Three Signals For A Huge Silver Spike In 2014

Silver Spike2

While the average price of silver remains at a multi-year low, there are several indicators pointing toward a much higher price by the end of the year.  Currently, the average price of silver so far this year is $20.17, a few cents less than the $20.19 set in 2010.

I realize many gold and silver investors are a bit skeptical and worn-out from the same old BULLISH RHETORIC coming from many of the top precious metals sites.  However, it’s extremely difficult to stay positive when most investors are what I call, FICKLE TO THE BONE.

In the 12+ years I have invested in the precious metals, I’ve seen the “Highs” and “Lows” in market sentiment.  Through it all, I have never stopped trusting the long-term fundamentals of silver.  I truly believe the best is yet to come.

That being said, I have come across three indicators or should I say,  positive signals that point to a much higher silver price by the end of the year.  Of course this is speculation, but when we add them together… it makes for a pretty solid case.

The FIRST SIGNAL comes from the work of Gene Arensberg at GotGoldReport.com.  I have followed Gene’s work for years and I have to say, he is about as even-keel as they come.  Gene just puts out the data and leaves emotion aside…. no hype, just strictly business.

According to Gene’s recent article, COMEX Swap Dealers Hedging a Massive Long Play on Silver? he stated:

I’ll tell you what, people, I like the action. I guess short-term anything is possible, but this looks like as bullish a setup as I have seen in decades.

For Gene to say, “this looks like as bullish a setup as I have seen in decades”, he must have good reason.  Gene shows in the chart below, just how many short contracts the Swap Dealers have added in just the past few weeks.

GGR Swap Dealer Short

The blue line represents the amount of short contracts and the pink line is the price of silver.  As we can see, the Swap Dealers short positions shot-up to a record 57,000 contracts.  The Swap Dealers are the bullion banks, but Gene believes a lot of the new shorts were added by Goldman Sachs and not by the typical player.

At the same time the Swap Dealers were adding a great deal of shorts, the Managed Money traders (large specs, hedge funds and etc) covered a great deal of shorts and added longs…. shown in the chart below:

GGR Managed Money Silver Short

Here we can see that the Managed Money traders short positions dropped from a massive 43,000 down to below 10,000 contracts.

Again, according to Gene:

That tells us a few things, not the least of which is that The Funds (MM traders) became convinced in late June that the downtrend which had been in place since February had ended and it had been replaced by a nascent uptrend. Otherwise the trend-following Funds would have had no reason to cover their shorts so fast.

Basically, what Gene is saying is that someone took the Long side of the Swap Dealers massive short positions, and he believes they have to be HUGE to do so… in his words:

If the combined Swap Dealers have used COMEX futures to HEDGE their Swaps Book, then who in the Sam Hill took such a giant long position via swaps? Whoever it is HAS TO BE HUGE and whoever it is – is NOT going to be run out of town by the paper sellers. Not if I am right about who I think it is, and I am not saying yet. …”

Gene isn’t saying who it is, but I believe it’s JP Morgan.  Andrew Maguire discusses this as well in his most recent interview on KWN.  Maguire believes the big bullion banks such as JP Morgan are winding down their short positions due to the Volker Rule which forces more transparency.  Which means, the banks will have to provide legitimate hedging.

So, as the typical large bullion banks reduced their shorts, Goldman Sachs and other institutions in the Swap Dealers category added massive numbers of naked short silver contracts.

Both Andrew Maguire and Gene Arensberg believe the current situation in gold and silver markets are extremely bullish for much higher prices ahead.

The SECOND SIGNAL is by the work of trader Bo Polny, who Jim Sinclair stated was one of the two traders who called the top for gold.  Not only did Bo Polny call the top in gold, he also called the top in silver within two hours.

Bo called a move higher for Gold in May & June this year, a low in the summer, and then a spike up with a huge move to $2,000 by the end of 2014.  Bo discusses this in a Kitco Interview:

Bo Polny Interview

In the interview, Bo says that gold is in a 21 year bull cycle and the next up-leg starts this year.  Not only did Bo Polny call the top of gold and silver in 2011, but he also called the bottom for both metals in 2013…. according to records on his website: Gold2020Forecast.

