WAITING FOR THE BUY SIGNAL: What’s Going On With Silver Investment

The Silver Market is setting up for one heck of a move higher as investors are waiting for the signal to start buying.  While the silver price has shot up due recently, it still isn’t clear if this is the beginning of a longer-term uptrend.  The reason for the quick spike in silver was likely due to a small short-covering rally by the Large Speculators trading on the Comex.

For the first time in a quite a while, the Large Speculators (Specs) were net short silver.  For example, the Large Specs were net long by more than 100,000 contracts last year when the silver price was $18.50.  However, the last COT Report showed that the Large Specs were net short silver by 17,000 contracts:

The Large Specs are shown in the Light Blue bars. Typically, the Large Specs are long, not short silver.  You can see the Large Specs going short three weeks ago as their light blue bars turned down.  On the other hand, the Commercials (in Red) are usually net short.  However, the Commercials had the lowest net short position in years.  So, to see the price of silver shoot by nearly $1.00 in a few days isn’t surprising when I have seen this setup for a few weeks.

However, it’s difficult to know if this is the start of a long uptrend in the silver price.  It’s coming, but I just don’t know if this is it yet.  We will know when the Silver price is making a big move when it finally gets above $20 as the broader markets crash.  Now, many silver investors might be a bit frustrated because silver sentiment and investment demand dropped to a low last year.

In 2017, demand for silver declined as investors were lured into the stock and crypto market bubbles.  According to the data put out by the 2018 World Silver Survey, total Global Silver Bar & Coin demand declined from 207.8 million oz (Moz) in 2016 to 151.1 Moz last year.  As we can see in the chart below, global silver bar and coin demand fell by 27% compared to 2% for physical gold investment:

The World Gold Council reports that global gold bar and coin demand fell to 30.8 Moz last year versus 31.6 Moz in 2016.  However, the decline in physical gold investment would have been even more substantial if it wasn’t for gains China, Turkey, and the Middle East to offset significant reductions in the United States.  Gold bar and coin demand fell by 58% in the United States last year.  And we saw the same trend take place in the silver market.

The majority of the decline in silver bar and coin demand took place in the U.S. and Canadian markets.  As the chart below shows, U.S. and Canadian silver bar and coin demand fell by 52% from 105.5 Moz in 2016 to 50.8 Moz last year.  However, global physical silver investment only declined by two million ounces:

While silver investment demand decreased significantly in the west, India’s silver bullion imports increased by 17% in 2017.  So, silver investment demand wasn’t down across all countries or regions.  However, the majority of the decline in the west was due to the 36 Moz decrease in U.S. silver bar and coin demand (2018 World Silver Survey).

According to my analysis, demand for physical silver and gold investment declined last year in the United States due to three reasons:

  1. Election of Trump as President changed the psychology of the Alt-Media community in that there was less motivation to purchase precious metals, prepping-survival goods, firearms, and ammo.
  2. The continued bubbly rally in the broader equity markets and tech stocks
  3. The massive increase in Bitcoin and Crypto-currencies in 2017.

Unfortunately, 99% of investors continue to pile into extremely overvalued and highly leveraged-margined assets in history.  The value of stocks, bonds, and real estate are at the highest levels ever while the world’s oil industry is coming under a great deal of pressure that few are aware.

The U.S. Shale Oil and Gas Industry is a $250+ billion Ponzi Scheme that Bernie Madoff would be jealous.  So, the BIG MOVE in silver is likely to occur right when the broader markets and the oil price collapse in unison.

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46 Comments on "WAITING FOR THE BUY SIGNAL: What’s Going On With Silver Investment"

  1. Huge rise in stocks is coming in the newt few weeks and months (cf. Gann analysis). Cryptos are now exploding higher on a daily basis and gold continues to fail at the 1360 frontier…
    Still no demise of the dollar, still no silver ruble, and obviously nothing happened with the so called petro-yuan which will take many years if not decades to have a real importance.
    I would not be surprised to see the China Russia partners failing miserably in the future…

    • Put your money where your mouth is; go net long the market now, I dare you.

      • Silver breakout terminated as scheduled. Bitcoin cash rising 15% and ripple and bitcoin cash has doubled in one month.
        Be now prepared for a huge rise in stocks.

    • That’s a pretty good summary of modern American mass psychology: “Just think positive, ignore the negative, embrace any and all alternatives to doing the right thing, and screw the other guy, even/especially if the other guy is God himself. Because after all, we’re exceptional.”

