With gold recently strengthening and silver attacking multi-decade highs, today King World News interviewed James Turk out of Germany. Turk commented, “Eric, there are a lot of stories making the rounds talking about silver hedging. People should not be scared by them. When you actually analyze it and consider what is happening, the implications are bullish for silver.”
“The media is putting this talk about hedging in a bearish light, and normally they would be right to say hedging is bearish for the price of metal. But not now. Even if these reports of new hedges are true – and the rise in silver interest rates recently suggests as one possibility that some hedging may be taking place – the underlying bullish dynamics for silver are not negatively impacted.
In fact, the rise in silver interest rates itself suggests both a desperation to borrow physical silver at whatever cost to meet delivery demands and avoid a default as well as that physical silver is in such short supply people are willing to borrow it at unusually high rates. So rising silver interest rates here is bullish, but let’s consider what happens in a hedge.
There is no pressure on the spot price, as evidenced by the fact that spot silver has jumped more than $4 higher over just twelve days while these hedges were supposedly taking place – and of course silver is still in the extreme backwardation that I mentioned when it first happened last week…Click Here
In fact, the backwardation is steepening almost every day. The 13-cent backwardation to Dec 2015 I mentioned previously has now widened to 32-cents, meaning physical silver is becoming even more scarce – and the shorts are in an even more difficult position.
So even if a bullion bank is borrowing silver to sell spot to complete a hedge for a mining company, the important point is that the spot market is absorbing everything the bullion banks can throw at it, and even more importantly, silver remains in extreme backwardation which itself is growing. All of this is very bullish, but here’s another even more bullish interpretation of this hedging.
It’s bullish because it represents a recognition by the big bullion banks that are short silver that they are in trouble and need to cover their losing position.
So the commercial shorts in silver are about to be squeezed again and gold is going to hit new highs. All just part of a secular bull market in the metals, sit back and enjoy the ride.
Full article here: King World News
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