WILD Silver Market Price Swings, What to Expect Next... / Commodities / Gold and Silver 2021

As extreme marketconditions drive tremendous volatility in silver spot prices,buyers are exerting unprecedented pressures on retail physical bullionproducts.

Record-setting buyingvolumes pushed the silver price toward a multi-year breakout on Monday. Silverhit an eight-year high of over $30/oz during the day, closing at $29.41.

On Tuesday, however, thesilver market got slammed – along with stocks that had been heavily bid upbased on internet discussion board campaigns. As GameStop (GME) shares suffereda 60% meltdown, silver plunged by close to 10% to just under $27/oz.

As of Wednesday morning,silver has recovered slightly to $27.15. Meanwhile, coins, bars,and rounds continue to be in very short supply, and premiums are elevated.

For an in-depth discussionon the developments in recent days, watch my interview on Arcadia Economicshere.

What happens next? Was therecent price spike and demand surge in silver a fleeting Reddit-driven fluke?

Much of the mainstreamfinancial media’s coverage of the moves in the silver market has focused on the“WallStreetBets”angle – implying silver is just another ticker symbol subject to being pushedhigher by day traders for no fundamental reason.

In fact, real physicaldemand for the white metal is manifesting outside of Robinhood accounts. Whileexchange-traded funds linked to silver saw enormous inflows, so did bulliondealers. By Monday, inventories of most common silver bullion products werecleared out.

Buyers of coins, rounds,and bars aren’t the sort to trade in and out of their holdings based on dailyblips. By and large, they are long-term holders who believe in the fundamentalvalue of physical precious metals as contrasted with nontangible financialassets that trade on exchanges.

If you have recently boughtor plan to buy silver solely because you hope internet chatter will quicklydrive prices higher, then quite frankly you may be making a mistake.

The fundamental case forhigher silver prices has nothing to do with GameStop or other faddish tradingfrenzies.

Instead, the case forinvesting in silver is based on the realities of exploding U.S. currencysupply, COVID-strained mining output, rising industrial demand from solarenergy, electric vehicles, and other high-tech applications, and, yes, risingretail demand for physical bullion.

That said, there is also acase to be made for a “short squeeze” event that breaks the overhangingconcentrated selling pressure (manipulation) in silver futures. This is a pointmany in online trading communities have been harping on.

They are not wrong to doso.

After Monday’s big pop insilver prices, the CME Group sprung into action to help short sellers. ItsCOMEX futures exchange announced it would raise margins on silver trading by18%.

That had the predictableeffect of forcing traders to pare back their positions. And as prices began tofall precipitously, some sold in a panic.

Newcomers to silver tradinglearned a hard lesson. Those who control the levers over the paper silver marketare still, for now, able to manipulate the market – sometimes openly in thecase of the CME’s margin tightening; sometimes secretly in ways that areillegal.

“Over the past few years,some of the biggest banks in the world have paid hundreds of millions ofdollars in fines for rigging and manipulating the precious metals markets,”notes Zacatecas Silver CEO Bryan Slusarchuk.

In an interview with FoxBusiness earlier this week, Slusarchuk provided some insider context that is normallymissing from Wall Street-centric discussions of gold and silver.

He pointed out that “thepaper silver market is hundreds of times the size of the actual market for physicalsilver. And what you continue to see are these open contracts get kickedfurther and further down the road with most participants in the silver markethaving no real ability nor inclination to ever deliver physical.”

“Now physical is in shortsupply,” he added. “And that leads us I think to the potential for the motherof all short squeezes.”

In such a scenario, the“squeeze” would be driven by demand for delivery of actual physical silver.That’s what many newbies who recently jumped into exchange-traded instrumentslinked to silver or mining companies are missing.

It’s not enough to targetpaper markets with “buy” orders. In order to truly break the backs of the shortsellers, they need to be confronted with a surge in real physical demand.

The scenario is starting totake shape, but it won’t play out fully in a matter of just a few days. Silverinvestors would be well served to avoid succumbing to either extremes of greedor fear during periods of heightened market volatility.

Unleveraged longs enjoy thebenefit of being able to play the long game, riding out the wild swings withintheir emerging major bull market.

As mining executive BryanSlusarchuk put it, “I hope that the ultimate outcome here is that a newgeneration of investors and speculators realize that silver is money. Silverwas money thousands of years ago. Silver remains money today. And silver willbe money in a thousand years from now.”

Stefan Gleason isPresident of Money Metals Exchange, the national precious metals company named 2015"Dealer of the Year" in the United States by an independent globalratings group. A graduate of the University of Florida, Gleason is a seasonedbusiness leader, investor, political strategist, and grassroots activist.Gleason has frequently appeared on national television networks such as CNN, FoxNews,and CNBC, and his writings have appeared in hundreds of publications such asthe Wall Street Journal, Detroit News, Washington Times, and National Review.

© 2021 Stefan Gleason - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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