Silver: Have we seen the bottom?

Last week, volatility returned to the markets and the prime catalyst – of course – was the growing political concerns in Washington, plus a new political scandal in Brazil.

That’s all good news for precious metals.

Let’s look at silver – which saw its price rebound sharply, after falling about 14% – now trading higher in seven of the last eight trading days. Even after the selloff, silver is still trading up about 5% for the year from last year’s closing price of $15.936.

The fact is last year was a turning point for silver prices on an annual-average basis, with prices up 9.3% to $17.14/oz. This marked the first increase since 2011 for silver.

And I expect this trend to continue.

Take a look below at The Edelson Institute cycle forecast for silver, which is looking very bullish heading into the summer months.

As you can see from our cycle forecast, the decline in April and early May means that silver has likely bottomed. And from a technical standpoint, I am eyeing $17.05 as the first level of resistance on this current upswing: A break above this level would be very bullish.

Plus, from a fundamental perspective, things are looking bullish for silver as well. Speculators in silver futures and options aggressively liquidated their net-long positions recently, cutting the long positioning by 41% from a record high of 190,000 contracts down to 71,000 contracts. This move sets silver up for its next leg higher.

Also, during the later April-early May downturn, total open interest plunged 19.6%. That removes the speculative froth that was building in silver futures, another bullish sign.

The recent silver production numbers released by The Silver Institute’s World Silver Survey 2017 were also positive: Global silver production dropped last year for the first time since 2002. Overall, total silver supply decreased by 32.6 million ounces in 2016.

Don’t forget that the summer months can be quite volatile for precious metals, so caution is warranted. But we should see the silver market continue to grind higher while using further pullbacks as an opportunity to add to our silver holdings.

Here’s How to Play It

On the next pullback, the simplest way to add silver exposure to your portfolio is by using an ETF, like the iShares Silver Trust (SLV). But if you really want to ramp up your exposure, you can go with a leveraged ETF, like the VelocityShares 3X Long Silver ETN (USLV), which is triple levered – or ProShares Ultra Silver (AGQ), which gives you double the leverage.

Another way to play it is through silver mining stocks, which should rise right along with silver prices.

Any which way you decide to play it, always be aware of the risks involved with each type of investment product and only invest if you are comfortable with those risks.

Good investing,

Mike Burnick

 

 

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Comments 7

  1. Gary Davis May 22, 2017

    I do not understand the comment: “Speculators in silver futures and options aggressively liquidated their net-long positions recently…” It seems to me that if the price of silver is expected to go up, wouldn’t long call options go higher as the price exceeds the lower strike prices? So if prices are expected to go up, why liquidate net long positions?

    Reply

  2. Gen M May 23, 2017

    So, will you signal when to back up the truck as Larry always said he would. Larry also promised to identify the best miners. I realize no one can time the market precisely, but your chart clearly shows another leg down before it takes off. I guess I expect better guidance than what we seem to be getting.

    Reply

  3. Mark Holstein May 23, 2017

    Any fundementals, charts, waves, debt, black swan events,are irrelevant as long as the Federal Reserve is rigging metals prices through it’s bullion banks by placing massive short positions suppressing prices. When is the SEC and other regulators going to put these people responsible in jail and fine them multi-billions of dollars? Never! Any investment in metals is dead money until this is corrected.

    Reply

  4. Mark H May 26, 2017

    Cycles, waves, fundamentals, supply/demand, overwhelming debt, ratings downgrades, massive paper leverage or the man in the moon have nothing to do with metal prices as long as the Federal Reserve and it’s bullion banks illegally crush any rise in prices through massive naked short positions. Regulators sworn to uphold the laws against illegal manipulation look the other way as this fraud continues unabated. Our “elected public servants” are too busy operating the largest criminal racketeering syndicate in history to bite the hand that feeds and enables their corruption. Until we get honest government, We the People are at the mercy of these arrogant criminals who have complete disregard for the US Constitution and the Bill of Rights which has been subverted into a worthless piece of paper.

    Reply

  5. karl51001 June 2, 2017

    I like the chart for silver and we should see the last leg down early next week. I would really like to see similar charts for gold, palladium and S&P and dollar.
    Also, a longer term chart for gold and silver would be useful.
    Karl Schreiber

    Reply

  6. taikun July 10, 2017

    Can somebody explain how to read Larry Edelson charts especially the markings at top and bottom

    Reply

  7. taikun July 10, 2017

    Do the editors of this newsletter ever read these comments and provide answers to questions

    Reply