Silver – And Gold – Are Both Acting Very Bullish

by Dave Kranzler, Investment Research Dynamics

Reader tesitmonial:  You’ve written a great report about the “Emerging Silver Producer.” The key is higher silver price but i am concerned about the price of silver though.

I hold my accounts with Sprott and as you know they are super bullish on silver. You have written a couple articles about silver with a positive outlook yourself. I still see the forces who is in control of the prices as too powerful, look what happened yesterday. The ability to drive prices down within one trading (below 17) and extremely negative corresponding move in the mining shares. Its hard to see how silver can be fairly traded in the current system. If you are a producer, you are completely helpless, their fate lies in the goodwill of a view entities who can destroy the business if it suits them.   

This person just read my “Emerging Silver Producer” research report but is concerned about the market manipulation of the precious metals.  This apprehension is very understandable.

However, after 14 years of full-time involvement in the precious metals sector, I believe the next big move – the second leg of the bull market, if you will – is  in its nascence.  This was my reply:

The key to yesterday’s price action was that silver held above $17 going into the Comex close.  Gold, and especially silver, are behaving differently right now (click to enlarge).
10minSilver
Whereas since their respective peaks in 2011, the market action was characterized by “short all moves higher and cover manipulated price smashings,” now it appears and “feels” like smacks are being bought and and rallies traded but not shorted (other than by the bullion banks feeding paper into the market to cap rallies).

Also, many of us believe that there is a supply issue with silver and gold.  12.7 million ounces of silver have been removed from the SLV vaults since April 27th.  55 tonnes of gold have been removed from GLD since Feb 5th.  This is despite the fact that both metals have moved higher in the time period.

The metals have been moving higher in that time period and the GLD/SLV inventories should have, worst case, remained flat.  The Comex gold o/i has shot up 107 tonnes since Feb 5.  This means there’s investor/trader demand.  It also means that GLD more than likely should have been adding gold.

For the last 4 years, the financial media has made a point of broadcasting “investor selling” in precious metals by pointing at the metal decline in GLD.  Why is the price going up, investor demand going up, yet the metal stock in GLD is going down?  Where is the media on this?

This is not supposed to happen.  Higher prices mean more investor demand.  More investor demand means that the inventories of SLV and GLD should be at best flat, but more likely increasing – not being liquidated.  Someone wants/needs that physical metal. 

Yes, the bullion banks are still somewhat in control of the price of gold/silver using paper derivatives.  But it appears as if they are losing their ability to cap the prices.  I was chatting with john Embry yesterday and we both agree on that.  We can’t figure out where the silver is coming from to make deliveries other than from SLV.  The massive withdrawals from SLV in the last 3 weeks would confirm that.

Is the next leg about to start?  Who knows…BUT, I vividly recall back in 2003 or thereabouts, right before gold was ready to launch over $400 and start an 8 year rally to $1900, Robert Prechter was overtly vociferous about calling for gold to fall to $50.

 Currently, Harry Dent – who for reasons unbeknownst to me has an avid following – is loudly proclaiming that gold’s next move is down to $700.  “The lady doth protests too much, methinks.”  Harry Dent, like Robert Prechter, is a scam artist who’s sole purpose is to sell research.  By the way, where has Prechter been lately on gold…

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