Silver Stackers: "China Has Your Back" - Mike Maloney
Summary
TLDRThe video analyzes a recent significant drop in silver prices, comparing it to gold and discussing the volatility and fundamentals of both metals. It emphasizes that while silver is highly leveraged to gold, the current market conditions, including Chinese buying and global central bank accumulation, suggest strong underlying support. The analysis covers futures contracts, trader positions, and historical trends, concluding that despite short-term fluctuations, silver remains a valuable investment for the long term, particularly when considering the gold-silver ratio and the anticipated rise in precious metal prices amid global economic uncertainty.
Takeaways
- 📉 The silver market experienced a significant drop, with the price falling from a high of 2943 to a low of 2781, which the speaker refers to as a 'big silver Smackdown'.
- 📊 Silver is described as 'leveraged gold,' meaning it can have more significant price movements in either direction compared to gold.
- 🏦 The Shanghai gold and silver futures are highlighted as indicators of Chinese market activity, showing increased open interest and trading volume.
- 📈 Despite the drop, the speaker suggests that silver investors should not panic, as the fundamentals of the market, including Chinese buying, remain strong.
- 📝 The Commitment of Traders (COT) report is discussed, showing a discrepancy between commercial and non-commercial traders' positions, which may influence market sentiment.
- 💼 The speaker emphasizes that long-term investors should not be concerned by short-term market fluctuations and should focus on the fundamentals.
- 📉 The gold market has been relatively stable over the past six months, with a price range between 2300 and nearly 2500, indicating potential for future growth.
- 🌐 Global silver production has been on a decline since peaking in 2016, suggesting a potential supply issue that could drive up silver prices.
- 📊 The gold-silver ratio is presented as a personal buying guide for the speaker, who believes that silver is currently undervalued compared to gold.
- 🛑 The speaker advises against selling during a pullback, instead suggesting it as an opportunity to accumulate more silver.
- 🏆 The long-term outlook for gold and silver is bullish, with the speaker expecting higher prices due to global instability and the precious metals' status as safe-haven assets.
Q & A
What happened to the silver price recently?
-The silver price experienced a significant drop, falling from a high of 2943 to a low of 2781, which the speaker refers to as a 'big silver Smackdown.'
How does the speaker describe the typical reaction to a big down day in the market?
-The speaker notes that people tend to panic on a down day, unlike on an up day, and emphasizes that this reaction is more common among traders rather than investors.
What is the relationship between gold and silver prices?
-The speaker explains that silver is leveraged to gold, meaning that if gold prices increase, silver prices will increase by a multiple of that amount, and the same applies to decreases.
What is the significance of the Shanghai gold and silver futures in the context of the speaker's analysis?
-The Shanghai gold and silver futures are highlighted as indicators of Chinese investment in these commodities, showing that the Chinese are buying when prices drop, which supports the market.
What does the speaker say about the open interest and volume in the Shanghai silver futures?
-The speaker points out that the open interest and volume in the Shanghai silver futures have significantly increased in the past four months, indicating heightened activity in the silver market.
How does the speaker interpret the Commitment of Traders report?
-The speaker uses the Commitment of Traders report to analyze the net positions of commercial and non-commercial traders, suggesting that a high net short position can indicate a potential bull market.
What is the speaker's view on the relationship between gold and silver as safe haven assets?
-The speaker believes that gold and silver are ultimate safe haven assets, and that they are coupled in such a way that when gold prices rise, silver prices will follow.
What does the speaker suggest about the gold-silver ratio?
-The speaker uses the gold-silver ratio as a personal buying guide, noting that a high ratio indicates that silver is more of a bargain compared to gold.
How does the speaker analyze the global annual silver production?
-The speaker notes that global annual silver production peaked in 2016 and has been falling since, which is significant because silver is primarily an industrial metal with demand from various industries.
What is the speaker's strategy for investing in silver and gold?
-The speaker plans to use market pullbacks to accumulate silver, converting it to gold at favorable prices, based on the belief that gold will continue to rise and drag silver prices along.
What historical perspective does the speaker provide on the gold-silver ratio?
-The speaker mentions that historically, the natural ratio has averaged around 13 to 15, and that the current ratio of 85 indicates that silver is significantly undervalued compared to gold.
