Hi Ho Silver - Is This For Real?

July 20, 2019

London (July 20)  When gold broke to the upside in June after the Fed meeting, silver followed. However, gold's little brother could not even manage to rise above the 2019 peak at $16.20 per ounce. Gold rose above the 2016 high at $1377.50, but the price of silver remained far below its peak from that time at $21.095.

Gold's rally is a continuation of the bull market that began in the early 2000s. The yellow metal has rallied in all currencies. After trading in a $331.30 range since 2014, gold broke higher and has not returned to the critical level of technical resistance that has now become support. At first, silver only managed to make it to $15.555 on the nearby September futures contract in June before falling back to probe below the $15 level again even though gold did not challenge the $1377.50 level.

Last week, silver suddenly woke up during a day when the price of gold moved to the downside and the dollar index traded at over the 97 level. Silver is a metal that loves to surprise on the up and the downside. Fundamental analysis in the silver market is usually a waste of time. The cost of production is cloudy because most silver output comes as a byproduct of other metals and ores. Market sentiment is the most influential factor that drives the price of silver. A segment of the market continues to cry foul when silver does not follow gold like an obedient puppy. Conspiracy theories are a convenient excuse to blame others for losses. JP Morgan, HSBC, and other financial institutions do not control the price of silver and do not care if the price goes to $1000 per ounce or to zero. Silver moves higher or lower on the back of the market's sentiment. Don't get me wrong; there is manipulation in the silver market when it comes to short-term spoofing and putting up price prints from time to time. However, any thoughts of a grand conspiracy to move the price of silver higher or lower for sustained periods are nothing more than a fantasy offered by delusionary members of the market standing on a soapbox. The theories are interesting and entertaining, and they build an audience for some analysts who sell what they offer as the inside scope that amounts to nonsense. They provide solace to those nursing losses in the silver market as it is easier to blame others for losing money.

Last week, the price of silver moved to a higher high as sentiment caused it to climb for five straight trading sessions. Time will tell if we are at the start of a significant and overdue price recovery in the silver market. By the end of the week, silver had conquered the 2019 peak and moved to a new high for this year. If silver is on the road to challenge the highs from 2018 the Velocity Shares 3X Long Silver ETN product (USLV) will become golden.


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