As the MSM, Wall Street and various so-called analysts waste time focusing on worthless and insignificant data, the price of silver is positioning itself for the coming TWO-STAGE RALLY.
The majority of the precious metals analysts discuss the revaluation of silver as it pertains to the amount of fiat currency in the system.
While this is a good determination (from past historical guidelines), it only deals with one part of the overall equation.
The second and maybe the more important factor… is the destruction of “PAPER CLAIM CHECKS” on physical assets.

 macleodFollowing on from last week when Iraq hit the headlines and the price of oil firmed up, gold was steady for the first three trading days.   It seemed the shorts just held their breath and hoped Iraq would go away. But with oil prices up yet again Thursday a vicious bear squeeze followed after someone bought over 3,500 gold contracts, driving the price up to just under $1300. Once this level broke at 13.40 New York time, gold jumped a further $15 as stops were triggered.
Silver also responded dramatically, rising through the $20 level to $20.90 for a gain Thursday of 5%.
The price action and open interest this so far month is shown in the following charts and illustrates how record bear positions are being squeezed in both metals.

After the standard post FOMC metals smash that has occurred after 95% of the FOMC statement releases over the past 7 years never materialized yesterday, one had to wonder whether a short squeeze was imminent. 
It appears the short squeeze is on as silver has shot through major resistance at $20 on the COMEX open, and after a quick retest of the level, is again shooting vertically higher with a last of $20.90, a 3 month high!

silver rallyThe silver COT data (yes, I know, manipulated…) is, as I read it, as bullish for silver as it was at the silver bottom last June. This suggests another good buy zone either just passed or will arrive very soon.
Many technical indicators for both silver and gold markets are deeply over-extended on the down-side and flashing “buy signals.”
Silver has dropped back to levels seen in 2008 and 2010, before the run-up in late 2010 – April 2011.
Is another big rally about to happen?

LegendaryIn his latest video update, Chris Duane explains why the most oversold markets make for the largest returns.
Duane makes the case for the fact that silver is poised to place LEGENDARY GAINS once the current correction is completed, and that now is the time to accumulate physical silver while the metal is out of favor by nearly everyone. 
People marvel at the returns silver made from 2008-2010, but it is obvious that the next rally will blow that silver move away. 

summerIs it possible that a substantial 2014 summer rally begins after the release of this Friday’s key jobs report? I think so.
I’ve outlined a rough scenario for summer rally enthusiasts on the daily silver chart below. I’ve suggested silver could move up to about $22.
Much higher prices are possible if Western world inflation and Indian buying increase significantly, and I think that’s exactly what’s going to occur. 

Statistically, gold and silver prices closely follow each other.
But what is more important is the ratio between silver and gold and the trend of that ratio.

The 30 year gold/silver ratio chart reveals that the silver-to-gold ratio is currently priced at the low end of the range, long-term silver prices are gradually increasing relative to gold, and a price explosion could occur at any time!

china bank runWe have well documented over the past few months the unprecedented flows of physical gold and silver being drained out of Western vaults and shipped East.
SD reader Ji Hai Shan, an American currently residing in China, has provided a boots-on-the-ground first-hand account which substantiates our recent claims that spiking silver premiums on the Shanghai Gold Exchange indicate a shortage of the physical metal in China.

“3 months ago, when I inquired about buying some more bars, they said that I would have to wait a month.
So, yesterday, I stopped by the shop and was told again that I would have to wait a month. 
The affordable investment grade bars are in shortage.”

Ji Hai Shan’s first-hand account of the developing shortage of investment grade silver in China is below:

monthlysilverEveryone in the precious metals community is scratching their heads over the recent behavior of the price of silver.   At the end of the day, the severely depressed price level can only be attributed to the extreme degree of manipulation and price containment activities of the Federal Reserve and the U.S. Treasury’s Exchange Stabilization Fund team (which is officed in the same building as the NY Fed).
Besides containing the upward price movement of gold and silver in order to support its effort to prop up the dying U.S. dollar, the question is, why is silver being hammered like this with Comex futures?   Ultimately, I believe a severe shortage of unencumbered physical bars for delivery into India and Asia has developed.  More on this in the next few days.
In the meantime, you can see from the 20-yr graph of silver that silver is, by far, more oversold than at any time in the last 20 years:

