Pigs have gotten slaughtered in the silver market this week, but that doesn't mean that the greater battle has been lost. The pigs have merely played out their role as useful idiots so that bigger guns can enter the stage. With the landmines cleared out of the way, the generals can chose to leave the battle scene or go for another round of attack. It all depends on technical indicators that all seem to forebode another round of attacks fairly soon.
First, there is the issue of physical silver, which seems to be in short supply. Many dealers are out of stock, and what little silver there is trades at enormous premiums to spot. If this situation persists, we can assume the shortage to be real and not merely a function of the sudden surge of pigs willing to buy silver at almost any price.
Turning to Google trends, we see that the interest in silver has exploded 10 times since a week ago, making it for the first time ever more queried than Tesla, Bitcoin and gold. This indicates a substantial interest in silver. It's not just the pigs. Other people are interested in silver as well, which suggests to us that physical silver may remain hard to find for some time going forward.
Then there's the odd disconnect between future prices of silver, which are going down, and physical prices of silver, which remain high. This indicate a split between the official price of silver and its real price, reminiscent of Soviet practices where the official price of cabbages had little to no bearing on the real price of cabbages. If people start catching on to this meme, faith in the futures market may break down completely.
From a tactical viewpoint, another attack on silver seems likely due to the apparent weakness in the futures market and strength in the physical market. However, silver is not where I'm positioned, and I have no plans to enter this market at the moment. My strategy limits me to gold, real-estate and index funds. I'm not going to make a hasty decision just to get a piece of the action.
Strategies should not be altered in the heat of the moment but as a calculated deviation due to insights of substance. I may for instance choose to create my own index fund from individual shares rather than owning shares through a bank created index. I may also choose to own silver coins for practical purposes so that I can pay for goods and services in the parallel economy if society goes cashless. But none of this should impact my current position. My metal of choice is gold, not silver. However, gold and silver are related, so the current battle in silver is likely to spill over into gold. It's worth keeping an eye on the action, and make some tentative stipulations as to what we're likely to see going forward.
If physical silver remains hard to get, gold coins become the natural alternative, so we can keep an eye on gold vendors to see what they have in stock and what prices coins go for. I've been tracking a bank owned vendor here in Portugal, and I've noticed a sustained drop in available coins. This started about three years back, when the supply of gold wafers dried up together with one ounce coins. There's currently only gold sovereigns being traded, all at elevated prices, so it appears that the shortage in the silver market also exists in the gold market.
All of this will be interesting to follow. However, my strategy does not require me to do anything before the gold/Dow ratio falls below 5, so I'm not likely to have to do any trading anytime soon. There's at least a year or two left before we start approaching my target price.
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| American Silver Eagle |
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