To set the record straight, I don’t place much merit in TA – technical analysis.  However, I still admire those who can use them to trade.  Bo goes on to say that gold will hit $10,000 by 2020, after hitting $2,000 by the end the year.

The reason why I believe Bo Polny may be on to something is due to all the other factors converging in the precious metal markets discussed above.  Not only will the bullion banks be forced to hedge gold and silver in a more legitimate fashion due to the Volker Rule, the Asian markets will start trading precious metals on a more 1 to 1 physical basis this fall… according to Andrew Maguire in the linked KWN interview above.

This will put severe stress on the PAPER COMEX-LBMA MARKET.

It will be interesting to see if gold hits $2,000 this year.  If not, no big deal… I have time to wait.  However, Bo Polny put his neck out on the line and with it, a great deal of paid subscribers.  So maybe he knows something I don’t.

One last thing.  Bo also went on the record to say, silver would move higher in percentage terms than gold.  He believes silver will see a new high in 2014 as well.

The THIRD & LAST SIGNAL is due to the stock purchases of a well-known Billionaire trader.  In the Motley Fool article, Bet Like George Soros and Cash in on a Silver Rally, the author Matt Smith stated:

Billionaire investor George Soros has already made some big bets on precious metals and silver miners in particular. He invested $9.4 million in precious metals streamer Silver Wheaton (TSX: SLW)(NYSE: SLW) and $10.7 million on miner Pan American Silver (TSX: PAA)(Nasdaq: PAAS).

Not only did Soros purchase Silver Wheaton and Pan American Silver he also bought some of the top gold shares such as Barrick, Gold Corp and Yamana Gold.  While these are not huge purchases, they represent a step in the right direction.  I would imagine as the prices of the mining shares move higher, Soros will be adding more to his portfolio.

If we look at all three INDICATORS-SIGNALS together, we can see something big is getting ready to occur in the precious metals market.  As I stated before, I am in gold and silver for the long-run, but it’s nice to speculate on what may take place as these market conditions converge in the short-term.

I believe Gene Arensberg when he says the indicators for gold and silver are the most bullish setup he has seen for decades.   Lastly, it will be interesting to see if Bo Polny’s widely bullish call for $2,000 comes true by the end of the year.  Heck, I would be impressed if we hit $1,750.

I still adhere to the long-term fundamentals.  Gold and silver will be some of the best investments and stores of value in the future due to PEAK OIL, the decline of NET OIL EXPORTS and the FALLING EROI.

Those are already BAKED IN THE CAKE… we just have to let them cook for a while longer.

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36 Comments on "Three Signals For A Huge Silver Spike In 2014"

  1. Oh dear Steve, I CAN’T believe you quoted Bo Polny!! He has been wrong so many times! His recent call was wrong, why would you mention him in your article? I’m starting to question your credibility!

    • AuAg,

      Actually, I believe Gene and Andrew Maguire make a pretty good case for a big move up in gold and silver shortly… and that’s more due to fundamentals. As for Bo Polny, all chartists have been wrong many times. As I stated in the article, I don’t put much faith in TA – technical analysis, but it’s not my NECK ON THE LINE if gold doesn’t reach $2,000 by the end of the year.

      Lastly… we are just speculating here. Again, as I mentioned in the article, the fundamentals win out in the end.

      steve

  2. Love your work!

  3. You can’t put any weight into what George Soros has chosen to reveal about his investments. I think it is better to assume that his insignificantly small miner investments are to mislead you into purchasing the miners right now. Did you purchase and review Bo’s research? Once again, I’m not sure how much weight you can put into his public statements. Personally, I agree with you, but I don’t use his interviews as research or buy signals. I’d have to review his analysis before I put any weight into it.

