Silver: Do Old Indicators Matter Or Is Physical About To Overrun Paper?

Tyler Durden's picture

Submitted by John Rubino via,

For as long as most gold and silver investors can remember, the paper markets - that is, banks and speculators placing bets with futures contracts - have set the price of those metals. And within the paper markets, “the commercials” - fabricators and big banks - have consistently fooled speculators like hedge funds into going long or short at exactly the wrong time.

The data series that tracks this relationship is known as the commitment of traders report (COT), and it’s been a pretty reliable indicator of precious metals’ short-term trajectory.

Right now that’s bad news for gold and especially for silver, because the speculators - who, remember, are usually wrong at the extremes - are exuberantly long the latter, implying that the silver recovery is due for a correction. Here’s a recent piece from well-known metals trader Dan Norcini:

Silver Commitments of Traders – Halloween is Arriving Early This Year


By that I mean, it just keeps getting scarier and scarier.


My guess is that every speculator on the planet is long silver/short gold or outright long silver.


That of course is an exaggeration but I am not exaggerating when I categorically state that the silver market is a train wreck just waiting to happen. As I have said before, and will say so again – I would rather miss any more upside in this market than get long now, not with a trade so lopsidedly jammed with speculators on the long side. I will leave that for the daredevils and others who like driving the stagecoach as close to the edge of the mountain pass road as they possibly can.


Here is a look at the hedge fund outrights:


Silver shorts April 16 2


Yet another all time record high! Tell me we do not have a buying frenzy taking place in the silver market! I suppose it can keep going higher and the specs can keep piling on more and more longs but when it breaks, it is going to be ugly – unless you are short and then it will be a thing of beauty to behold a mass exodus of hapless specs who ended up buying the top in this thing.


Commercial interests and Swap Dealers have been more than happy to offload silver into the hands of speculators at these prices. If I were long this market, and I am not, I would get some downside protection through the use of options at the very least.

On the other side of this argument is London metals trader Andrew Maguire, who in his latest interview on King World News asserts that gold and silver are entering new, post-paper age in which physical demand sets prices:

Western central planners have finally lost control of the gold market.


There is an unprecedented liquidity drain out of London markets into physical markets in the East. It’s flowing out of the paper market into the physical exchanges. These events are unprecedented, forcing changes in the behavior of paper markets that are not comprehended by paper-centric analysts who are puzzling over outdated chart patterns and synthetically extracted data.


Just this week things came to a head. An overwhelming number of bearish observations appeared in the blogosphere. I see a lot of hand wringing about open interest structure which historically at these levels has resulted in a major rinse lower. But the gold market is increasingly driven by global physical benchmarks. The physical market dog is starting to wag the paper market tail. Anyone trading paper-centric historical patters is driving forward while looking in the rear view mirror.

Maguire goes on to say that if this is indeed the long-awaited physical take-over of the precious metals markets silver will not only fail to correct, it will go up faster than gold, bringing the gold/silver ratio down to more historically normal levels.

For those getting back into precious metals after the brutal bear market of the past few years, the prospect of the Eastern physical markets taking over from the Western paper markets is welcome. But it adds another layer of complexity to an already opaque market.

So here again, the only rational response is to embrace the short-term uncertainty and dollar-cost average. Since both camps in the above debate see precious metals much higher a few years hence, just buy a little at a time and don’t try to play the squiggles. Leave that to the pros.

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zeropain's picture

pair trade,  long spam : short silver

SilverDoctors's picture

The gold/silver ratio could make a MAJOR move here over the next 6-12 months.  Take a look at silver's 5 year chart.  You can't even tell its moved off the bottom...yet the miners are screaming higher. 
Tomorrow should be interesting as the cartel cant let silver break through $18 or gold through $1300. 

