Guest Post: Silver: Ready to Pop or Drop?

Tyler Durden's picture

Submitted by FMX Connect

Silver: Ready to Pop or Drop?




Volatility is About to Expand

On several occasions in the past, we’ve alerted readers to potentially big moves in markets using our Trend-Vol alerts, Precious Metals being the chief focus. Trend-Vol is an early warning system that focuses on several factors to predict movement. Those factors include: historical and implied volatilities, skewness and Bollinger Band width.  This momentum indicator warns when volatility is about to increase and directional moves can be large, quick, and profitable, even after the original trigger goes off.

Simply put, and stated here often; volatility breathes. We believe that it is about to exhale soon in the Precious Metals, particularly Silver, but Gold is on the radar as well. What we do not know is in which direction the markets will head…. yet. 

A Silver Trend-Vol Retrospective

We can show some historical behavior in Silver when the signal triggers using the chart above.

1. Here Silver gave a mid-day signal that you might have bought and held with a stop at the top band line which also coincided with the 100 SMA. You would have been rewarded with at least $1.50 had you knew where to place trailing protective stops. This even if you only bought the close of the break out day and held for 3 days.

2. This was a quick 2 day trade that had you again bought the close of a very strong day, you’d have had an opportunity to sell $1.00 to $2.00 higher the next day.

3. This is where the CME margin raises just proved to be too much for the market to bear. If you sold the initial day’s close despite it being over a $3.00 down day, you’d have still had $5.00 left in the move the next day, and if you were brave with overnight orders, another $3.00+ the next.

To be fair, as in every system, devils lurk in the details. Like, how to determine what an entry point is and what is a fake out; Where to put your initial stop-loss and how to trail-stop winners. These vary depending on the trader’s style bankroll and VaR management. This may help:

  • Risk 1 to make 2-3 on your trades.
  • Use daily low/highs and the Bollinger Band line for trail-stops
  • The lowest risk signals come at end of day, midday signals may reverse hard.
  • Conversely, waiting for end of day to confirm a signal, often misses a good chunk of the move.
  • The best daily alerts often coincide with a 60 minute B-Band widening from a tight position.

Get Ready

Silver and to a lesser extent Gold are poised to move. You can make a case for either direction. Today’s action was very constructive for commodities in general. But Gold and Silver were the weak performers.

The charts show bear-flags, but stochs are in the process of reversing. Fact is, we can see what we want based on our own bias. What we are much more confident in is that in the next week, the Precious Metals will have a move of their own. 

If you are in the camp that Europe must print money to solve its problems, despite the evidence that Germany is getting its way for now then put on your buying shoes. Ditto if you see Helicopter Ben cranking out more greenbacks in response to a Euro debasing or political pressures from our Keynesian overlords.

If you believe that we are on a deflationary spiral, and that there simply isn’t enough money to buy anything at current inflated prices, and there will be no QE3 and that Europe will have enough (levered) money to solve their Grecian woes then get ready to sell Mortimer. Just remember that straddles don’t care which way the market goes.

Last week we told people to keep their powder dry. Now it is time to load’em up. We’ll update you on a direction when we see it in the markets. – Good Luck.

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Ahmeexnal's picture

Yes, any way it will be ok.
If it drops, BUY MORE!!

bernorange's picture

I've been watching/tracking the inventory of 100oz silver bars at the major dealers for the last couple of weeks:

Don't really care what happens with the paper futures market.  The physical market is indicating growing scarcity. 

kito's picture

from where, the pro pm websites? the ones that always preface the shortage argument with, "i just finished speaking with a big hong kong bullion dealer who said...."

bernorange's picture

No.  I'm talking about the dealers like tulving, apmex, provident metals, etc.  Many of the major dealers disclose inventory information.

trav7777's picture

so they sold some inventory down and will restock.  So what?

bernorange's picture

Perhaps.  Maybe it's just me but watching major dealers report no inventory for weeks at a time seems possibly significant.

Prometheus418's picture

I'm long physical silver, but I don't think I'd read all that much into what you're seeing there.

The only indication that I see that they're wanting more inventory is that APMEX is paying a couple of bucks above spot for eagles- but that in and of itself is not screaming "massive shortage" to me.

The way I see it, they've got an interest in not selling out their entire stock when the price is low.  It's not like metal goes bad sitting in the vault.  But then again, it has been a pretty consistant rumor- for my part, I've been seeing desirable silver get a little more hard to come by (ASEs and pre-65 dollars,) but there is still plenty of oddball metal around- stuff like commemorative coins and smaller pre-65 change. 

Shortages may come, but I don't think they're here yet.

endurion's picture

I am the president of a precious metals wholesaler of an equal size with Tulving (whose domain name seems to have expired). I can tell you that the massive drop in the silver price caused our order volume to spike up about 500% for about 1 week. 