    • GoldGuy,

      I agree with you on Bo Polny’s call. Again, I am not the one who has his neck on the line for $2,000 Gold by the end of the year. That being said, Gene Arensberg and Andrew Maguire make a pretty good case for the big changes taking place in the physical and COT markets.

      It will be interesting to see how this divergence in the SWAP DEALERS plays out over the next several months.

      steve

  4. My wife begin to disbelief me. Other people I told about this investment opportunity in Silver begin to laugh at me also. So I hope you’re right Steve that the correction is over soon.

    • At this point the people and organizations that manipulate silver prices may be able to do so for a surprisingly long time..until it is completely impossible for them to hold the price down. Only severe, sustained shortage of physical silver can do that.

    • GermanReader,

      You are facing an UPHILL battle when dealing with friends and family on the subject of precious metals. As I have stated several times, my REASON to be in gold and silver stems from my ENERGY RESEARCH. Again, I would not have suggested owning gold and silver after 1981 due to the world increasing global oil production for the next 3+ decades.

      We must remember, Gold and Silver were the GO TO ASSETS by the past Empires, but now its ENERGY. You see, most energy was from human and animal labor which gold and silver were the ACCOUNTANTS.

      Unfortunately, global energy production is peaking which makes all of those $100 trillion in paper assets quite vulnerable. The reason to own gold and silver in my opinion, is to have a REAL STORE OF WEALTH when the paper assets implode due to a declining GDP on the back of falling energy supplies.

      steve

  5. If Bo is right, and 6 years from now is the silver top to get out at, it would be quicker than I was anticipating. I’ve been saying 10 years for 3 years now. I never got to saying 9 because it seems everything is going too slow. Perhaps not in Bo’s book and he sure is a better charter.

    10,000 gold, and outperforming silver, topping a few months early, that might get the ratio to drop from 60+ to 32 again. Or even lower this time? 32:1 would give (with gold at 8000-9000) <$300. Not quite what I was hoping for, but you have to be happy ith a 10-bagger on your first purchae in 2011 and 15-bagger on the bulk of purchases in 2013. In a sub-decade trade. How much of that will inflation take? Or will inflation make the moves greater still?
    I am just hoping that when silver and gold are toppy, there will be prime real estate bottoming. Like going to current levels and lower. So at least we can make a move forward having been in PM's. Else we might as well have bought land to begin with, enjoyed revenue off it, and do better all these years.

    So curious what the retail market will do when this thing takes off. And what premium (in % of spot) will do on our silver coins with quasi-numismatic value attached. Could the price boost in gold get silver to go bone dry gobally, prices to really go mad? Ratio to not bottom at 32 like in 2011 (I say this was due to silver's margin hikes, it would have done 20:1 when let loose to rise alongside gold), perhaps we can hope for 10:1 after all? Getting 6x more gold for your silver than today would be an awesome advance. But at 10:1 I'll likely sell most or all silver. $1,000 silver that would be. x50 from current levels. Then a currently $500K plot of land can go to $1M in 2020 and you could still afford it with today's $40K worth of silver. Turn a modest car into a pretty house or modest farm. Real estate owners will take x2 on their worth by 2020 I'm sure.

    It all lends good hope. But we'll have to wait and see, And in the mean time, make sure we don't waste potential ounces. But the wife an ounce worth of flowers or just cook her diner yourself while she chillls out? $1,000 by 2020 will make you happy you saved some cash, logged an extra hour at work, sold your premium coins when PM's were low and % premiums high. To get more ounces. Seems insignficant today, a bag of groceries worth to gain from making a silver coin flip, but if we get $1,000 in 2020… Heck even $200. Worth tightening the waist belt a bit. Enjoy the things in life that can't be bought, until we can buy everything else.

