Silver Price Forecast: Short Squeeze First Target

A brewing silver short squeeze has been hot in the news recently. On the heels of the Gamestop (GME) short squeeze which sent the price of the troubled videogame retailer higher by nearly 2,000% in six weeks, the Wall Street Bets Reddit group has now turned its attention to the silver market via the Wall Street Silver forum. With a membership of 32,600 investors and growing, there certainly appears to be some firepower behind the growing possibility of a short squeeze in the physical silver market.

High Premiums for Silver

Investors are choosing physical bars and coins, as well as ETF’s, in order to attempt to squeeze the major wall street banks which are short silver on the New York COMEX futures exchange. As evidence, we note that most major online retailers are experiencing shipment delays of several weeks, and premiums on coins and bars are running 30% - 40% above the spot price of silver! That is an incredible premium to be paying for physical delivery of silver.

Unless one currently owns no physical silver whatsoever, in which case the establishment of a core position is essential, we do not recommend paying such high premiums to accumulate the physical metal. Other ways to acquire silver have thus become popular, such as the Sprott Physical Silver Trust (PSLV), which has witnessed its highest all-time monthly volume as of February 22:

What will be the result of this developing short squeeze?

While silver rising back to $50 again (the 2011 peak) and possibly beyond may fit in with our long-term expectations, let us focus on the intermediate-term projection for the pending squeeze that we can calculate based on observable data. For that, we turn to the charts.

Silver Price Forecast

Spot silver has been within the midst of a 6-month consolidation dating back to August, 2020.

The peak from August nearly hit $30, while the peak from just two weeks ago touched $30.05 to be precise. Meanwhile, the low from the consolidation in September was $21.65.

This gives us an amplitude of $8.40 for the still-ongoing consolidation. We must remember, for each buyer of silver, there is a seller. In other words, there are $8.40 in amplitude of short sellers who have sold silver over the previous six months, hoping for a further decline.

The ongoing consolidation with the $8.40 amplitude can be seen below:

What does the $8.40 consolidation amplitude tell us about the future of silver prices?

When the price of silver finally rises above the August 2020 and February 2021 peaks, there will be a rapid attempt by those who shorted silver during the consolidation to cover those positions. In sum, we should expect a squeeze in buying pressure to be roughly equivalent to the amount of short selling which occurred during the consolidation.

In other words, $8.40 of buying pressure should come into the silver market after the recent peaks are broken.

Silver Target

Where does this leave silver over the long-term perspective?

The resulting short-squeeze should see the metal achieve a target of $38.45, defined as equal to the amplitude of the consolidation added onto the breakout point:

We reiterate that this will be an intermediate-term target only. Silver may or may not continue on toward higher targets approaching $50 or beyond over the coming months. However, for this analysis, we want to focus on a realistic high-probability target based on a definable pattern which is emerging in the market.

Takeaway on Silver

Upon breaking $30.05, a likely target for silver will thus be $38.45. Those using leverage in the silver market (options or futures traders), or those investing in the silver mining sector, may look to take partial profits and/or initiate defensive positions at the pending target if confirming indicators present themselves.

Physical metals buyers should wait to see if a pullback materializes once this level is achieved.

At www.iGoldAdvisor.com, we constantly monitor the precious metals markets for realistic and high-probability targets. We are currently positioning private clients and research subscribers for the move in silver ahead.

In sum, above $30.05 silver has a clear shot toward the upper $30’s before any significant correction may occur. Investors should be using retracements over the coming weeks to finalize positions before the next leg of the short squeeze begins!