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Sunday, November 18th, 2018 - Buy Gold - Bringing you trusted gold news and gold investing information since 2006

3 Factors Driving Silver Up in This Rally

Silver has put together a back-to-back days of sizable rallies, and is at $32.40 (at the time this was written). Let’s take a look at some of the factors that may be driving silver up in this rally:

1. Silver is in backwardation. Backwardation is the condition in the futures market in which contracts for settlements in future months are trading at a lower price than near-term contracts. In other words, traders are paying a premium to receive the contract sooner. To put it simply, they want the underlying asset now. For a deeper look at this subject, see David’s lesson on contango and backwardation, and Magic’s lesson on the futures curve. Backwardation in silver extends all the way out to contracts due for settlement in 2015.

The onset of backwardation is cited by those who believe that JP Morgan (JPM) and HSBC (HBC) have put on short trades for which they do not have the underlying asset — i.e. naked short selling — in the silver market as a sign of bulls forcing JP Morgan and HSBC to close their positions. As Morgan and HSBC– both of whom have been hit with class-action lawsuits for fraudulent manipulation in the silver market– exit their short positions, silver may rise significantly. Our previous thread on silver manipulation may be of interest to some.

2. Open interest has been rising slightly, which may be a sign of new bulls entering the market, even as shorts get squeezed out.

3. Silver has come off a multi-week period of consolidating its previous gains, so this may leave it free for the next leg up, according to common technical analysis theories.

Below is a daily chart of silver, shared by morgandallen. We are nearing the top of the upper trendline, which may induce some selling. Personally, I’d be interested in buying at around the $31.50 level — a previous relative high (visible in the chart below).

As always, feel free to share your opinions and questions in the comments section below.

Disclosure: I am long SLV, PSLV.

The original article is published at http://www.c2ads.net/full-text-rss/makefulltextfeed.php?url=http://seekingalpha.com/sector/gold-precious.xml&format=rss&submit=Create+Feed


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