  6. But….
    the ‘Tard , (not to be confused with ‘The Dude’) who has 2600+ subscribers, says most of the PM market is laced with howling hucksters & liars who are never right.
    even names names.
    i had to look twice at this guy’s mug to make sure it wasn’t ricky the sidekick. LOL.
    discusses the big lie $5T silver meme put out there, so easily picked up and run with by the usual suspects with zero basic investigation or suspicion.
    altho, he will sell u a 1-gram silver in an envelope for $2.97.
    june/2014
    https://www.youtube.com/watch?v=7oD_ufC_Pko

    • Tom,

      Tried to watch a few minutes of this guy’s video but it was imbecilic and retarded; had to turn it off to protect my brain from moronic input.

      • David,

        LOL… totally agree. I actually watched the entire video. Please see my response to tom below.

        steve

    • Tom,

      Thanks for posting the link to RawdogleTard’s youtube channel. I have to say, I needed a good laugh. I find it simply amazing that Cory C. labels Mike Maloney, KWN and all the other precious metal analysts as SNAKE OIL SALESMEN because they are coning investors into buying gold and silver, while he sells silver at a premium that Tiffany’s would be jealous.

      If you go to the Free Silver Card site: where you can buy his 1 gram silver card with his wonderful mug on the front for $3.77 a pop, or less if you purchase larger quantities… you end up paying $116 for an ounce of silver.

      Talk about a SNAKE OIL SALESMEN. Each of his cards has 1 lousy gram of silver and it takes 31 grams to make a troy ounce. So, at $3.77 a card, you pay $116 for a troy ounce or, if you buy 10 you get them for $2.97… which ends up being $92.07.

      However, if you had your HEAD ON STRAIGHT and wanted to purchase silver at a REAL DEAL, you could go to Mike Maloney’s GoldSilver.com site and purchase their Silver Pegasus for $22.80. Which means, you can buy 4 oz of Silver Pegasus for less than one troy ounce of cards at the $2.97 rate that the TARD sells.

      Lastly, before TARD explains in his youtube video why all these precious metal sites are CON MEN, he starts off by selling his 1 silver gram TARD card at a $80-$90 premium over spot.

      TALK ABOUT A CON ARTIST…LOL,

      steve

      • While I have expressed my surprise at Rawdogs selling of these cards, it’s a way to open for donations or give back to channel subscribers more than anything.
        He is a well-off guy and doesn’t need to make a thousand bucks and put so much effort into it. I think he just doesn’t like to be a 100% amateur vlogger, need monetary respect, even if tiny.

        The Pegasus rounds were recently to be had at free shipping. In other times, they are overpriced for what they are. I like them though, and had I had money I would have jump on the free shipping promotion FOR SURE.

        The thing with folks like Mike Maloney is that they seem to be bullish at all times. Even in a 3-year bear market. Jim Sinclair calls a bottom at $1600 and then we get $1180.
        By offering a unique extra option (Pegasus) Maloney in theory helps us extract extra silver from stockpiles. Our best chance to get overprices silver is through depleting stockpiles, right?

        I think they should do better though. Join forces, and set up the Open Coin tri-metal standard I am proposing to in 1 big smash turn metals back into global money. BAMM! Gram denominated standardized coins. Free to mint by anyone, in any qty. Create the amount of coined metal money all you like, and by depleting stockpiles, purchase power will increase rather than inflate away.
        Maloney sent me to his never-visited forum. Sprott and Schiff ignored me.
        So are they for real? Is my idea bad?
        For a few dozen grand you can establish a world currency where intrinsic value is in the metal, and the premium is the impurity (say .925 big silver coins) to make them durable in circulation.
        Mints will LOVE this coin standard. So will collectors, if everyone start making their own, in the same size. And the local coin your neighborhood supermarket commissioned for an anniversary promotion can can used to buy gas or jewelry on the other side of the globe. Because a machine will recognize is as a (for instance) .920 pure 25 gram 35mm silver coin of specific alloy. (good as) money. Money squared.

        And the PM gurus don’t come up with it themselves, and ignore it when it finds them.

        Such a coin standard, putting silver back in the wallets of people in 200+ countries, how much silver could this extract from reserves? Say a billion people get in. And on average they hold 2 ounces. For daily transactions, small banking reserves, and piggy safes. 2 billion ounces for this standard. Just think a second of what this would mean. The currency itself would render it a key currency, infinitely hard. Mine THAT.

