NO ONE know what the price will be on any date. NO ONE. We can guess using tons of research, charts, analysis. I can quote people that tell me pretty charts, but no one knows. I sometimes listen to the technical guys and play some miners off of the timing. I am an adult. I know what they say may not work out. I do NOT BLAME them for losses. I take the best information I can find and run with it. In mid summer, Chris Vermuellen predicted silver and gold would consolidate. I didn’t listen. I lost tons. In fall, he predicted $42 silver by Christmas. It didn’t materialize. I think he provides great information. Sometimes he’s right, sometimes he’s wrong. He was DEAD RIGHT in September and I had to tip my cap. In December, well, ouch. The nature of this stuff is to listen to as MANY people as possible and form YOUR OWN path.
This is what trying to predict the silver price is like….
I told my friend it’s like flying a plane to London from New York. You know you might get there at 11:45AM, but there could be headwinds, storms, etc where you have to adjust. You may arrive there to severe fog and be queued up with other planes circling and arrive late. What you get from a LOT of resources online are people that know EXACTLY what they are talking about, but can also be 100% full of shit at the same time. It’s no knock on them. Things change, and you have to adapt.
If you look at spot price this moment, those running the psyops campaign to break your will want you to feel like you have lost. One of my buddies is hounding me daily, more or less holding me accountable personally for what spot price isn’t going up. I’m completely unfazed about the accuracy of my analysis – but we live in a world of results. I made mention, I could be right and wrong at the same time. The Schroedinger’s Cat. However – that was sort of predicated upon them changing the rules. You can barely find silver available for purchase anywhere and somehow price drops $3? Makes complete sense. Yeah no.
Let me dissect what I missed on. Yes, I’m human. I’m not Nostradamus. As much as I feel I get right – most of this is a timing issue and not a fundamental issue. Rick Rule is worth billions and was wayyyyy early on uranium. Michael Burry shorted the housing market and he was right – but along the way many people lost faith. If we are right on the fundamentals, it’s simply getting the right timing. That is easier said than done. I also heard Rule say a quote – “I’d rather be 6 years early than 60 seconds late”. So…I’m set. I got the popcorn out. But guess what. Banks aren’t about to lose billions of dollars and buy me an island without fighting back. Right now, they are a bear caught in a bear trap and are wounded and dangerous. But…their fate doesn’t change. It just creates volatility and then you just wait for the damn thing to fall over one day. If you can understand the fundamentals are correct, but timing is tricky, then you will sleep well. If you take 10% of your portfolio and risk them on 3 week options on what me or anyone else says, you might be a kick ass wing man in Vegas, but you should not be rolling the dice on timing like that with such a high percentage of your portfolio.
What did I miss?
- At $27 silver with high levels of March open interest, coming off of the crazy weekend where we hit $30 silver, I predicted $35 silver by the end of February. Did not happen. Not even close. I feel this is in play for March, but I’m going to step away from the timing on this. I think there are some that are calling for $1000 silver who are out of their minds, and those who are ultra conservative who are not tracking the physical supply fundamentals.
- I predicted $50-$75 silver by the end of March. We are still not there yet, but this is unlikely to happen at this point.
- I put a small percent of my portfolio into $50 SLV calls for end of March. These look like they will go to zero.
But – I also want to discuss where I felt I was correct, and where we are in the bigger picture.
- My hypothesis was based on 4 phases to go through.
- Phase 1 – Buy and continue to buy retail physical
- Phase 2 – Buy PSLV and they will then buy 50m ounces. I was errant in saying they would buy it the last day of Feb futures through the COMEX, as there’s 1500 contract position limits (which is going to change to 3,000, but is 1,500 currently). They bought 29m ounces in Feb and it looks to me like they could buy 20m more ounces this month if demand is there.