Since then, however, order volume has dropped off a cliff... and this has been industry-wide. A great deal of the physically available silver inventory for immediate delivery was consumed during that week-long buying binge in the $28-$31 range. Most mints are a few weeks behind, but the government mints are keeping regular allocations to all distributors, i.e.: US Mint, Royal Canadian Mint, etc.

If people weren't so spooked about buying more silver right now, the shortages would be *much* more pronounced. If silver moves more than $2-$3 in either direction I would expect order volumes to spike up significantly once more and this will exascerbate the existing strain on the inventory.

Right now we have over 40,000 ounces of US Silver Eagles availabe for immediate shipment for $2.75 over REAL spot on 500 oz. or more. PM me or email me if you want credentials, at cdolson [at| treasureislandcoins [dot| com  ... if you want, we're at 701-282-4747.

Pinto Currency's picture



The retail market tells a story however, I believe that the real physical (true price) story is to be found in the bulk physical market.  There are more than a few indications and anecdotes that this market is extremely tight with prices for bulk delivery silver in size substantially above the retail market prices.


These statistics are from the London ponzi silver leasing market, however they provide some information in terms of silver available to hold for a while.  A dropping SIFO gives indication of market tightening.

kito's picture

ive used gainesville coins, and the only time there was a temporary shortage was during the mania when silver was at 49. you could call now and get as much as you want...

bernorange's picture

Gainesville is reporting that they are out of stock on all 100oz silver bars.

fxrxexexdxoxmx's picture

Gainesville coins has had my $745.00 dollars for three weeks and are not sending my order until th 31 st. Which means they will have stolen the interest on my money for a month. Fuck gainesville coins 

They suck and I will never order from them again.

silverguy1979's picture

I have not purchased from Gainesville Coins yet but a few of my friends do and they seem to really like dealing with them.  I looked on their site and earlier this month and they did have some stated delays on products so I chose to wait until all items were back in stock.  I don't think you can get mad at them though if they stated there would be delays upfront.  If you didn't like it, then you shouldn't have purchased.  Just my 2 cents

silverguy1979's picture

Also with Tulving, I have heard some pretty nasty things about this company. He filed chapter 7 liquidation back in the early 90's.  I don't care what his prices are, I wouldn't trust this person!  I saw this article the other day and would never purchase from him:

boatman's picture

my buddy bought from g'ville.....3 WEEKS late on delivery AND the biggest bunch of BS you ever heard on the phone for those 3 weeks.....really....i don't have a dog in this race.

lostintheflood's picture

from where, the pro pm websites go to

DoChenRollingBearing's picture

@ bernorange

Tulving a couple of weeks (or so) ago advertised they had 500,000 oz of silver in stock.  When I checked Saturday, they only advertised 400,000 oz in stock...

Also, one of the coin shops where I buy gold had little inventory (no AGEs).

bernorange's picture

DoChen, would you mind contacting me via the contact form on  I would like to talk to you about this privately if you don't mind.

DoChenRollingBearing's picture

Just did!  But, I am not an expert on PMs, I follow them closely, but no expert.

Privately is OK.

lostintheflood's picture

I would like to talk to you about this privately


but i wanna hear!

juslen's picture

Damn right, when silver was around 25 dollars an ounce I was able to go on E-Bay and buy one ounce silver eagles for 27 dollars a piece and two silver eagles for 52 dollars + shipping. When silver was last 27 dollars or so, silver was upwards of 39 dollars an ounce on E-Bay. For the last couple weeks silver has been around 31 dollars an ounce. Unless you buy 10-100 oz bars or you buy rolls of rounds or coins you are paying a minimum of 37 dollars an ounce once you factor in shipping and handling fees. Even after silver went from 50 an ounce to 34 in just a few short weeks silver prices were still around 40 an ounce for quite some time. So yes, physical silver is scarce.

passwordis's picture

   The supplier (a broker) I've been dealing with for years has a 35 day delay on virtually all silver. They've had delays in the past  but nothing approaching 35 days.

As far as the price you are paying.. $37 when spot is around $30?   You need to shop around my friend!  As we speak my supplier has 100 oz JM bars for $3272 shipped to your door plus a $50 small order fee for orders under 500 ounces. 10 oz bars are almost identical in price. Rounds are a buck or so more.

I think I need to buy a gun's picture

if it doesn' pop with gold revaluation, then it will pop with inflation next year because i know it cost more than 30 dollars to get it out of the ground

wombats's picture

It might go up or it might go down.  Absolutely profound!

How much is this guy paid for these insights?

Poor Grogman's picture



He is at least as smart as dumbo trader...

Neither of them gives a target.. thats a good start.

but to be fair to the article I think we are appraoaching an interesting move.

My (guess), as thats all it is. First the metals get pole-axed as Greece goes down.

then bond's euro bank runs etc, sell everything not bolted down if you have margin out. Panic & riots in the southern EU

Then we head into the total and final "Crack up boom" as the system heads off the cliff, and confidence is  finally smashed. (QE = ?)

At this stage it will be "Tangible assets only" or you will be screwed.

But what the heck would I know?