  7. quick question Steve what’s your opinion on perpetual assets? I’m trying to convert my 401k into a Roth LLC and I plan using there services to do so

    • Adam,

      I spoke on the phone with Will at Perpetual Assets during our interview which is posted on his site. We spoke for a while before we did the interview and he sounds like a pretty stand-up guy. Much else, I don’t know. I would advise you speak to several sites that offer the 401K conversion and see what are the positives and negatives of each.

      It’s always wise to speak to 3-4 places before making a decision. If you do decide to go with him, please contact me and let me know how it went.

      steve

      • Thank you I will Steve now I just hope my work allows me to transfer my 401 bc the goal is to convert it to silver eagles that I personally store

      • I read each of your offerings with relish as they provide unique insight into this very murky world.

        Obviously since you are so fixated upon a particular aspect of the whole, you may be excused for overlooking some crucial things.

        First among them is that ALL RETIREMENT FUNDS BELONG TO THE GOVERNMENT.

        One cannot differentiate between plans or products in those plans, etc. If it has not been fully taxed the government has an interest in it and can direct the investment any where it wants, e.g. social security, etc.

        All 401k’s, IRA’s, Roth’s will be directed into US Treasuries. Any investments in gold/silver or other hard assets will be cashed out and the resulting funds be invested in Treasuries. This will be done to protect the funds within the accounts.

        • Jerry,

          Your prediction makes a lot of sense, however I don’t believe the U.S. Treasury market will be able to withstand the DE-DOLLARATION forces that are coming. While the U.S. Govt may initially try to force Americans to invest in the U.S. Treasury market, I don’t see it as a long-term strategy.

          Just as the London Gold Pool collapsed, so will the Bond and Treasury markets. They are the last and greatest Bubble remaining.

          steve

          • My point is that sending your retirement funds to a government controlled and “qualified” plan, in any form, leaves them wide open to confiscation.

            Any promise by the “government” regarding these investments is highly suspect, viz social security, etc.

            One wonders how the government can claim jurisdiction and confiscation rights regarding American citizens and their finances abroad. It’s because those funds were not taxed or are in question as to tax status.

  8. DaleFromCalgary | July 28, 2014 at 6:58 pm | Reply

    The good news is that gold will eventually go to $10,000. The bad news is that by the time it does, gasoline will be $10 per litre, and a two-bedroom apartment will rent for $10,000 a month. That is why one accumulates gold, as insurance, not as a bet.

    Don’t forget that you have to pay tax when you sell your bullion.

    • Well, we have had ample time to get in at undervalued PM. There is bound to come a moment of them being overvalued. Those can be pretty wild swings. Especially in silver. And PGM’s look good too.

      You just need 1 asset class to be undervalued when your PM’s are overvalued.

  9. May ALL the thieves and their minions , that trade and profit from the ‘manipulation’ of the PM’s ….die a very long and painful death…amen

  10. Thanks for the article. Makes a guy wonder, with so many knowledgeable men who have studied the metals markets for years are calling for a big move. Perhaps its the it move many stackers have waited for.

  11. When The Rothschilds say the price of precious metals will go up, they will go up. And not until then.
    So all the bullshit charts and prognostications are just that. Bullshit. Its a hard fix and you AIN’T in on it.
    Tough.

    • Readyman,

      You bring up a good point, however, from what I heard… the Rothchilds got out of the Gold & Silver Fix back in 2007-2008… after the U.S. investment banking and housing collapse. They realized the END IS NEAR and decided to let the other STOOGE BANKS hold the bag when the Paper precious metal market unravels.

      steve

      • Hi Steve, long time reader, 1st time commenter.

        I have to point this out.

        Who won the bid for the new Silver Fix?……….Thomson Reuters………..who owns Reuters…………..The Rothschilds!!!!

        They never left the manipulation game in my opinion.

