Prepare for silver to flood the market and subsequently: Lower Silver Prices.
I'm short silver. Psychologically, I reached the tipping point a few days ago after I closed out my long position and entered an even bigger short position. I wanted to spend some time debunking the Silver Scarcity Myth. I am preparing for the market to be flooded with actual silver --- coming out from the woodwork, unwinding the scarcity myth.
There are all sorts of people pointing out that the COMEX silver inventories are falling. As seen here, here, and here (pdf). In my opinion, this is just an example of the people who are driving the market showing the public what they want everyone to see: the myth of scarcity.
Did you know that when the selling pressure is materially greater than the buying pressure on the ETF, the trust is forced to sell silver and reduce the number of shares in the float? I guarantee you that recently we've seen more selling than buying. I can already feel the wave of silver coming to a store near you.
Privately held Silver:
Why isn't anyone pointing out that since 1998, we've seen the quantity of silver that is privately held run from around 35% to over 90%?
I advise taking a look at the report that I pulled the above picture from, here (pdf).
Riding The Silver Slide:
I'm looking at the monster slide in price and I just can't imagine that large hoarders of silver aren't questioning whether or not they should cut out of their positions. I think that this is why we've seen a lot of silver get dumped into ETFs and sold into the market as prices have rallied the past couple years. People are still wondering if the top is in? Maybe we're still in denial and have more room to fall in a very quick order. I think so.
Peter Schiff is Fallible:
Look, nobody is perfect. He's still calling this a correction and a buying opportunity. That said, in my opinion there is no price that he would be willing to sell silver, ever. Peter needs to realize that although the government is printing dollars, they aren't circulating around the economy. We aren't seeing any signs of hyperinflation, yet.
When Does it End:
I don't know. That said, Gold dropped huge Thursday. Oil dropped huge Thursday. The dollar rallied after basing for a couple days --- the biggest rally in months. If I was sitting on a pile of silver that I had owned from $5-$10 --- I'd be going off to sell it as soon as I possibly could. That's why I think we are headed lower. How much lower? I don't know. Everyone else seems to think that $30 and $25 are good low points. Those prices look like a good place to bump around to me but realistically I see so much downward pressure on silver that I think this will likely look more like 1980. How on earth do you call the chart below a healthy pullback? It looks more like the trajectory of silver bullion flying off of a cliff. Markets are notoriously blind. They are like driving cars while looking out the rear view window. Where's the bottom? Probably not there yet based on what I'm seeing.
(Click chart to enlarge)
Click to enlarge
Disclosure: I am long ZSL.