Outlines
📉 Silver Price Analysis Amidst Market Volatility
The speaker begins by addressing a significant drop in silver prices, referred to as a 'silver SmackDown', where it fell from a high of 2943 to a low of 2781. They emphasize the importance of not panicking during market downturns and compare it to a previous larger drop. The speaker provides a six-month overview of silver's performance, highlighting its correlation with gold, which is often seen as a leveraged play on the market. They explain that while silver can experience significant gains when gold rises, it is also subject to sharp declines. The focus then shifts to Shanghai gold futures, where the speaker notes an increase in open interest and trading volume, suggesting strong market activity. The analysis aims to provide a fundamental understanding of the market's underlying dynamics rather than causing alarm.
📈 Bull Market Insights and Commitment of Traders Report
The speaker delves into the Commitment of Traders (COT) report, which provides insights into the positioning of various market participants in futures markets. They discuss the bull market's progression from a net short position to a significant increase, starting from the 1600s up to 2400, despite a high net short position for commercials at the beginning of the bull run. The analysis of the silver market shows a lack of a significant blip in the COT report, indicating less concern among gamblers about a potential silver price explosion. The speaker also notes a unique situation where non-commercial traders were net short while commercials were net long, marking a significant shift in market dynamics. They conclude with a discussion on gold and silver as safe-haven assets, suggesting that despite current market conditions, these assets are likely to retain their value.
🏭 Silver's Industrial Demand and Production Trends
The speaker discusses the industrial demand for silver and its production trends, noting that global annual silver production peaked in 2016 and has been declining ever since. They emphasize that silver, being primarily an industrial metal, is subject to supply and demand dynamics. The decline in production, coupled with increasing industrial demand, is expected to lead to a rise in silver prices. The speaker also touches on the gold-to-silver ratio, suggesting that silver is currently undervalued compared to gold and could be a good buying opportunity. They use the gold-to-silver ratio as a personal buying guide and encourage long-term investment rather than short-term speculation.
🌐 Global Economic Factors and Long-Term Investment Strategy
In the final paragraph, the speaker reflects on the broader economic and political landscape, considering the impact of wars, central bank activities, and financial chaos on precious metal markets. They highlight the role of gold and silver as crisis and chaos hedges and predict that the world is heading towards greater instability, which could drive up the prices of these metals. The speaker shares their long-term investment strategy, which involves buying silver at current prices and converting it to gold, anticipating a future increase in the gold-to-silver ratio. They conclude by expressing confidence in their analysis and offering reassurance to those who may be concerned about the recent market fluctuations.
Mindmap
Keywords
💡Silver Smackdown
💡Leverage
💡Equilibrium
💡Fundamentals
💡Open Interest
💡Volume
💡Commitment of Traders (COT)
💡Net Short Position
💡Gold Silver Ratio
💡Safe Haven Assets
💡Long-Term Investor
Highlights
The silver price experienced a significant drop overnight, falling from a high of 2943 to a low of 2781, causing concern among investors.
Silver is considered leveraged gold, meaning its price movement can be more exaggerated compared to gold's.
Investors are advised not to panic during market downturns but to consider their long-term positions.
Shanghai gold and silver futures show increased open interest and trading volume, indicating strong market activity.
The Chinese market is actively buying gold and silver, providing support during downturns.
US Commitment of Traders data reveals a discrepancy between small traders and commercial entities in their net positions.
Silver's open interest and volume have significantly increased since the beginning of 2024, suggesting growing market interest.
Gold and silver are seen as safe-haven assets, especially in times of global uncertainty and financial chaos.
Gold prices have been relatively stable over the last six months, suggesting a strong psychological barrier at $2500.
Global annual silver production has been on a decline since peaking in 2016, which could impact future pricing.
The gold-silver ratio is used as a buying guide, with current levels indicating silver may be undervalued compared to gold.
The speaker is a long-term investor, focusing on accumulating positions during market pullbacks.
Historical gold-silver ratios suggest a natural balance around 15:1, significantly lower than current levels.
The speaker anticipates a crisis and chaos in the world, which could drive gold and silver prices higher.
Silver is considered a bargain at current prices, with the potential for significant gains if converted to gold.
The speaker plans to use the current market pullback to add to their investment position in silver.
The analysis aims to provide reassurance and inner peace to investors amidst market volatility.
