Silver Stackers: "China Has Your Back" - Mike Maloney

Summary

The 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

00:00

📉 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.

05:02

📈 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.

10:04

🏭 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.

15:06

🌐 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.

Keywords

💡Silver Smackdown

The term 'Silver Smackdown' refers to a significant drop in the price of silver. In the video's context, it is used to describe a substantial overnight decrease in silver's value, which is a central event being analyzed. The script mentions that silver fell from a high of 2943 to a low of 2781, indicating a considerable market fluctuation.

💡Leverage

Leverage in finance refers to the use of borrowed capital to increase the potential return of an investment. In the script, it is mentioned that silver is leveraged to gold, meaning that its price movements are amplified compared to gold's. When gold moves, silver is expected to move more dramatically in the same direction, which is a key concept in understanding the video's analysis of market behavior.

💡Equilibrium

Equilibrium in economics is a state where economic forces are balanced, and there is stability in supply and demand. The script refers to silver 'noodling around' to find an equilibrium after the significant price drop, suggesting the market is adjusting to find a new stable price level following the 'Smackdown'.

💡Fundamentals

Fundamentals in finance relate to the underlying factors that determine the value of an asset, such as revenue, expenses, and market conditions. The video script discusses looking at fundamentals to understand the underlying reasons for the silver price movements, emphasizing the importance of analyzing more than just price action.

💡Open Interest

Open interest is the total number of outstanding contracts that have not been settled. In the context of the video, it is used to analyze the Shanghai gold and silver futures markets, indicating the level of market participation and investor sentiment. The script notes a significant increase in open interest, suggesting growing market activity.

💡Volume

Volume in the context of trading refers to the number of contracts or shares traded in a security or market during a given period. The script discusses the increase in volume for silver futures, which is an indicator of the market's activity level and can be used to gauge the intensity of price movements.

💡Commitment of Traders (COT)

The Commitment of Traders is a report that shows the positioning of traders in futures and options markets. In the script, the COT report is used to analyze the positions of commercial and non-commercial traders in the silver market, providing insights into market sentiment and potential future price movements.

💡Net Short Position

A net short position indicates that the total number of short contracts in a market exceeds the total number of long contracts. The script mentions that the silver market started its bull run from a high net short position, suggesting that despite many traders betting against silver, the market moved in the opposite direction.

💡Gold Silver Ratio

The gold silver ratio is a measure of how many ounces of silver it takes to equal the value of one ounce of gold. It is used as a buying guide in the video, with the speaker noting that when the ratio increases, silver becomes a more attractive purchase relative to gold. The script discusses the ratio's historical context and its implications for future price movements.

💡Safe Haven Assets

Safe haven assets are investments that are expected to retain or increase in value during times of market turbulence. In the video, gold and silver are described as ultimate safe havens, suggesting that they are likely to perform well in the face of global uncertainty and financial chaos.

💡Long-Term Investor

A long-term investor is someone who holds investments for an extended period, often years, with the expectation of earning returns over time. The script contrasts this with short-term traders or speculators, emphasizing the speaker's perspective of using market pullbacks to accumulate assets for the long term.

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