Posted on 15 June 2011 with 6 comments from readers
Silver prices are set in the Comex futures pit in Chicago, and traders are becoming excited again by prospects for the shiniest of metals because of the supply and demand position within the exchange.
COMEX, commonly referred to as the Commodity Exchange is a primary futures market that solely trades in precious metals including gold, silver, aluminium, and even copper. COMEX does not supply the metals but merely facilitates its trade. There is a good chance that you can learn more about COMEX and all you need to do is visit the website.
What has happened recently is a drop in the amount of physical silver available for delivery in the Comex – down 38 per cent to 29 million ounces since the start of 2011 – while the amount of silver that is being held for clients to claim in the Comex is up by 23 per cent to 72 million ounces.
This looks like a classic under supply relative to demand situation waiting to happen, and this is very bullish for the price of silver.
There is less physical silver available for delivery in the Comex while the amount being held for clients is sharply up. So you have a falling supply of silver and strong demand. That should mean a higher silver price.
Of course it is only a couple of months since the price of silver spiked above $50 and then fell dramatically back to earth. ArabianMoney commented at the time that this was actually a healthy indicator for much higher prices in the future, and that a correction meant that this was not the final spike, merely a short-term speculative blow-off to clear out the speculators.
How long will it now take for them to come back? Well, hopefully they have gone for sometime and have retired with burnt fingers and it will be the longer term investors who buy silver now.
ArabianMoney is still concerned about another drop in the silver price before it starts to move solidly ahead again, to retest the already established new high. That would probably occur in the midst of a crisis in financial markets that many analysts now expect very soon, most likely involving a default by Greece and a European sovereign debt crash.
No other safe haven
However, if bond markets blow up and interest rates surge then the exit to precious metals as a safe haven could be very rapid as king of the gold bugs Jim Sinclair suggested last week (click here). Accumilating silver now might then look very clever.
The next issue of the ArabianMoney newsletter will explain a novel way to invest in silver to maximize the gain from this price shift but you will need to subscribe to get this potentially very valuable information (subscribe here).
Silver was this website’s top tip for 2011 (click here).