Transcripts
well last night there was a big silver
Smackdown should you panic should you
sell we're going to do a little analysis
here and and really take a look at this
and I think you're going to be
[Music]
surprised so this is a chart of the
silver price I almost wish it wouldn't
do this automatic thing that it does but
uh here is the big uh silver SmackDown
silver uh fell uh from its high was 2943
and its low was
2781 big overnight Smackdown and then it
sort of noodled around uh today trying
to find a equilibrium but I want to
point out you know everybody panics on a
down day like this nobody panics on a on
an upday there's a big up unless you're
short there's a big up day there and
it's much so this is six months of
information uh there was a bigger down
day right here so we've got a big up day
a big down day silver is basically
leveraged gold so if gold goes up a
certain amount silver will go up 1.5
times the amount two times that amount
three times that amount sometimes uh and
but it's got the same leverage on the
downside so a lot of times silver uh
investors get panicked or depressed but
you're less likely if you're an investor
and not a Trader this is the type of
thing that where Traders lose investors
you don't lose until you exit your
position and uh you exit it and lock in
losses so let's take a look at some of
the fundamentals and see what's
underlying all of this so this is
Shanghai gold Futures this is from Nick
LED at stock uh at uh gold charts or
us and what you see uh so here is the
gold price and we're talking you know
400 uh Ren Mimi I guess um per I'm not
sure per gram I think it is and then um
uh there's this Plateau here that we've
had over the past four months which is
great but we want to take a look at open
interest and the volume we had uh about
180,000 contracts this is in ,000 so
180,000 and we're poking our nose over
400,000 contracts so more than a
doubling since
2022 and you can see that lately this is
very high but let's look at Silver this
is the Shanghai silver Futures so
Shanghai exchange what I'm showing you
here is the Chinese have your back uh
gold and silver are pushed all over the
place by the Commodities Exchange in the
United United States but when it goes
down the Chinese are buying but here we
have silver and uh first look at look at
the open interest how many contracts
there are and you're you're talking
about 650,000 here and uh we're up at um
over 900,000 here uh 920 something like
that so it's significant but look at
this volume what has happened in just
the past four months or so this is since
the beginning of the year 2024 so this
is about uh three and a half four months
and the volume is way up compared to
what it used to be so like I said the
Chinese have your back uh again from
Nick L this is the US uh the commitment
of Traders so this is Futures again but
it's broken down a little bit
differently it's broken down into the uh
commercial which is the big bullion
Banks and the big uh precious metals uh
refineries and so on uh and then the
non-commercial and the non- reportables
so these are small Traders and if you
take the small Traders this line here
and add that to the uh non-c commercials
the the red bars you get an an exact
reflection of the blue bars so this is
the net what they're doing is they're
taking the the open interest here uh
which has has uh become very high just
lately uh and they're taking out the net
difference of Longs and shorts uh by you
know rated by um the you know whether
they're commercial non-commercial or
non-reportable and what you see is that
a bull market so here we are at uh like
1630 or something something like that
1620 uh the low
1600s all the way up to
2400 uh starting from a low net short
position uh and what's interesting
though is uh this bull run here started
at a fairly High uh you know net short
position for the
commercials uh so this this fairly High
uh discrepancy between the net position
and it peaked here last week now this is
from July 19th and we won't have the
updated information for another couple
of days there's no reason for the uh the
Commodities exchange to hide this stuff
for a week but they do uh and then but
let's take a look at Silver so silver
did not put in that big blip uh meaning
that the uh gamblers that are that are
part of this uh commitment of Traders
the gamblers are a little bit more
worried on you know that silver could
explode this did not uh exceed the
previous week's uh position and but what
you do see here you know it was almost
down to nothing in fact it was upside
down here which I had never seen this
was like a brand new thing that happened
uh in this Century it hadn't happened
where the uh the non-commercial
were net short and the commercials were
net long that was a brand new thing but
it marked the beginning that this was
less than $18 so you're talking the high
17s up to over 32 so you're talking you
know this is this is a huge move um and
uh these short-term bull markets they
start from these very low
positions uh and this shrinks so again
you've got the small investors here well
Traders this is on the Commodities
exchange these are paper this is
fictitious silver that doesn't really
exist and so uh the red bars plus this
line equal the Blue Line uh but we were
ready for a pullback and we've gotten
that pullback that happened like I said
last night but I'm giving you some of
the fundamentals here uh this is weekly
transparent gold holding
and it's all of the published
repositories the vaults plus the mutual
funds and the ETFs and what's
interesting here is gold went from the
mid1 16s so you got about
$1,650 an ounce back in 2022 to over