Bill Holter's warning that We Might Not Reach October, & the Golden Jackass himself (Jim Willie) just warned today that a global Lehmen moment is dead ahead, which will send gold to $10,000 and silver to $300
Might be one of the last chances to load up on Phyzz before the long awaited reset.  

kliguy38's picture

anyone without the physical will be up shit is getting close but there will NOT be warning .....there will not be a reset initially just chaos in pricing. the vol will make you puke.....they'll try every trick they can to hold it

Save_America1st's picture

Dan Norcini?  Really?  Dan hasn't been relevant in 3 or 4 years since he flat-out refused to acknowledge any paper PM manipulation was ever happening at all.  Now that Douche Bunk has finally admitted to what we've known for many years in that they and all the other banksters have been criminally manipulating and supressing PM paper prices, Dan Norcini probably couldn't get much more irrelevant at this point unless he will finally admit that he was dead wrong all along. 

And thanks for all you do Doc...glad to see you on here once in a while. 

For those who might not yet know about out there, you all should start making it one of your top daily reads for sure. 

And don't forget the weekly Metals and Market podcast:

lickspitler's picture

Maguire is a fraud, he's been wrong for $600. Good to see the one eyed foil hatters still going off like a frog in a sock.

Where is Jim Sincairs call or turd ferg $5000 by next Wednesday. Reset bla bla, manipulation bla bla. it's a bad movie.

Transformer's picture

You're right these guys don't know what they're talking about.  Just keep telling yourself that.

espirit's picture

Plenty of dry fiat powder left for adding shiny to the lake bottom.

Will need another boat tho'.

Hammer it down again, I double dog-dare you Fucking Banksters.

Transformer's picture

If they do, what an opportunity!!!

LoneStarHog's picture

SCREW Dan Norcini...That goddamn PAPER trader has been trading with and publishing their CRAP for sometime now...Thank gawd Sinclair dumped his sorry ass and got Bill Holter...SCREW YOU, Norcini.

kliguy38's picture

Norcini is a douchebag....ignore that clownassniffer

Kaiser Sousa's picture

he dissed GATA and contnues to assert that there does not exist official intervention in the Gold & Silver markets by the Fed & ESF...

nuff said.....

Bay of Pigs's picture

Norcini has zero credibility. His analysis stinks.

JonNadler's picture

he has less credibility than me and am Jon Nadler! He will soon be with me here in the welfare office

BigJim's picture

Norcini may be wrong about manipulation, but he's been far more reliable with regards to price. Sinclair is a permabull pumpershill; he's been dead wrong since 2011. Why would anyone take him seriously?

kliguy38's picture

Really??? Well he just missed a 300% move in EXK...a 700% move in RIC...a 300% move in GORO a 500% move in maybe thats chump change but those moves are just a sample that he's sat on.....I don't mind that too much because I know that he's a Clownassniffer

Theosebes Goodfellow's picture

Is any of this going to change your world? Stay calm and stack on. Three words. Dollar-Cost-Averaging. Next, please.

Fester's picture

Holter used to be great, level headed, but for some reason he has started making wild assumptions about PM's and world affairs.


Hope he comes back.

Kaiser Sousa's picture

come on Doc u know that technical analysis is virtually worthless given that ALL markets especially the 2 enemies of the debt based currency paradigm have been completely commandeered by the sociopathic MoneyChangers assholes...

besides, it doesnt matter what the debt coupon dollar phpny paper price of Gold & Silver are until they r 10 to 20 times higher thatn they r now...

I just gonna keeping sheeding paper for the real money with the 5,000 year record of being just that...REAL MONEY...

will be getting some from u guys after the Fed bullshit fest...



stacking12321's picture

you still dont get it, do you? money changers are not the problem. doc is a money changer, he changes dollars for silver and gold. there is no harm in that.

money printers (counterfeiters) are the problem.

UmbilicalMosqueSweeper's picture

  The Second Cuming of Adolf the Barbarian will soon be upon them. Oh no, the whip! Clear the Temple! Run away, run away!

Jackagain's picture

Yeah...unless the Fed raises rates tomorrow...and June....

kliguy38's picture

yeah and you know what happened when they did that the last started its bull market ....that train already left the station......

cpnscarlet's picture

Lest we forget - all pudits mentioned in the article and comments have been DEAD WRONG on event timing. That makes them DEAD WRONG in any financial sense - capital has a time value. Maguire is at least a year late talking about a silver squeeze (and this rise is no queeze yet), Jackass is 3 years early on his calls on DB, and Holter was kissing Santa's Ass on the call that the collapse was going to be LAST September.