      • In the meantime stocks and especially cryptos are exploding higher on a daily basis…

        • RD,

          I find your comments quite humorous. Your rationale of the markets is akin to celebrating when one’s CANCEROUS TUMOR continues to grow. I gather there is nothing wrong with cheering for DEATH of the Markets, but please make sure you come back in here and leave some pleasant comments when the markets start crashing and Gold-Silver silver prices surge.

          steve

          • If I have not personal issues like health which preventing me to joke anymore here, I promise I will be here ! Best regards Sir.

  2. Well if you believe that silver is going a lot higher then what does it matter really when you buy it. What is the downside from here…maybe a dollar or two? Compare that downside to the upside of plus 30%…Unless you are buying in the thousands of ounces it really wont make much difference….buy it stack it and forget about it for ten plus years

  3. I own over a thousand oz of silver with a DCA of 16$. I also own gold platinum a copper rounds. I’m heavy in railroads,water, and aerospace. The reason I say this is to make a point and that is don’t put all your eggs into one basket. Based on what I’ve read I’m in the top 1% in gold ownership compared to my investing peers. That’s good enough for me assuming those numbers are correct.

    • I like your strategy Adam

      I’m into physical silver, food & water, a pile of GDXJ shares, and in the process of acquiring some basic firearms & ammo. Also, quality clothing, wool, stuff that will last a few decades – odd I know, but what the hell.

      I spent a year in northern Norway in 2001, after I finished high school. At a place they called “Folk School.” I noticed those northern Norwegians had only a few sweaters and a few pairs of pants, and a fantastic pair of hiking boots, and quality wool socks. I liked their approach.

      We backpacked all year, sun or snow. Visited old caves that Norwegians hid from the Nazi’s in for months on end. It put it all into perspective, what could happen, how lifestyle can change.

    • I own over 2500 oz of silver with a DCA of 21.00 canadian. I also own gold, platinum. I’m heavy in farmland, fresh water, and cash. Self sustaining lifestyle. But wont go into stocks yet. I feel like a deer caught in headlights some days

  4. If every man and woman in the U.S. would buy just one ounce of silver for themselves and for their children, just one ounce, we’d be a long way towards national and personal financial security.

    • Harry Dent said that gold price has to go below 1,000 FRN before it can go through the 2,000 barrier. Is it possible that silver price has to go below 6 FRN before going through 50 FRN ?

      • Billy Lone Bear | April 21, 2018 at 1:34 am |

        Highly doubted. If you take the inflation adjusted 08 low this equates to about $11 which is also the bottom level of cost of production. I do think we will see lower prices in the initial crash but doubt any lower than 14s and perhaps only for a week or two. Either way I hit my goal of 10,000 ounces as I’d rather not gamble on the possibility of saving a dollar or two in exchange for the certainty of a 200% return or higher.

        • 10,000 ounce of silver is too much. You better convert it into gold. Much easier to handle.

          • Billy Lone Bear | April 21, 2018 at 8:40 am |

            Precisely my plan at a much lower GSR. 🙂
            It’s funny though nobody ever says you have too much dollars, stocks, bonds, real estate, or even gold.

  5. Your first graph is a comparison between gold and silver by ounces. What I would like to see is the same chart in dollar value between gold and silver inclusive to ounces. Thisd way I can see how much money is being spent.

  6. Muhammad Aidid | April 21, 2018 at 12:47 am |

    Can we believe u? FYI ,your oil price reaching under usd20 per barrel prediction has been debunked .. now wti at usd68 ..

    • Oil will either end up at 10-15$ a barrel or 175-225$ a barrel either price will have the exact same outcome. Prices are not relevant only your standard of living matters. In both scenarios your standard of living gets crushed. Your standard of living is based on oil and oil is based on thermodynamics hence your standard of living is tied to thermodynamics as well. I don’t care what digital price humans put on something. In the end the only thing that matters is energy surplus if that’s declining so will one’s standard of living.

  7. Billy Lone Bear | April 21, 2018 at 1:27 am |

    I think the lions share of decline in investment demand may be from JP Morgan.

    Another takeaway I got was that if U.S. Bar investment was 16 million ounces or $270M, this means there are little to no billionaires stocking up on physical at any serious level. Then again if you’re a billionaire you don’t need to insure your wealth as even a 90% drop in purchasing power still leaves you on easy street.

    • Billy,
      You are not correct. The most important silver stackers are the JM Morgans and they are beyond billionaire’s! More importantly is “Why” they are stacking. This should be the reason we all stack at these levels.

