To The Moon

Today, we are specially writing an article for Baiyin. In fact, our domestic stocks are the popular varieties, gold belongs to the niche, and silver belongs to the niche within the niche, so you have been watching me write articles, talking more about gold than silver.

But the protagonist of today's article is silver.

Pictures

Let's look at the first picture first, this is an overlay chart of the trend of gold and silver over the past two decades. The red line is the price of gold and the yellow line is the price of silver.Judging from the historical limit values in the past few periods, the limit value and volatility of silver should be greater than those of gold, especially in the final peak acceleration stage.

Therefore, when the price of gold broke through $2,700/oz, hitting a record high above $2,740, everyone should also pay attention to the sharp rise in the near future, and gradually forming a technical situation of short squeeze.

There is a view in the industry that the volatility of silver is much higher than that of gold, and it is expected that silver may significantly outperform gold in the coming year.

For example, a Goldman Sachs report I recently read concluded that silver is expected to start a "catch-up trade" against gold, and doing long silver is one of the best transactions in the current market, and listed the following four reasons:

First, silver is a key component of AI.

Second, the price of silver is negatively correlated with the path of interest rates and the trend of the US dollar, and the Fed's tendency to ease monetary policy will have a positive impact on the price of silver.

Third, compared with gold, the position of silver is lower, and there is obvious room for compensatory growth.

Fourth, silver is on the verge of a multi-month breakout.

Pictures

Look at the second picture, when the price of silver broke through the previous high resistance of US $32.50/oz last Friday, it generated a huge trading volume. Some analysts believe that this is the "smart funds" of market institutions entering the market, reducing the possibility of false breakthroughs here. After the resistance turns to support, it means that the price of silver has opened at 35, 45, Even the pre-record high was close to US $50 per ounce (April 25, 2011).

Pictures

Then look at the third picture, the long-term trend of the gold-silver ratio (gold price/silver price) means that the current price of silver is seriously undervalued compared with the price of gold. In other words, if silver can catch up and continue to accelerate the short squeeze, there is still a lot of room in the future. As shown in the figure, if the ratio returns to the historical average level of 52.8 since 1915 (currently around 80), the price of silver needs to soar to $51.89/oz even if the price of gold does not rise at the current level.

Pictures

Then look at the fourth pictureIn 1979, the Hunter brothers in the United States speculated on silver. That was the first time that the price of silver reached $50 at that time, because of speculation; In 2011, after the subprime mortgage crisis, the Federal Reserve's currency was over-issued, and the price of silver reached $50 for the second time; Nowadays, under the background that the price of gold has hit a record high, the photovoltaic industry, new energy vehicles and AI all need to use silver. Once the inventory is consumed in large quantities, is it very possible that this round will hit 50 again?

Of course, this $50 price does not translate inflation, that is, $50 in 1979 is certainly not equal to $50 in 2024. As shown at several time nodes in the figure above, if the price of silver is adjusted according to the inflation rate, then in 1979 and 2011, according to our current inflation rate, it was US $143.54 and US $68.04 respectively. The current price of silver is US $34.40, which is quite reasonable.

Pictures

Look at the fifth pictureCompared with gold, silver has more obvious industrial attributes. The fourth picture above mentioned the demand for photovoltaics, new energy vehicles and AI. The surge in industrial demand, coupled with the decline in global mine production, has left silver in a structural shortage for the past four years, and there is no sign of relief. In 2023, the silver shortfall reached 184.3 million ounces, and the shortfall is expected to be even larger in 2024, reaching 215.3 million ounces. The silver gap in recent years has rapidly exhausted silver supplies on the ground, making silver supplies even tighter. The reduction in supply will exacerbate the impending short squeeze on silver, pushing the price of silver to surge even more significantly.

Pictures

Finally, look at the sixth picture, the ratio of silver price to the U.S. M2 money supply, can give us an idea of whether silver is keeping up with, outpacing or lagging the growth of the money supply. Silver has slightly lagged M2 growth since the mid-2010s, and along with other factors discussed in this article, silver is poised for a strong rebound.

In addition, a key condition for the formation of a short squeeze situation is to have short positions, especially unusually serious short positions.

So the ghost story came-

Data from COMEX silver futures showed that swap dealers, mainly gold and silver bank trading desks, held the largest net short position in eight years, totaling 38,832 contracts. This equates to 194.43 million ounces of silver, or about 23% of annual global silver production-a staggering number.

Since some institutions clearly don't have so much silver spot in their hands and have to sell naked short in the market, should they do short positions in the context of gold prices continuing to hit record highs?

Of course, it's to kill the short sellers. For every $1 increase in silver price, the short sellers will lose $200 million!!!

The money game in the international financial market is so cruel and real. I sincerely hope that everyone will not stand in the wrong team.

-END-

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