dynamiteIt is said that history doesn’t repeat itself, but in the case of silver, I don’t see how that can be avoided. In more ways than not, silver today reminds me of the time when it traded under $5 per ounce.
As was the case back then, the thought that it might eventually climb more than ten times in value was widely disbelieved and openly scoffed at. That’s because silver was the most undervalued asset in the world, both then and now. If you didn’t catch the first run, you’ve just been given a second chance.
And it is also interesting that silver is registering as the most undervalued investment asset precisely at the same time when there is more total investment net worth and buying power in the world than ever before
. The assets in hedge funds alone are now at a record $2.7 trillion; 1 percent of which ($27 billion) is more than the value of all the silver bullion in the world (if it could be bought).
The 100 million oz of new silver available for investment annually would take only one-tenth of one percent ($2.7 billion) of hedge fund assets. Unless hedge funds have stopped looking for undervalued assets, I can’t help but feel that’s a set up akin to a lit match and a barrel of dynamite.

beach ballSilver dipped to $19.10/oz overnight and remains under pressure this morning . With the gold: silver ratio at just over 66 ($1,290/$19.38/oz), silver remains a compelling buy at these levels.
The stealth phenomenon that is silver stackers or long term store of value buyers of silver coins and bars continues and is seen in the record levels of demand for silver eagles from the U.S. Mint.   The US Mint sold 13,879,000 ounces of me in Q1, 2014.  This is just over 2% less than the 14,223,000 sold in the first quarter last year.   March sales were the fourth-biggest month ever and the US Mint is now on pace to exceed 2013 totals.
Silver stackers remain the smart, informed buyers.  They realize that silver is undervalued versus gold with the gold silver ratio at 66:1.  This is particularly the case on a long term historical basis. The long term historical average, gold to silver ratio is 15:1.
Silver industrial and investment demand is increasing very significantly and meanwhile supply is falling. The fact that the huge majority of the investment public and financial services industry remains unaware of the fundamentals in silver means that the bull market in silver likely remains in its intermediate stage.

 

While gold is the king monetary metal, silver will turn out to be the king precious metal performer.  Currently, gold is stealing the show as the East (China) continues to consume more than total world gold production.
However, silver will surprise the markets in the future as overwhelming demand will outstrip supply in a big way.
The key factor that will drive up the price (value) of silver much higher than gold in percentage terms, will be its affordability.  As the price of gold heads back above $1,500 and silver to $30, an individual can buy a heck of a lot more silver than gold.
As the public and market are lulled back to sleep (presently) on the value of silver, there will come a time in the future when it will be impossible to acquire a single ounceonly at much higher prices.
Silver Will Be The King Precious Metal Performer.

beach ballAfter Friday’s monster $1 rally of nearly 5% in silver, and $20 in gold, the metals are again breaking out to the upside on Monday’s Asian open, just as we forecast on this weekend’s Metals & Markets.
Silver opened Globex trading with a vertical move, and after consolidating around $21.70, is spiking again on the Asian open, and looking like it wants to challenge the $22 level this evening.

silver rallySilver outperformed gold this week, having risen about 5% from $19.05 to Friday’s close at about $20. Intra-day movements have been the result of market-makers trying to work the price lower, because they are net short, and being squeezed by lack of genuine selling. This is illustrated in the chart below of silver’s price and open interest on Comex.

Silver is on the verge of a massive short squeeze.  Speculators’ silver-futures shorts surged to extreme bull-record levels less than a month ago.  And they’ve barely started to mean revert, which means big buying to cover is still coming soon.  While speculators’ silver-futures positions are always a great contrarian indicator at extremes, exceptional shorts are the most bullish portent of all.
Unlike new long-side buying, short covering isn’t optional.  Silver futures’ hyper-leverage guarantees that speculators have to quickly buy to cover as silver’s price rises.  This feeds on itself, igniting a buying frenzy as traders rush for the exits.  The bigger their aggregate shorts, the greater the rally their covering sparks.  So the recent bull-record shorts are a super-bullish harbinger for silver and its miners’ stocks.