Silver Lease Rates Pierce the Veil of B.S.

May 25, 2006

Lease rates are spiking up again.

My view here is that the shorts are leasing silver and are "dumping" what they have leased into the market in an attempt to get the price down as much as possible.

This view is supported by unusual volatility showing up in gaps on silver chart below. Volatility started on the downside in mid April. (price dropped from over $14 to under $12 in one day as shorts tried to smash price) but short covering pushed the price to a new high in May within 3 weeks. Since then we have had:

  • Gap island reversal,
  • Runaway gap on downside
  • Measured move based on gaps met on downside
  • Reversal with upside gap
  • Followed by downside gap. (Does not fit classical definition of gap island reversal because its not coming from a high. This implies that latest downside gap may be artificially contrived)

All these gaps need to be seen in context of period prior to April when there was almost no volatility. This action is screaming at me that there is panic activity in the market, and I see no reason why that panic should be amongst the longs. It seems much more likely that the panic is amongst the shorts who may be looking at their last opportunity to cover.

Relative Strength Charts below show ratio of Silver/Gold bouncing up. Pattern looks like a flag consolidation within bull trend.

RSI and MACD both seem to be bouncing up from lows


When you pierce the veil of fear and loathing, silver remains relatively strong - and looks like it will strengthen further relative to gold.

On next run up, and after previous high is penetrated - timing impossible to call - it seems that silver may start to Spike upwards at the rate of dollars per day.

Interesting times ahead, and not for the faint hearted. We may need to superglue ourselves into the saddle to stay there.

Gold falls on firm dollar, China rate cut lends support