Silver: Mixed May Expectations

There are fewer than two weeks to go before the next test of the Cabal’s resolve to keep on suppressing the precious metal prices. That is, if the REDDIT Ape-inspired movement to effect a bear squeeze on silver – and in effect also on gold - could gain enough momentum during April to make a worthwhile test. While the movement started with the Apes, there has to be much wider support to make it a true test that would have a good chance of success. The Cabal will not relent, except when holding their short positions will unduly place their financial health at risk.

A brief look at the global COVID cases and daily deaths compared to US daily deaths shows that the pandemic is still rife in much of the world, but is tapering off in the US. It nevertheless remains a mystery why the US daily death rate is high from Tuesday to Friday, but substantially lower over the weekend and on Mondays. Surely it is not that the ill prefer not to spoil the weekend for their nursing staff and hang onto life until the staff have recovered from their weekend of lighter work? There is a similar weekly cycle in the global numbers, to prove that this regularity is not limited to the US.

Strange, but with no easy explanation that makes sense. While the decline in deaths is good news for the US, global statistics – with the usual lag between the number of cases and the number of deaths – remain cause for concern.

As mentioned before and as discussed in the social media, the effort by the Apes to begin a short squeeze in silver by removing as much physical silver from the market as possible is under way. Into the end of March, with April not a major silver month, the prices of both metals were hammered incessantly to reduce the number of in the money options and the contracts that would stand for delivery. With May being a major month for silver – also the month when the 2020 bull market in gold and silver resumed – the Comex end of month period in April will provide an early pointer to the success of this venture.

Actual data on which to estimate the amount of silver that is being removed from the market in this manner are not readily available. However, it seems logical to expect that the flow of silver into the retail market has to be substantial over an extended period before the global silver market will suffer sufficient shortages to create a major problem for silver deliveries. Therefore, the risk of defaults at the end of April should depend more on the number of contracts standing for delivery than on the decline in the silver available in the retail market.

If the REDDIT campaign extends and can marshal wider support from major investors who accumulate silver in over the counter transactions and from other sources, then we could still see the Cabal in trouble. Even if they could shift their own major short positions to the hedge funds and thereby reduce their exposure to a short squeeze, it would only transfer the risk to the funds should the price of silver begin to increase. If the hedge funds then start to close short positions in the open market where there are few sellers, COMEX would still run into a default situation in due course.

Whichever way this develops, the increased focus of attention on silver fundamentals is creating an awareness that will end the manipulation of the price.

The two sets of Barchart CoT charts below show the net positions of different traders’ classes in silver contracts for the past four years. The upper pair is as of Friday and the lower is from two weeks ago. Swap Dealers are grouped with the Commercials (red line in the upper chart) and presented separately as the green line of the split chart. The large specs (green line in upper chart and dark line in lower of the split charts) effectively are counter parties for the commercials.

The interesting change over the past two weeks is the the Large Specs, which had reduced their net long position from two weeks ago, clearly have changed course and are going more long again, effectively taking profit on their short positions. Doing so has compelled the Commercials to go more short of silver during the past two weeks. If this trend continues through the coming week, the Big Banks will have to repeat the sustained attack on the metal prices of late February and March as April nears its end. The success of a new attack will be largely determined by how many of the buyers of low priced May contracts will stand for delivery.

On 1 April, there were 154 987 silver contracts on Comex, of which 119 708 were for May. On Friday, the preliminary report had silver OI of 170 302 contracts of which 83 309 were for May. The OI had increased by about 15 000 (10%) yet the number of May contracts had declined by about 36 000 (30%). These changes could suggest that buyers of May contracts did not want to risk being caught again by the regular end-of month attacks on the metal prices, which they anticipate to be even more severe at the end of April than the previous months. They preferred to use lower prices in early April to switch their positions out to later months.

Does this imply that the silver rally will fizzle out again in ten days’ time, as had been the case the previous two months? That would largely depend on how high the prices of gold and silver extend their current recovery and how many silver longs then stand for delivery. Another factor will be how many new and old silver bulls are preparing the necessary funds to set an ambush for the Big Banks should their attacks succeed in driving the price of silver again to the recent lows, or even lower. There has to be a growing realization that the suppression of prices has a relatively short remaining window of opportunity to be successful and that one should accumulate contracts while prices remain so low.