- Phase 3- Industrial bar shortage puts pressure on Industrial users. ETFs buy up a lot of 1,000 oz bars and tightness is everywhere. Rick Rule confirmed that PSLV is now struggling to buy 1,000z bars. To me, this is also telling me that a LOT of industrial users are having problems sourcing. Some contend that industrial users have a year supply, but I think with JIT types of delivery these days, my GUESS is this stockpile is a lot lower than anyone wants to tell you. I BELIEVE WE ARE VERY MUCH IN PHASE 3 AND I DO NOT KNOW THE INFLECTION POINT WHICH WILL TRIGGER THE MAD RUSH. BUT IT’S NEAR. I believe the MSM is only looking at the single night event on the futures contract gig and are completely missing the story how worldwide inventory (at this price) is gone. As price rises, inventory increases, and more people will buy, and more inventory becomes available, and so on.
- Phase 4 – Price moves up when industrial users start massive orders and shorts start significantly covering
- COMEX sellers are NOT giving up their metals, but are buying in the spot market. I have been showing daily the number of contracts delivered are not matching up with COMEX inventory, which is barely moving. This is showing massive amounts of paper selling which is thus creating backwardation with the physical metals at times.
- Pattern revealed the last 6 months you had a plunge at the end of the month, and a sharp turn up at the beginning of the next month. With tightness in the 1,000 oz bar market and an ascending triangle – it seemed a reasonable analysis that in early March, price would start to rise as they sourced from the spot market.
But here is what happened….instead. Check out how this pattern diverged.
What you see above is that we expected the last few days of Feb to come down in price as they chase out those who are paper traders and “run the stops”. Those who are standing for delivery then reveal themselves, and did so at about $27. So what then happened was they needed to source from spot, but spot is $1 over for 1,000 oz bars. So you know what they did? They simply papered the market to reduce price by a dollar to then source on spot.
What you see above would lead you to think that they took 44,635,000 oz of silver out of the COMEX. They…did not. The total in the registered right now is 128,081,216.560. This is the activity for 3/4 and reported on 3/5.
However, check out the report for 2/24
This shows, essentially that in the last week and a half, there were 44.635 million ounces delivered to those standing for delivery, but only 7.6 million came off of the COMEX registered? Someone had reported that Goldman was to deliver 15m oz and they withdrew from SLV as a registered participant and handed it over.
Between 7m off of the COMEX and 15m from SLV, that adds up to 22m. Where did the other 22m oz come from? One of my theories had been that the price rises we had seen every month immediately after the drops were people buying in the spot market in large quantities. Now, I cannot tell you where this other 22m oz came from. There’s 1759 contracts remaining, or about 8.8m left.
So where all of this comes into play is that:
- 8.8m oz need to be sourced throughout the rest of this month. On most months, this is very doable with the time left.
- Sprott PSLV can buy 20m or so ounces this month
- Big players can step in to the spot market and buy up to 7.5m oz
- Industrial users may start to make longer term purchases
- The ETFs are pretty much not able to source bars, and 2 popular ones had to change their prospectus to reflect this.
I still think we are about to have an epic second half of March. But, what went wrong with my analysis? What did I miss? How do you adjust your thinking?
- I have written many times now about the 10yr that would creep up, that the Yield Curve Control would have to be implemented because with interest rates too high, not only would it cause the stock market to crash, but our government would become insolvent due to inability to service the interest on our debt. What many of us did NOT see was HOW FAST the 10yr went up, as bond prices collapsed – but also the Fed sat on their hands and did not implement measures, that we know of, to address this. My buddy, a former IRS agent and a savant at analyzing AMAZING plays, suggested this may be due to waiting until the stimulus passes. If YCC is implemented prior to passing, then everything may look amazing and it would lower the numbers that could be passed. By letting the yield curve run a little hot, this puts additional pressure on getting higher dollar amounts passed. I think this is something to consider, and once the stimulus is passed, it’s possible a very short time thereafter a form of YCC is passed. What did I miss? Me, like others, felt more bonds would be bought by the treasury to slow the ascent of the 10 year and this just so happens to coincide with the beginning of the delivery month. IF I was right, and IF this played out as it was supposed to, many banks could have gone the way of Bear Sterns. So letting the 10yr run a little hot also helped suppress metals prices and continue to be an artificial prop for the DXY.