2400 and it's almost all accompanied by
net outflows selling selling gold caused
the price to rise at least in the US why
why because there's other factors at
work and that's you know the Chinese and
the rest of the world and the world's
central banks preparing getting ready
for something accumulating and so
whenever uh these people sell this this
is the blue line is the Holdings uh here
going down and down and down and then
every once in a while you have some net
inflows net inflows but it's rare and uh
this this all of this sales
and the price Rises so there's other
people here that have your back here's
silver there's a lot more outflows than
inflows uh this price rise here was
accompanied with these inflows but I did
expect uh some more outflows so expect
uh next you know when this comes out in
just a couple of days uh expect uh some
more outflows to be on this chart but
the big story here Global annual silver
production peaked in 2016 and it's been
falling this chart goes all the way back
to
1930 2016 and it's been falling ever
since and silver is primarily an
industrial metal uh most of it gets used
up in Industry industry needs it uh so
you're an investor but uh most silver
still goes to Industry and so you you
can't have this fall falling reduction
forever and not have the price rise if
it if the demand on the industrial side
is increasing but here is the big point
and what you've got to watch here is the
gold price uh over the last 6 months and
you can see that it's been in this range
between 20 just under
2300 uh up to uh just a breath away from
2500 um a high of 2482
2483 so that 2500 is a big
psychological uh barrier and when it
gets past that I do think you're going
to see a lot of buying but we just
recently saw all of these all all-time
highs this this high in gold was
accompanied by
crickets there was uh no rush toward
gold so this there was basically uh
everybody was sort of ambivalent
all-time highs and you've got to realize
the world that we're living in now look
at the wars look at the Central Bank
accumulation look at the financial chaos
that seems to be going on where
everything seems to be going up and down
at the same time and then take a look at
the political situation have you ever
seen I I've never I I was born in
1956 I have never seen an election cycle
this crazy it's everything in the world
is just turned upside down and nuts and
gold and silver are the ultimate Safe
Haven assets and they are coupled when
gold goes up it will drag silver with it
period And there's no big damage that
has been done to Gold
whatsoever uh and so the thing to watch
is the gold silver ratio here it is at
84.85%
the it's easiest for me to watch this on
my own website it went up 2.8 48% which
means silver V silver's value as
compared to Gold fell by that amount
meaning silver is more of a bargain and
I use this for my buying guide the gold
silver ratio is my personal buying guide
and so all I see here until some severe
damage is done with gold and we would
have to see it you know let's take take
a little bit longer view here um I'm
going to go back um one year you know if
it breaks 2,000 we're in trouble 2300 is
a real good support uh level if it
breaks 2,000 then maybe we're in some
serious trouble but there is a lot of
support in that 200000 region I would
not expect it to be breaking that and
then but see I am in this for the Long
Haul I am a long-term investor not a
Speculator not a Trader or a gambler so
I am watching that gold silver ratio and
so here is the gold silver ratio and
stock charts has not yet updated today
I'm making this on the 25th and so I put
this just a whisker under 85 right where
the gold silver ratio is and as you know
to get a real perspective the big
picture you've got to take a look at how
much of this line is below that blue
line and how much is above and how rare
it is to be able to buy silver at such a
bargain compared to gold and then just
remember that gold drags this all over
the place so if you're panicked or
depressed you've got to think well where
is the world headed uh is is gold and
silver are they a crisis head hedge are
they a chaos hedge do you think that the
world is headed toward chaos and I
believe we are overdue for a crisis so
uh take uh crisis multiplied by
chaos and that's where we're heading and
I believe that we are headed for far
greater gold and silver prices and what
I am looking to do is to be buying
silver at these prices and converting
them to gold down at these prices
because it's going to revisit that area
one day don't believe me uh go back to
2011 and ask people if they ever thought
that they would see the gold silver
ratio back down in the 30s everybody
thought it belonged at 60 or so well
guess what go back throughout history
and what the natural ratio the ratio for
the past few thousand years sort of
averages around 15 13 to 15 and it more
reflects the gold silver ratio the
minable supplies the the no the crust
supplies the minable supplies are
probably closer to 8 to one or or so on
Silver is exhausted and uh and so I am
expecting this is 1980 when it dropped
down below 15 to1 well just take where
we are now 85 so um at at 40 uh 250 50
you you get if you sell you're going to
get twice as much gold than you paid for
if you if you change this into gold if
you sell for dollars you've outperformed
Gold by double so that is my analysis I
hope that reassures you a little bit I'm
not panicked I'm going to be using this
pullback to uh accumulate you know to to
add to my position I want to thank you
for watching and I hope this gave you a
a little bit of inner peace thank you
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