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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AuAg
Guest
AuAg

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!

Tony
Guest
Tony

Love your work!

GoldGuy
Guest
GoldGuy

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.

GermanReader
Guest
GermanReader

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.

David
Guest
David

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.

XC Skater
Guest
XC Skater

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… Read more »

tom
Guest
tom

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

David
Guest
David

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.

Adam
Guest
Adam

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

DaleFromCalgary
Guest
DaleFromCalgary

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.

XC Skater
Guest
XC Skater

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.

dan
Guest
dan

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

HYMN
Guest
HYMN

Why Dan!,whatever do you mean ?

HYMN
Guest
HYMN

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.

Readyman
Guest
Readyman

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.

DaleFromCalgary
Guest
DaleFromCalgary

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.

Olegig
Guest
Olegig

In my opinion fundamentals show direction and TA indicate timing.

Nitsuj
Guest
Nitsuj

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

RUSS SMITH, CA.
Guest

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