The Silver Price!

July 8, 2018

When one scans the web for material on the silver market, it does not take long to discover that it is a murky market; perhaps even less transparent than that of gold. There is not enough consistency across the board for the amount of production or the volume of above ground reserves, while opinions vary from global demand is greater than production to astonishment that the price can remain so low while the demand for all the new uses for silver is mounting. But this seems to be changing.

The first direct clue that there is a problem of some kind in the silver market comes from the need for Comex to shift requests for delivery of silver – and of gold – via the EFP transfer to the LBMA in London. It would seem that the true nature of this mechanism is not (yet) known. Since it is a request for delivery, one can assume that the contract that end up at the LBMA must have some claim on physical silver – but is it merely another form of paper claim on unallocated silver that has been hypothecated umpteen times or does it represent an actual claim that the buyer can have shipped from the LBMA vaults to his own warehouse?

At the end of this report are some extracts from various commentators on what this practice implies and other facts about the silver market in particular. What is now becoming known hints very strongly at a situation that is spiraling down into what almost passes for a black hole – a place from where there is no return, that destiny seems to be waiting for the forces of suppression given that there has been more than an order of magnitude increase in requests for delivery against Comex silver contracts during the first 6 months of 2018 compared to 2015/16.

Cyrille Jubert, from France, reports that Comex was compelled to ship EFPs across to the LBMA during the first six months of 2018 that represents an increase of 69 times in requests for deliver from what it used to be during the same period of the previous two years. Note: 69 and not 6.9!. He ascribes it to the (super)wealthy who is building a stake in a hard asset – which can be interpreted as a case of either ‘any hard asset will do’ when panic strikes or perhaps ‘silver is by far the hard asset of choice at the moment’ for reasons still not widely known.

In either case, such demand for silver by people who have clout at their finger-tips, will not long be satisfied with an unallocated share in a silver hoard that may or may not exist, other than in terms of the warehouse receipts that log the amount of silver in storage. Computers, like paper, can report untruths without flinching.

I return to an earlier mentioned view that the very narrow range of the silver price on 29 June despite extremely high volume. The high volume and a narrow range is not due to buyers trying to push the market higher or shorts hoping to establish a bear trend, but some force placing a tight hold on the market for whatever reason. The only known force of course is the one behind the price suppression scheme. How long can that continue in the face of the new demand?

Euro-Dollar

Euro-dollar, last = $1.1745 (www.investing.com )

The recovery back into the red bullish triangle failed to hold in response to the new troubles in the European Union – in part because the relative balance in the north-south divide became unsettled as Italy went a little rogue at the voting booth. But underlying it all, the real problem there is one that afflicts just about all of the rest of the world – debt.

The euro has been for some weeks to months the primary victim of this affliction, mainly because of the uncertainty of what may new problems could issue out of the original home of the Lira – and the possibility, remote as it might be, that the Lira could make a comeback. Followed by the Drachma. And more? And do not forget that Deutsche Bank is still precariously poised at the top of a slippery slope that easily could become an avalanche.

DJIA

The break below the steep support line S (24 572) a week ago is still in place, with the threat that the Bear is taking over again. The minor recovery last week has not yet touched line S in what would be a goodbye kiss and also not close to breaking back above line S to hint at an extended new rally. This week, now that half year end and NFP and 4th July is history, might be more revealing of what the new trend is to be – with the odds favouring a trend that will be bearish increasing the longer that there is no break back above line S.

DJIA, last = 24456.48 (money.cnn.com)

Gold PM Fix - Dollars

Gold Price – London PM fix, last = $1255.35 (www.kitco.com )

The picture with respect to gold supply and demand is not as clear as the one that is developing for silver according to various reports. It is however near certain that the drift of gold from west to east is still intact even if the activity appears to vary according to the seasons and with India and China, the two bigger importers, not always in sync. But the trend continues and must have effect at some time.

At least the price of gold has held at the support of lines L ($1256) and D ($1253) or close to it. Now that the days associated with greatly increased suppression of the gold price are past, we should see a rebound off the support. How strong that will be remains to be seen, but a break above line T ($1298) and the psychological $1300 is needed to fan the coals of anticipation into flames of excitement again.

Euro-Gold PM Fix

Euro Gold Price – PM fix in Euro, last = €1067.7 ( www.kitco.com)

The bearish break below the support of line T (€1091) and back into bear channel YZ (€1088) again extended towards line C (€1057) and then came to a halt. While the euro was weaker, the bear trend slowed, but the improved euro on Friday had the euro price of gold moving lower again, only partly assisted by the price of gold bouncing back above $350 from a low start at the beginning of the week.

This week should show whether the weaker dollar on Friday after NFP news is going to be a new trend or whether it is merely a hiccup along the recent bullish trend. As the odds for higher rates increase, one would expect the dollar to remain strong.

Silver Daily London Fix

The price of silver is holding a little short of the support along line T ($15.83) as if there is a reluctance to test the last prominent support visible on the main chart. If silver now switch to a bullish inclination seeing that the main suppression days are past, we could see the price rising without having tested line T and a corresponding improvement in the odds that the price will manage to break above the resistance along lines C ($16.53) and L ($16.94) to challenge the $17.00 level again.

Silver Daily London Fix, last = $15.995 (www.kitco.com)

U.S. 10-year Treasury Note

The US 10-year Treasury note first rallied off the high yield to reach and rebound higher off lines L (2.976%) and V to remain in bull channel VW ( 2.882%) and test line C before reversing lower again, still in channel VW. This time, the yield broke below line L, but then failed to extend the trend. A reversal back to line L can be a goodbye kiss, preparatory to resuming the bull trend, or can sit sideways below line L, ready to resume the rising trend.

While the yield remains below line L – which is rising quite steeply – expectation of rising rates should keep it sideways at best. For the yield to resume the bull trend, one would expect a significant crisis to happen somewhere in the world that would trigger a general flight to the safety offered by Treasuries.

U.S. 10-Year Treasury Note, last = 2.822% (www.investing.com )

West Texas Intermediate Crude. Daily close

WTI Crude – Daily Close, last = $73.80 (www.investing.com )

With a recent exception, the price of crude has held well to the steep bull channel JKL ($69.31). The break lower failed to break below the support at line S ($64.43) and rebounded back into channel KL in a move is known as a ‘goodbye kiss’ on line S – a return for a final touch on a penetrated trend line before resuming the trend.

The new rally in channel KL ($78.69) set a new intermediary high at line C ($73.73) and has since held close to the trend line. The uncertainty about OPEC’s production cuts – announced, but will they follow through? – once clarified, will determine the new direction off line C.  

Gold weakens on global cues and lackustre demand