I seldom trade the futures market for gold and silver anymore, but I watch those markets regularly. What I look for is what is happening right now. The manipulators have been sucking blood from the turnip and I am thinking there is not much blood left – that we are getting real close to a bottom. I am writing this at about noon, October 8, 2014.
The situation is silver is particularly interesting. The connection between the paper market (COMEX) and the market for the metal itself is seriously out of whack. The cost of producing silver is more than the current paper futures price (just over $17 per ounce) – and the supply of silver is tight. That combination is indicative of a likely adjustment in the very near future.
Take all of the above and toss in the fact that there have been unusual movements of physical silver of late (the silver ETF has had massive inputs of the metal) and I can make a pretty good case that the manipulators are positioning themselves for a big move upward. The recent depression of silver has been a case of commercials buying as the price falls and the tech funds selling and shorting. Currently the tech funds are massively short silver. It would appear that the shepherd has gathered just about all the sheep he can expect for the coming slaughter.
I do not know what the future holds, but the probability of silver being driven down further seems small. On the other hand the possibility of a very large move to the upside is within reason. The futures market is so volatile when these moves take place that I just had to swear off trading them. But physical metal is still a viable means of playing these moves. And buying at – or very near – the bottom for a commodity usually results in a good trade. In my opinion, silver at the current price, is a screaming buy.
The next week or so should be really interesting in the market for silver. If I am right we will see a pretty significant correction in the price of the shiny metal.