  8. Andrew Hopkins | April 21, 2018 at 3:42 am |

    Always enjoy your comments especially oil.

    How do you manage to report on all these commodities. I just concentrate on oil without being distracted….and gas of course.

    All the bears are hibernating. I have seen this coming ever since the Saudi’s dropped the price. Took a bit longer. Get ready for an oil explosion. World wide capex plunged 3 years ago and the world is looking at a $100 market again.

  9. Cryptos ramped up last year starting in May
    The patters seems to be repeating
    Do yourself a favor and buy crypto and sell in December and stack Silver
    Better to light a candle than curse the darkness

  10. Unfortunately for you guys, the longer this goes on, the fewer people are interested in your game.

    People may be dumb, but they are not as dumb as you think. Gold and silver going nowhere since 2011. Millionaires, billionaires minted all the time. Stocks, real estate high. The world system hasn’t collapsed and in fact chugs along as normal. And not just for a few years, but for a full decade since the financial crisis.

    Enough time for people to realize, wait, there is a huge opportunity cost to holding gold and silver. Namely, the fact I could have made so much money, so many dollars, and be spending them now and enjoying life.

    Now that this psychology is in place, nothing can change it. The Federal Reserve and banks are in complete control. Having broken gold and silver, all they have to do now is manage the endgame. In fact, gold and silver could rise in price and still people won’t go in anymore, this is how scarred they are. And, on top of that, the young in the world, apart from the super rich, aren’t exactly swimming in capital. They have very little savings to put into gold and silver, even if they wanted.

    Game over, you lost. The correct thing is to play a different game.

    • DisappearingCulture | April 21, 2018 at 12:38 pm |

      “Now that this psychology is in place, nothing can change it. The Federal Reserve and banks are in complete control”.
      This may take the prize for most moronic statement you have posted on this blog. Now that you have outdone yourself…can you top that?

    • dolph,

      Besides using DEROGATORY RACIAL LANGUAGE or BOGUS EMAIL ADDRESSES to get your point across, I see you up to your typical shortsighted analysis about the precious metals. So, the metals haven’t gone anywhere since 2011. Well, if we use your sort of superficial analysis, then we can say that the Dow Jones Index didn’t go anywhere after the 1929 crash for more than two decades. It took 25 years to surpass its previous high.

      Dolph… so the Fed & Central Banks can print OIL BARRELS. That’s a new one.

      steve

    • So your main argument of why silver will not go up is that people have little cash?
      Doesn´t that aplly to any investment?
      Aren´t investment options always analyzed in relative terms?. How does investing in silver at half the long term costs compare to investing in things like netflix or amazon that are sold at 100s times earnings (if we believe they really have earnings) or 10x book value?

    • Hey Dolph!

      So,

      “People … are not as dumb as [we] think” and “The world system…chugs along as normal”

      But – “…this is how scarred they are.”

      Really?, if things are so normal and the future’s bright, why is everyone so scared?

      Have they broken silver and gold? Silver is up about 1200% and gold 3000% since the mid-1970s.

      They can’t break nature. Why are so many Asian countries buying it hand over fist? If gold is dead, why do the central banks hold it?

      We know you are just playing a game with us.

    • People’s actions are meaningless regarding gold and silver. Prices are determined exclusively by COMEX commercials, nothing more, and nothing less and it will remain this way for some time.

  11. DisappearingCulture | April 21, 2018 at 12:57 pm |

    In an above post:
    “In fact, gold and silver could rise in price and still people won’t go in anymore, this is how scarred they are”
    For people new to this blog, or alternative investments/currencies, etc., this is what WILL happen:
    1] When G & S go up in fiat valuation, fiat currencies will move into them, driving them up faster. This will happen even if the stock/equities markets are going sideways for a while longer as they have been doing this year.
    If/when the markets start to decline, fiat will POUR into them, and anything else going up at the same time [could include cryptos but I’m skeptical there].
    2] The Fed et al are NOT in complete control; their control is very tenuous, just like in 2007 [when people thought they were in complete control].

  12. As long as the Dollar is the world reserve currency TPTB are in control, but yes, a fragile control based on the laws of thermodynamics.

    Silver will only rise when “they” cannot deliver physical silver at the paper manipulated price.
    BUT, at that point the price may bifurcate; one price for physical delivery and one price for a paper derivative.
    BUT that condition will only last for a while….
    This is so easy to figure out; think like a criminal who has the ability to print unlimited $$$$ at will….if they can they will and are until they cannot……so the game will continue until it breaks….and I dare say no one know when that day will be.

