Silver: 4 Structural Adjustments That Verify The Begin Of A New Secular Bull Market

January 23, 2023

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We’ve coated silver extensively within the final 2 years. Not solely will we stay firmly bullish on silver, long run, we even turned out rather more bullish as new knowledge is coming in.

Notice that every little thing we’re writing on this article has a long run focus. We don’t care about what silver goes to do tomorrow or subsequent week, it’s meaningless. Silver is for long run traders, not merchants, let that be clear!

Very not too long ago, we wrote that gold has a really highly effective long run setup. Gold is a number one indicator for silver. We stated that gold as a Main Indicator for Silver Is Turning Bullish As 2023 Kicks Off.

Furthermore, again in September, when the world was considering that the world would crumble and that silver would crash massive, we stated: One Silver Chart Justifies “Purchase The Dip” For Lengthy Time period Positions. It was the gold/silver ratio which got here in a STRONG BUY space.

The message of the silver chart

Let’s begin off by the chart. As stated many instances “begin with the chart.”

We function a silver chart that’s reserved for premium members of the Momentum Investing service (for inventory market traders) and Commerce Alerts (auto-trading service). We’re doubtless by no means once more going to function this chart within the public area.

The silver worth chart proven beneath is structured across the 3 month cycles. The silver cycles are very completely different than the inventory market cycles.

You’ll discover 4 cycles of three months, 12 months in whole, between Could of 2021 and 2022, which marked a bullish reversal. Nevertheless, on the finish of the reversal, the quickest price hike in historical past pushed commodities decrease. Silver didn’t escape the promoting and began a bullish reversal at a decrease degree.

Notice that this isn’t per se dangerous on the long run, quite the opposite, there’s a variety of analogy with the Tesla setup again in 2019, earlier than Tesla took off, as defined right here Silver vs. Tesla: Similarities and Variations.

The June cycle and September cycle in 2022 coincided with a bullish reversal which we consider will transform a long-lasting backside for years to come back.

The present cycle has a topping attribute. We consider any pullback must be purchased aggressively within the space which we indicated on the chart.

The chart is solely a mirrored image of actions of consumers and sellers.

If we learn this chart appropriately and conclude “the June cycle and September cycle in 2022 coincided with a bullish reversal which we consider will transform a long-lasting backside for years to come back” than we should always see this mirrored in different knowledge factors.

4 structural adjustments within the silver market

We already talked about {that a} scarcity within the bodily silver market is brewing: Silver: A Divergence Of Epic And Historic Proportions. That’s an epic improvement, a recreation changer.

However there should be extra. Way more. If that’s the case, we should always be capable to confirm these knowledge factors in an goal means.

That’s what we’ll do within the the rest of this text.

Within the the rest of this text we’ll present 3 extra knowledge factors which can be recreation changers within the silver market. They coincide with the bullish reversal sample which we consider is a long run and lasting backside. Ultimately, all these 4 knowledge factors are associated to one another, it’s a matter of connecting the dots!

The info factors we’ll function affirm the chart and vice versa.

Courtesy of silver analyst Ted Butler who was variety sufficient to launch a lot of the knowledge factors we’ll point out within the public area.

The bodily market scarcity that’s underway should have ripple results. Or, said otherwise, there should be further knowledge factors which can be proof of a bodily market scarcity.

Ted Butler places forth proof of this, notably the bodily turnover into the silver COMEX warehouse:

I consider the extraordinary bodily turnover within the COMEX silver warehouses is the surest doable signal anybody may ever get prematurely that the bodily scarcity is shut at hand. I do know that it has been 12 years since this bodily motion started, so who the heck am I to counsel it’s signaling we’re near the purpose the place the silver scarcity will quickly be extremely seen and unmanageable? I’d reply that, taken along with all of the extraordinary developments over this time, from JPMorgan accumulating a billion oz silver and 30 million oz (possibly extra) gold bodily place, to then settling with the DOJ and double crossing its fellow massive COMEX shorts, to extra issues than I can recite right here. It’s the totality of the problems.

I might level out that it has been practically three months the place whole COMEX silver warehouse inventories, after declining sharply over the 2 prior years (by as a lot as 100 million oz), have now hovered across the 300 million oz degree. But, the turnover persists. With out getting too deep into the weeds, this means to me that we could also be truly on the level the place solely new stuff introduced in can fulfill new calls for for bodily silver – and the place the silver within the warehouses are owned by these not inquisitive about promoting. Sure, that is very speculative on my half and it may simply prove we’re not as shut as I counsel.

The problem of bodily silver turnover into the silver warehouses is a subject that is still underexposed. Ted Butler’s tackle that is that it’s the ‘symptom’ of bodily silver scarcity.

He continues on the identical matter:

Maybe probably the most singular spectacular achievement of the 12-year intense bodily motion within the COMEX silver warehouses is that it has succeeded in protecting the world’s industrial silver customers and fabricators fully-supplied on this just-in-time world. The minute the on-time silver deliveries hit a snag, some customers, in looking for to avert future supply delays, will transfer to order additional or stockpile silver. This may set off a series response. The miracle is that it hasn’t occurred so far.

Furthermore, the silver CoT report continues to be very bullish regardless of a powerful rally in silver since October. This suggests that commercials who dominate the silver futures market worth setting are reluctant so as to add an excessive amount of to their internet brief positions.

Whereas that is topic to vary, it’s a recreation changer, as per Ted Butler’s evaluation.

Lastly, complementary to the CoT report however nonetheless completely different, is the Financial institution Participation report. This report reveals positions of banks in numerous commodities.

Once more, courtesy of Ted Butler his findings – he’s factual and knowledge pushed:

This month’s Financial institution Participation report featured a reversal of kinds from the prior report, in that the relative lack of financial institution promoting was extra pronounced in silver, whereas it was in gold within the prior report. From Dec 6 to Jan 3, whereas the overall industrial internet brief place in gold elevated by roughly 30,000 contracts, the banks within the BPR solely accounted for 13,000 contracts of the promoting, with non-banks (a wide range of swap sellers), accounted for the stability of 17,000 contracts. A s a reminder, the worth of gold rose about $80 over this time.

Wanting again from the BPR as of Nov 1, the overall industrial internet brief place in gold elevated by 85,000 contracts to Jan 3, as gold costs rose by $200, and the portion of whole industrial promoting by banks was 30,000 contracts, in comparison with non-bank industrial promoting of 55,000 contracts. That is in regards to the smallest financial institution promoting in reminiscence.

Thus, the “thumbs up” so far as my tentative conclusion of a sea change in financial institution shorting. In fact, I suppose the banks may come onto the brief aspect at larger costs, so nothing is written in stone at this level.

This is the reason we like Ted Butler a lot:

I’m not attempting to be a wise-guy with all of the solutions who may also be capable to pinpoint precisely the exact second of liftoff. As all the time, I’m simply attempting to make sense out of verifiable public knowledge. On the identical time, it’s high-time somebody stands as much as admit that the unprecedented bodily turnover within the COMEX silver warehouses is so uncommon that ignoring it’s not a authentic choice if one professes to have an curiosity in silver.

All in all, we consider these developments within the silver market are epic, true recreation changers. They affirm our chart readings. We consider the brand new silver bull market is beginning its engine. It has a protracted solution to go. Will probably be a multi-year rise with bumps alongside the street.

And, keep in mind, silver is just worthwhile for traders with a long run horizon.