- I didn’t predict a large bank taking 15m oz out of SLV. This is an indication to me that Goldman’s risk department didn’t exactly like the risk of shorting the COMEX and having silver in SLV with silver that “might not be there”. SLV has drawn down more. What this means, essentially, is that in the future, this reduces Goldman’s shorting power. I don’t know what they are long, but the point is that the more metal that is handed over, the less these banks can short. This means less cliff dives. Most of these banks do not want to hand over the silver – or else the COMEX would have been drained 44m already, and not 7m.
- Do NOT underestimate the amount of paper they could throw at the problem to lower prices. Many of us that are students of learning what’s going on with all of this have observed that if the paper price continues to have a divergence from physical price, this creates backwardation scenarios that hedge funds capitalize on. The number of shorts by the big 8 continues to be reported on the COT. We get it. Essentially, the only shorts in the world are the big 8 banks, and I believe it was Andrew Maguire said that it was these 8 banks against the world. What you saw at the end of February was cliff dive after cliff dive on no news, at all. There wasn’t even the excuse of the 10yr yet and they were knocking down contracts with price cliffs. I did NOT think we would “break the COMEX” – but I did think if there was 75m oz to source in the spot market this month, that this would have pushed prices up, quickly.
- The $1.9T stimulus has been delayed, which I thought would be a massive catalyst for gold and silver.
- $1.9T stimulus just passed the senate, has to go back to house and then to Biden. Should be a done deal in a few days if not sooner.
- This potentially will then also lead to the YCC being implemented
- We are only at the 6th this month, and as this month goes on, I feel the tightness will escalate daily even more with 1,000 oz bars.
I think with this whole thing, what gets me is Kitco and others are still thinking the “silver squeeze” failed, and somewhat mock it. I think anyone who has discussed this on air is woefully misinformed about what the REAL squeeze is. What they SAW was an attempt by some amateurs to get involved in the futures market, saw the price go up $3, then big banks just paper the markets to wash them out. That is the totality of what mainstream has seen.
They fail to understand that most retail is tapped out. That ETFs struggle to add product, and that 1,000oz bars with $1.00-$1.40 premium put significant stress on industrial supplies. The whole game here is simply buying physical and PSLV, and the INDUSTRIAL USERS will be the one who ultimately cause the price to rise. THEY will be the big buyers of futures, who WILL stand for delivery. If you could buy $26 on spot and pay $1 premium for $27 per ounce for 5,000 oz bars, or you can buy $26 on futures and pay $.10 premium, why would you not place a lot of orders on futures and stand for delivery? That time is coming more and more each passing day. Remember, you CAN take delivery same day in futures. Why would you go to spot when you could essentially get it for less on the current futures contract? If you see below, 162 contracts (810,000 oz) have already been bought this way.
IF you continue to see more tightness in the market, with premiums rising and futures prices falling – why would you NOT buy on the futures? This, to me, is the pressure I was referring to. You can paper all you like, but when the tightness is really felt by industrial users, this “shadow contract” number should rise throughout the month and continue through May.
I suspect the $1.9T stimulus, the YCC, and continued tightness could take us over the $30 mark. THIS is where I felt the more common fringe buyer gets involved. He understands, but doesn’t like to buy something with price going down. They want to buy at $30 for a shot at $100. I believe this round of new users happens to coincide with the billboard campaign that WallStreetSilver is running with. You can count about 40,000 people on WSS. Imagine if this campaign can engage another 50,000 to 100,000 silver buyers?
There’s a gofundme campaign setup this week to promote the awareness of silver and wealth preservation. Take a look – I’m still in the top 20 for donations, so some of you people need to bump me out of the top 100. Here’s how this works. If you have miners, and this thing DOES take off to $100 silver, you are probably looking at a 10-20x in your entire mining portfolio. More if you have options.