new cash raised directly into physical silver bullion.
Conversely when stock traders dump SLV shares faster than silver is getting sold, SLV’s price will soon break to the downside. This differential selling has to be funneled into silver itself. SLV’s custodians do this by buying back enough SLV shares to sop up their excess supply. They raise the funds necessary to do this by selling some of SLV’s silver bullion held in trust for its shareholders. This ETF is merely a passage.
SLV’s custodians have always been very transparent about these capital flows by publishing SLV’s total silver holdings every day. When they rise, stock-market capital is flowing into physical silver bullion. When they fall, stock traders are exiting silver. And not surprisingly today given the dire silver sentiment out there, SLV’s holdings reveal that American stock traders are quite underexposed to this white metal.
.......................................
View the complete article at:
http://www.zealllc.com/2015/silposur.htm
Zeal LLC
Adam Hamilton
3/20/2015
Excerpt:
Silver is scraping major support again, after a rough couple months where speculators left it for dead. But today’s brutal lows and extreme universal bearishness are the perfect breeding ground for silver’s next big rally. Investors are very underexposed, while speculators have big short positions that will have to be covered. So as gold reverses decisively and paves the way, capital is going to flood back into silver.
Silver’s great allure today when it is down and out is hard for most to understand. That’s because most traders mistakenly make linear assumptions in a nonlinear world. They expect today’s market conditions to persist indefinitely. But that’s not the way markets work, they are forever cyclical. The best times to buy low before later selling high are when assets are universally despised and trading at super-low prices.
And once silver inevitably reverts back to bull mode, the gains to be won by brave contrarians are vast. Between November 2001 and April 2011 in its last secular bull, silver skyrocketed 1105% higher! Over that same 9.4-year span, the benchmark S&P 500 stock index merely gained 20%. Ever since, silver has been trapped in a brutal bear that saw it collapse over 68% at worst. So it’s obviously deeply out of favor.
As a small market, silver prices are utterly dominated by investment and speculative capital flows. When traders return, their buying catapults silver higher. These characteristic sharp gains attract in even more traders, and their aggressive buying becomes self-feeding. The spark that ignites these wildly-lucrative silver surges is the price of gold. Gold prices drive silver prices, since traders look to it for their silver-trading cues.
And gold itself is due for an imminent major new upleg. As the euphoric overvalued and overextended US stock markets inevitably roll over, alternative investments that move counter to stocks will return to favor. And this coming gold buying will really be amplified by the overdue correction in the parabolic US dollar. Once gold’s rallying convinces traders it’s righteous and sustainable, they are going to rush into silver.
While there is always a fraction of contrarian investors eager to buy physical silver bullion, that is just a secondary driver of silver prices since that process unfolds slowly. Silver price action is largely fueled by inflows and outflows from two great pools of capital, the American stock markets and American futures markets. And one of the main reasons silver looks so bullish today is because both have great room to buy.
Stock-market capital flows into and out of physical silver bullion via the flagship iShares Silver Trust silver ETF, which trades under the symbol SLV. Its mission is to track the price of silver, and that is only possible if differential buying and selling pressure on SLV shares can be quickly equalized into the underlying metal itself. SLV effectively acts as a conduit between stock-market capital and silver bullion.
When stock traders buy SLV shares faster than silver itself is being bought, this ETF’s price threatens to decouple to the upside. To prevent it from failing to mirror the metal, SLV’s custodians have to shunt this excess demand into silver itself. So they issue enough new SLV shares to meet demand and keep SLV’s price in line with silver’s, and then they plow all this new cash raised directly into physical silver bullion.
Conversely when stock traders dump SLV shares faster than silver is getting sold, SLV’s price will soon break to the downside. This differential selling has to be funneled into silver itself. SLV’s custodians do this by buying back enough SLV shares to sop up their excess supply. They raise the funds necessary to do this by selling some of SLV’s silver bullion held in trust for its shareholders. This ETF is merely a passage.
SLV’s custodians have always been very transparent about these capital flows by publishing SLV’s total silver holdings every day. When they rise, stock-market capital is flowing into physical silver bullion. When they fall, stock traders are exiting silver. And not surprisingly today given the dire silver sentiment out there, SLV’s holdings reveal that American stock traders are quite underexposed to this white metal.
.......................................
View the complete article at:
http://www.zealllc.com/2015/silposur.htm