Yes, everything they say is true, they just don't know when to say it - it's all about selling the book and newsletter. ("Gee, Santa, $119 bucks for your wisdom? Any garuntee it gets any better for a price? Becuase your free posts for the last fice years have been crap.")

ZH Snob's picture

I have no crystal ball and do not attempt to predict the future.

I do, however, have a lot of shiny stuff with absolutely no counter-party risk.

alexcojones's picture

Haven't we been over this for 5 years now?

Silver is like that elusive football Charlie Brown tries to kick with Lucy.

Ponds of American Cry Out for SILVER-!

tenpanhandle's picture

One day, Charlie will run up and kick Lucy in the twat.

Paul John Smith's picture

Strange times ...

(and this will breed strange people)

(strange reactions)

(and madness)

(don't forget your lead bullion)

Jackagain's picture

How goes it Dr. Freckles....I heard AP runs this site now....they're doing wonders with Thorozine these days...

Paul John Smith's picture

Fucking AP ...

Any who - I'm fine, working, stacking metals, blogging/writing and in general trying to eek out as much "normal" from this fucked-up-carnival-casino-fun-house.

Dave Whiteman's picture

Silver bullets for the Blown Stranger.

Goldilocks's picture

King World News - Andrew Maguire (17:21)
April 23, 2016

Zest's picture

I'll believe it when I see a J-curve.

ForWhomTheTollBuilds's picture

Am I the only one waiting with a stiff drink in his hand for the excuses the mainstream types will come up with when the physical markets finally do take out paper?


"The comex was never supposed to deliver physical metal, everyone knows that."

"If Eric Sprott hadn't taken physical silver off the market, then we wouldnt have this emergency.  He and his investors ought to be thrown in jail for rigging.  No rational person would insist on owning someting that came with vaulting fees when he could have a certificate that is garaunteed to be priced the same as the real thing.  There is no reason to demand physical other than spite or to destabilize our markets out of some bizzarre idelogical bent."


"Without the trusted comex providing a liquid, worldwide market, gold and silver will now be worth whatever you can hock it for to locals on kijiji.  Better get rid of your rocks while you still can".


Am I missing any?


ClydeCrashcup's picture

I see you are familiar with the work of Jeffrey Christian.

ForWhomTheTollBuilds's picture

What drives me crazy is the number of people who think like that.  In 2010 or so, I met a stockbroker who, in a tone of imparting a lesson told a group of us:


"You know people talk like AIG was some kind of poorly run company, but the truth is they were a great company.  They just got caught this one time in a technically bad situation and had to unwind."  He was very earnest in his view that AIG was a victim of a rigidly unfair system.


I expect to hear much more of this sort of thing going forward.

AR15AU's picture

trader dan is a mouthpiece

as is mike ballanger

as is every other pussie out there shrieking about the cot

i'm going balls to the wall silver right now... i don't see $17 as a "dangerous" level to buy at no matter what the pukes with newsletters think

Pareto's picture

+100.  17, 16, 15 18, 20. fuck whatever.  been buying it hand over fist.  negative rates are coming. and the longer the FED stalls on this, the higher they go.  AAPL shitting the bed almost ensures that $INDU never sees 18K without some kind of massive (additional) intervention.  some kind of QE4 combined with interest rate suppression looms - in addition to physcial monetary stewards surfacing elsewhere.  For the FED its either give up the dollar, or give up the stock market, or some linear combination of both.  In any event, you have to hold some of this stuff.  Observe the rally in the $CDN - a tell if I ever seen one.  Blew through the 200 day - hardly gave it a sniff.

The commodities are rallying, not because of demand.  Its all about the $USD.

Stick a fork in her - she's done.  IMHO

slimycorporatedickhead's picture

I'll believe it when I see it, but everyone knows there is a disconnect between the paper price and the physical price

TsyFox's picture

You sure are right about there being a disconnect between the paper price and the physical price of silver.