I keep waiting for Dumbo trader to give me some more "Hot stock tips"

illyia's picture

I actually enjoyed this post as my thesis is recognized: Euro talks fail; big sell-off on sentiment if not earnings; gold sells off to cover margin calls incurred in this run up; gold bottoms with a sharp move to 1485 or so; turns around on a dime with smart buyers....

Thus the post is useful to me as confirmation of a planned trade.

Thanks Guest Poster.


FinLen's picture

He said he would let us know when the direction is evident.  You can use the info then and make a call one way or the other.  Or since this blog is free you can decide not to come to this site at all and make your own mind up.  Lets not bite the hand that feeds us.....

FreedomGuy's picture

Being ahead of not behind the move is what pays. The only useful point of this post is saying there will be great volatility. That's not much news.

Executioner's picture

"Silver and to a lesser extent Gold are poised to move. You can make a case for either direction."

Now that's reassuring.

FinHits's picture

It is a golden opportunity to have a silver lining, I guess.

SRSrocco's picture


1) COT Commercial Net Short percentage lowest since 2003....even lower than when silver was $8.90 in OCT 2008.

2) Largest Commerical Short Position against the Dollar I have seen in years.  59,000 Commercial Shorts compared to 9,000 Commerical Longs

3) Wholesale shortage is taking place when industrial buyers have to wait for delivery after buying at $30 an ounce

4) There is no GLOBAL SURPLUS of Silver....that's pure bunk....and there will be no surplus in 2012 or there after.  

5) GFMS stated global slver supply would increase 7.4% to over 790 million oz in 2011 compared to 735 mil oz in 2010.  Mexico's silver production was at 60.4 mil JAN-JUN, while last year it hit a total of 128.4.  Peru's silver production is down 9% JAN-AUG.  BHP Billiton just came out with their Q3 and they are down 25% YOY for the Q3 and down 20% for the first 9 months of 2011.  Chile's copper production is down 4.3% in the first 8 months so you can figure their silver is down about the same percentage.  Finally, the USA is down 10% JAN-JUL. 2011 will show a DROP not an INCREASE in global silver production

There is a great deal of MISINFORMATION in the media about gold and silver.  Without the constant manipulation of gold, silver, oil and US Treasuries, the DOLLAR WOULD BE DEAD.

Hearst's picture

You could also add the recent passage position limits by the CFTC, ongoing lawsuits against JPM, ongoing investigation by CFTC into Silver manipulation all leaning on the on the side of bullish.  Also remember CME Silver margin requirements are higher than years ago with Silver holding ground around $32 per oz which by the way is still up for the year.

Jack Napier's picture

The position limits only go into effect for the current month each month, and that doesn't start for 60 days. Anybody can still short to infinity on future months to suppress the current price. They won't be ready to implement position limits for all months until after the dollar is dead and they don't need to suppress the metals. Silver margin requirements still have a long way to go before they reach 100%. This vote is all for show unless Chilton really does speak out.

Good points for why silver should eventually go higher, but it's a manipulated market and it can go lower in the meantime. It probably will only because they are desperate to convince people to stay away from it. At the current rate of depletion there will be no more above ground available silver at current prices within 6 months.

Freddie's picture

Bring back Turd Ferguson.  His picks are probably no better but the big yellow cowboy hat he wears he probably takes a dump in it.

iDealMeat's picture

That cute little Canadian reporter was right.  Gold isn't backed by anything..  except faith..


knukles's picture

Sometimes I wonder what's backed that cute little Canadian reporter. Got a smoke, eh?

RafterManFMJ's picture



Rafter's Cliff Notes:

Silver may rise, or fall. Gold, the same.

caerus's picture

difficult to read charts when the cme can still raise margins but SI looks like a pennant a la early may...if the pattern repeats then may get a run to 36ish followed by a hike but that game can only go on for so long...still wary about pm sell off that follows ready to turn on a (silver) dime...devil's metal after all

buzzsaw99's picture

silver and gold are way over-priced.

CClarity's picture

Unless you think there is something nefarious about oil being up $6 since Thursday - > 7%

buzzsaw99's picture

oil is cheap. gold and silver are damn near worthless.

buzzsaw99's picture

it was once used for coins, silverware, photography, etc.. Now it is a useless relic.

The Peak Oil Poet's picture




silver is useful - all sorts of uses like photgraphic film and paper




ok, ah, gold is very shiny and i like shiny things - there!


i surely do love silver
i surely do love gold
they'll be as they are trusted now
and since the days of old


The Peak Oil Poet's picture


silver is like, well, doomed.


a bazillian disempowered righteous types bought it up big when it was way over its value - when all of those people suddenly. en mass, decide they've been duped (by themselves and otherrs playing to their foolishness), the price will fall to like $12


nothing is sure


except the foolishness of people



JohnG's picture

You could be right...I've been thinking along these lines.  If/when they physical buyers that bought on the way to 50 dump nearly all at one, price could easily half.

That'll be the time to buy.

I could be wrong (often I am), but it does make sense.