        It is pretty much common knowledge in the UK that the Rothschilds own Reuters.

        The House of Rothschild bought Reuters news service in the 1800′s. Within the last 20 years, Reuters bought the Associated Press. Now the Elite own the two largest wire services in the world, where most newspapers get their news. The Rothschilds have control of all three U.S. Networks, plus other aspects of the recording and mass media industry according to research by Eustice Mullins in his book ‘Who Owns the TV Networks’.

        Check out http://www.luckinlove.com/rothmedia.htm & http://rense.com/general77/POWERS.HTM

        I’m sure others with more time can verify or add to the list.

        I firmly believe they never left the silver manipulation game. Why would I say that?

        Because it jeopardises their iron fist grip on the paper money monopoly. It is in their interest to suppress the precious metals prices as they are a direct vote of no confidence in paper money.

        Please read the following:

        EXTENT OF ROTHSCHILD POWER

        According to one source “it was estimated that they controlled half the wealth of the world.”(50) The Federal Reserve Bank of New York was controlled by five banks which owned 53% of its stock. These five banks were controlled by Nathan M. Rothschild & Sons of London. Control over the U.S. Fed is basically control over the world’s money. That fact alone shows how immense the Rothschild Power is. If one examines who has been appointed to head the Fed, and to run it, the connections of the “Federal” Reserve System to the Rothschilds can further be seen.

        • NibiruHybrid,

          Thanks for the comment and insight. Actually, it makes perfect sense. When I heard that the Rothschild’s removed themselves from the precious metal fix several years ago, it didn’t seem to make sense. Charles Savoie states that Forbes puts out a bogus list of the TOP WEALTHIEST people in the world. He says, Forbes makes it seem as if the new rich have surpassed the old wealth.

          However, OLD WEALTH is more powerful than ever.. aye.

          steve

          • NibiruHybrid | July 30, 2014 at 4:43 am |

            I would love to see Charles Savoie produce a video documentary for silver stealers.

            If we could team him up will Bill Still or some one with documentary production experience i’m sure it will be a recipe for greatness.

            I’m sure the pm community would easily fund a kickstarter campaign to make to make it happen. The likes of David Morgan etc. will probably put their hands in their pocket too.

            It would need to be created as a non profit documentary released directly to YouTube for maximum exposure.

            I’m sure it would gain millions of views similiar to the popularity of Mike Maloneys Hidden secrets of money series.

            Perhaps next time your in contact with Charles you could suggest this to him. He has such a wealth of information and i’m sure others reading this would join me in backing this.

    • DaleFromCalgary | July 29, 2014 at 11:50 am | Reply

      Brush up on your history. The Rothschilds bailed out of bullion years ago. The main manipulator today is JPMorganChase, which inherited Bear Sterns short silver position during the Panic of 2008.

  12. In my opinion fundamentals show direction and TA indicate timing.

  13. Steve
    Did u happen to see the open interest in the Jan 2015 30call on SLV? 269,850
    What do you make of this?

    • Nitsuj,

      Actually, I did not notice that open interest figure. I don’t spend much time researching the paper silver markets, but if any of the readers here can shed some light… that would be greatly appreciated.

      steve

      • Well… its not a straddle, you would see about the same amount on the put side. This gives the option owner to buy the stock at 30. Doest seem like a big deal but we are talking 271,000 contracts times 100 =27,000,000. Also there is 157,000 at the 40 strike or 15.7 million shares.
        I have always wondered, is this is a way to telegraph a move to the big players with out saying a word?

  14. Hi!, Patrons Of The SRSorocco Report Et Al:

    For whatever it’s worth regards the future direction of gold and silver prices or any other type of discussions, TRUTH always passes through 3 phases: (1): it is ridiculed; (2: )it is violently opposed and 3:: it is seen as self-evident. As we pass through these phases we will eventually better understand the TRUTH. In the meantime good luck!

    RUSS SMITH, CA. (One Of Our Broke Fiat Money States)
    resmith1942@gmail.com

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