In the world of physical silver, inventories are really beginning to bulge.

If London silver is really as tight as Maguire claims, then Shanghai, the Comex, and SLV can ship some in.

In Shanghai they are literally running out of storage space for the sh*t.


And if Eric Sprott hadn't pulled his bullsh*t about adding some more silver to PSLV, we would still be in the $15 range. If anybody is guilty of manipulation it is Sprott and his 'carnival barker' Bix Weir.


If Eric Sprott doesn't follow thru with his silver buy for his ETF, then their should be a CFTC complaint against him.

mbutler101's picture

yep, you can bet your bottom narcodollar that if a real price differential existed, it would be arbitraged by the sharks in a nanosecond. I'm really tired of these guys 'talking their own book' and basically selling newsletter subsribtions, metals, ETFs, whatever the case may be, they are ultimately biased in some way, so I have to take their comments with a heavy grain of salt.

Montani Semper Liberi's picture

"In Shanghai they are literally running out of storage space for the sh*t"

 Please cite the evidence that brought you to this conclusion.

 BTW, I downvoted you for your stupid grammatical error.

 When reading a sentence, and the writer incorrectly uses the pronoun their instead of the adverb there, it momentarily takes the reader (me) in a different direction than what the author intended, and is most annoying to those of us who learned about homonyms in second grade English.


Quebecguy's picture

Oil's headed back up. Dollar's heading down. Good for silver. 


GSR 72.878, closing, already been good for silver. 


Keep stackin', just stick to the Plan.


Global Currency Reset is in progress...

Cautiously Pessimistic's picture

Meh...been reading for years and years about how gold and silver are going to 'break free' from manipulation.  I don't think that will happen any time soon.  I fear that there is much sorcery left before we get there.  Simply too much at stake for CB's around the globe to allow true price discovery.  And besides, I view gold/silver as an insurance policy, not an 'investment'.  If I never have to rely on it for survival, then I pass it on to my kids.

Herdee's picture

Goldman,JPMorgan,German Banks,etc.are losing control of the manipulation scams in precious metals and the huge fines in the billions are killing theme.Washington is bust and politicians need money to fuel their NeoCon agenda.What better way than to get around to taking advantage of the Banks after a PMS mood change.The drug taken has finally kicked in and Banks are being used as the suckers for government funding.It happens at a unique time,just when China and Russia have new physical markets and they have huge paper markets too,completly fucking up the manipulators in the west that have had no competition in order to keep them honest.It's very hard to make money in the west when you are not shafting the consumer and the small investor.

tailgunner's picture

I see a lot of trolls today on this issue.  Children with no patience.  Did not the Chinese just open a bullion only exchange in PMs a few days ago?  Now who wants to use crimex for bullion purchases - not.

Jim Willie wrote today on Goldseek he says we are there, the paper vs the real stuff.  If he is right a warning shot is due in a few days, and that could be just dandy.  But the Chinese are doing this in a way to make their huge pile of the real stuff very valluable very soon.  Russia smiles.

 DB in their surrender and to be naming co conspiriters, if they have not yet, has started the bank eat bank big time.  In the mean time the lawsuits  are mounting.  Judgement day is coming on this one.

Why does GATA have to be kicked every day.  No one sues them on their information, because discovery will kill the ones suing.  Then the charges would keep hundreds of lawyers busy for a long time.  The have been correct for a long time on the manipulation.  Christian opened his big mouth several years ago on the 100 to 1 situation of gold in London.  I figured he would get a hail gun for that.  Now the ratio is much higher.

On and on . . . we shall see




Strelnikov's picture

How many times have we read this story?  Don't bother to answer.


Sure, this may be it.  But I'm not betting the farm on it, as I have in the past.

Katos's picture

Well, since China has backed the yuan with gold, if China comes out and says, "hey we'll pay $2,000.00 for an ounce of gold"! How fast food you think westerners will be buying Airline tickets to haul their physical to China and collect their commision. Since it's a known fact that China and Russia have both ben stockpiling gold, he who has the gold, makes the rules. The paper trader's in the US wouldn't last long if China decides to revalue gold and silver.