APR 9, 2018
The historically high gold/silver ratio combined with extreme speculative short position levels (and extremely low speculative long position levels) are all strong buy signals on their own; all three are in play right now.
Silver has been dead money over the past year or so, relentlessly grinding sideways to lower. That weak price action has naturally left this classic alternative investment deeply out of favor. Silver is extremely undervalued relative to gold, while speculators’ silver-futures positions are extraordinarily bearish. All this has created the perfect breeding ground to birth a major new silver bull market, which could erupt anytime.
Silver’s price behavior is unusual, making it a challenging investment psychologically. Most of the time silver is maddeningly boring, drifting listlessly for months or sometimes years on end. So the vast majority of investors abandon it and move on, which is exactly what’s happened since late 2016. There’s so little interest in silver these days that even traditional primary silver miners are actively diversifying into gold!
But just when silver is universally left for dead, one of its massive uplegs or bull markets suddenly ignites. Some catalyst, typically a major gold rally, convinces investors to return to silver. Their big capital inflows easily overwhelm the tiny global silver market, catapulting this metal sharply higher. Silver skyrockets to amazing wealth-multiplying gains, dwarfing nearly everything else. This reinvigorates silver’s cult-like following.
Once silver starts rallying decisively on silver-futures buying, investors with their vastly-larger pools of capital will also start returning. Bullish analyses will explode, highlighting silver’s deep undervaluation relative to gold per the Silver/Gold Ratio. That will fuel bullish sentiment driving even more buying. Bull markets’ virtuous circle is buying begetting more buying. The more silver rallies, the more people want to buy it.
I’d be very bullish on silver with only a stock-panic-level SGR, only extreme spec silver-futures shorts, or only very-low spec silver-futures longs. But seeing all three at once, at a time when gold is rallying as the stock markets finally roll over out of their fake central-bank-spawned levitation, is truly extraordinary! This is literally the most-bullish setup for silver seen in years, so smart contrarian traders should be really long.