Dollar index. Last 61.544

The recent rally in the value of the dollar failed to break above its bear channel JK and turned lower right at line K. The break above the important trend line P then failed to hold, but the dollar held above the support of line F. A break this week to below line F (91.10) will confirm that the dollar has a bearish bias which, of course, might not last long if the powers that be decide a strong dollar policy is still both viable and desired.

Euro–Dollar

Euro–dollar, last = $1.1983 (www.investing.com)

The strong dollar briefly forced the euro below the bear channel UV and the support of line D. That break saw the start of the euro’s recovery which also has the European currency now back into bull channel WXYZ, which has to be maintained for the bull to resume.

The euro ended the rally on Friday still within bear channel UV. More dollar weakness is needed for the euro to break above the bear channel and to have an opportunity to rally further.

DJIA daily close

Various commentators have been predicting a collapse on Wall Street for some time, but money speaks louder than logic or analysis. As long as funds flow from the Fed and government to the banks and from the people to the fund managers, Wall Street will have the oomph to stretch higher.

Until, of course, it cannot. But ‘when?’ would be like guessing how long is a string of which only one end is visible.

DJIA. last = 34200.67 (money.cnn.com)

Gold London PM fix – Dollars

Gold price – London PM fix, last = $1774.45 (www.kitco.com)

The break below well established bull channel JKL was reason for concern, but it did not last long. The support along line L held on 21 March, but on the important 30th of March it broke lower to be fixed in London at $1683.95, to rebound higher and back into channel KL on April 1. It is now approaching the key resistance at line G. Friday’s closing price at $1779 is within reach of line G at a PM fix of $1784.

This week should show whether the selling pressure on the metals is to be reduced to prevent too many more contracts being sold at too low prices. The Cabal has to be careful that this accumulation at low prices, which – as discussed earlier – has already been happening, but with now a focus on the later contract months, does not create a problem for them later in the year.

Euro–gold PM fix

Euro gold price – PM fix in Euro. Last = €1481.13 (www.kitco.com)

The attacks on the prices of the precious metals had the euro price of gold in a seven month bear market that dragged the price lower across the full width of bull channel JKL. The declining trend held accurately below the resistance of line G, with the third – and hopefully successful – attempt to break higher on Friday.

On two occasions, the euro price of gold briefly dipped below the main bull channel. Now, if there comes a break above line G, it is possible for the long term rising trend in channel JKL to resume. Given that the dollar could weaken further against the euro, this implies that the dollar price of gold has bottomed and is set to increase at a faster rate than a strengthening euro.

Silver Daily London Fix

That the price of silver broke much lower below its bull channel JKL than what gold had done in either dollars or in euro, is no surprise. Silver also took longer than the gold or euro price of gold to recover into its established bull channel. Whether enough buyers took the opportunity to load up on silver, be it the metal itself or derivatives, will be revealed later, perhaps as early as the end of April.

Now, with the recovery into channel JKL and the break above line R, we can hope that the price will build momentum to withstand the attack that is bound to come during the next two weeks.

Silver daily London fix, last = $26.14 (www.kitco.com)

U.S. 10–year Treasury Note

The yield on the US 10-year Treasury note has now followed a much steeper gradient in 2021 than during the earlier part of the new bear trend in 2020. This trend followed the main bear channel JKL until the end of that year and then accelerated to hold just above line G, with its gradient steeper than that of channel JKL by the Fibonacci ratio. The reversal lower from above line F ended right at line G and it remains to be seen whether there will be a break lower or a rebound to resume the bear trend.

U.S. 10–year Treasury note, last = 1.590% (www.investing.com )

West Texas Intermediate crude. Daily close

WTI crude – Daily close, last = $63.13 (www.investing.com )

After breaking a little above the main bear channel XYZ, the price of crude started to consolidate near the top of the bear channel around lines R and Z. A recent break back into the bear channel XYZ has failed to hold, but resistance along line R is still in place. Bull channel JKL is still intact and has not been challenged during this period of consolidation. The outlook therefore remains bullish, with inflationary forces from the price of energy to continue to mount.

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