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Silver Supply & Demand Still Strong at $29, 11 Aug

Summary:
And, *bam!* Just like that, silver sells for . It seems so simple, so obvious, so black-and-white. Seeing the price chart in recent weeks, you wouldn’t know that silver speculators have been waiting for this moment since March, 2013 (when silver crossed the line to the downside, and has not looked back until now). After the epic blow off top in 2011, the price of silver was in a downward trend for many years. One might have thought the low price occurred at the end of 2015 below . But during the initial shock of COVID-19, the price of silver fell below . Since then, it’s almost double and a half. The Last Nine Years All during the long silver bear market of 2011-2020, whenever there was a price blip, two things were predictable. One, most silver analysts and dealers would

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And, *bam!* Just like that, silver sells for $29.

It seems so simple, so obvious, so black-and-white. Seeing the price chart in recent weeks, you wouldn’t know that silver speculators have been waiting for this moment since March, 2013 (when silver crossed the $29 line to the downside, and has not looked back until now).

After the epic blow off top in 2011, the price of silver was in a downward trend for many years. One might have thought the low price occurred at the end of 2015 below $14. But during the initial shock of COVID-19, the price of silver fell below $12. Since then, it’s almost double and a half.

The Last Nine Years

All during the long silver bear market of 2011-2020, whenever there was a price blip, two things were predictable.

One, most silver analysts and dealers would publish tons of material promising a new bull market, silver going to the moon, etc. Two, the fundamentals would invariably soften. Most of those price blips were caused by speculators playing with leverage in the futures markets.

Until now. We have three proof points to offer.

One, as we have shown, the fundamentals (i.e. the basis) are hardening with rising price. That is not at all the pattern of the last decade.

Two, the price rise has been larger in magnitude.

Three, this rise has lasted longer than any of them (with the exception of early 2016, which this one will probably surpass next month).

And Now This

Another unprecedented phenomenon has occurred. Last week, we published four articles about silver. We don’t normally write more than one a week. But the price of silver does not normally skyrocket like that.

And now we’ve written another article, after the silver price moved up another 6%.

Let’s Cut to the Chase

So here’s the intraday chart showing price and basis for Mon Aug 10.

We’ve labelled six phases:

I. For the first eight hours of the (London) day, the basis is falling. That is, silver is becoming less abundant to the market. During this time, there is a slight rise in price.

II. A 1.5% increase in basis accompanies a 55-cent blip in price.

III. A 2.5% decrease in basis accompanies a 25-cent dip in price.

IV. Sideways

V. A 1.65% increase in basis accompanies a $1 blip in price.

VI. Basis goes up and down with price.

Overall, the trading action ends with the price of silver up $1.10 and the basis close to unchanged.

The Big Question

This could be a sign that the fuel in this rocket is almost sputtering. But even that comment would have to be tempered with the observation that silver became no more abundant in the market even with a big change in price.

Given that momentum has now taken hold (i.e. chart traders are buying), the lack of a change in supply and demand fundamentals in the face of this much buying is a further bullish signal.

Meanwhile, Monetary Metals’ clients will continue to earn a yield on their silver (and gold!), paid in silver and gold.


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Keith Weiner
Keith Weiner is CEO of Monetary Metals, a precious metals fund company in Scottsdale, Arizona. He is a leading authority in the areas of gold, money, and credit and has made important contributions to the development of trading techniques founded upon the analysis of bid-ask spreads. He is founder of DiamondWare, a software company sold to Nortel in 2008, and he currently serves as president of the Gold Standard Institute USA. Weiner attended university at Rensselaer Polytechnic Institute, and earned his PhD at the New Austrian School of Economics.

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