  13. I see silver as a great investment opportunity. Mexico is by far the largest silver producing nation on the planet, and their oil giant PEMEX is a walking zombie. Moodys rates their debt as Baa3 (one grade above speculative). PEMEX carries 102 Billion in debt with an annual interest expense of 5.9 Billion. Their debt is 10% of Mexico’s GDP. They are by far Mexico’s largest producer of petroleum products. Fresnillo (silver mining company) stated that their electrical costs increased by 28.9% and their petroleum costs increased by 22.2% year over year. I think we can extrapolate similar rising energy costs throughout the agricultural and mining sector. I think we will start seeing more mining companies stop production or stop developing new mines as rising energy costs influence the risk / reward ratio. I also think agricultural exports to the U.S. will also be negatively impacted. In the U.S. I think we can expect to see much higher food prices going forward especially when we consider the long winter in Canada and the the Northern U.S., and of course a devaluing Dollar within the current geo-political environment. Food and silver look like good investments too me. The Federal reserve can’t mine silver, pump oil, or grow food. I’m wondering if the increasing food costs will trigger inflation scares.

    I sourced the PEMEX financial data from Wolfstreet.com. Its a very good read.
    https://wolfstreet.com/2018/04/12/how-much-longer-can-pemex-hang-on/

    • OutLookingIn | April 22, 2018 at 5:34 pm |

      Petedevine –

      I agree with your short summation of what’s in store for not only Mexico, but of the consequences that will be felt outside their borders. Food will be the big ticket survival item, besides having some PM’s and a plan of preparation.
      After going through 08 – 09 and a vacation in Hawaii, where SPAM is still very popular, I had an epiphany. In tough times people still require food, no matter if the quality is less than they could afford in good times. Key word is [afford] cost. I settled on Hormel Foods (HRL) the producers of not only SPAM but many other low cost food stuffs. They have had 52 years of consecutive dividend increases, with an 11% EPS growth over these past 10 years. Their fiscal 2018 forecast is for dividends at $1.81 to $1.95 per share. Share price at end week close of $35.45
      This is NOT advice. Just another avenue of wealth protection.

  14. Pete-If easy, could you provide a link to verify those very astonishing Fresnillo Silver cost increases? Made a stab at it. Did see Fresnillo claiming record silver production increase in 2017 compared to 2016 and higher profits, however that fits?

    Very interesting article on Pemex by Wolf. Thank you.

    Maybe real reason sending troops to border.

  15. Outlookin

    Good idea. another might be…. “If you don’t hold it, you don’t own it” Just spent 2k on fencing. ouch! The season is here tho

  16. silverfreaky | April 23, 2018 at 8:55 am |

    The pusher reports have no effect anymore.The silver seller need an new business modell.
    Nobody wants the silver crap.

    • If that was true it would be a good sign/omen. Unfortuantely, a couple days ago, all these clowns congratulated themselves on the breakout, so it was obviously a fake, only when all these clowns like jim willie, jim sinclair, bill hotler and may more will be silver sellers, that somemthing could indeed happen thereafter.

  17. Are you still sticking w/ your prediction of a crash in oil price?

    Fiat is being rapidly debased w/ sharp interest rate rises & treating oil as commodity looks like a sharp increase in price of oil in fiat currency terms by middle of 2020.

    Something doesn’t quite jive here.

    • Theravaida,

      Yes, I am sticking with my 1-2 year falling oil price forecast. Once the stock market loses 50% of its value over the next 1-2 years, watch for the oil price to fall to $30 or lower.

      The present Commercial Net Short Position in oil is 750,000 contracts compared to the 180,000 contracts when oil was trading at a low of $30 in 2016.

      Remember… as the oil price falls, the Commercials liquidate their shorts. They have a long way to go to get back to 180-200,000 contracts.

      steve

      • Okay.

        At least in the short term, this summer of 2018 is looking up to be a summer of red-hot inflation, rising oil price & spiking gasoline/food/grocery prices.

        Let’s wait & see how things develop after that till the end of the year.

      • Regarding silver, horrible COTs report after their shorts increased by a huge 14 000 contracts even after the monday huge slump. Just hope they have coverered the next 3 days…

  18. I can’t wait for silver to take it’s rocket ride…but what’s really exciting is how Rare Earth Elements will blast ahead of that rocket and not look back when China tells the USA it won’t supply us anymore with crucial needed resources for our military and tech. Invest now, become rich in 5 years. Check out Ucore Rare Metals and what Congress has to say… on USA soil!!

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