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What’s Fueling the May Silver Squeeze? | https://www.themorganreport.com
This May, silver advocates everywhere are uniting to squeeze the supply of silver, coinciding with the 10-year anniversary of the 2011 silver market crash. Looking back at the events of that year, it’s interesting to note what we learned since then.
One of the tell-tale signs that the price of silver would be affected was that the CME Group had repeatedly raised silver futures margins. According to an article from Reuters at the time, silver margins surged 84% in just over a week. Increased silver margins always take a toll on the price, forcing many traders to exit their positions.
As far as where we are now, from a big picture perspective for 2021, there are a few things to recognize. The funds continue to purchase silver to add to their investment holdings. Recent data from the Silver Institute shows that the amount of fund buying for the first quarter of 2021 is near where it was at in 2020, meaning an extremely large amount of physical silver is going into the ETFs.
The retail side also appears to be on track with what we saw in the first quarter of last year. In other words, with only a quarter of data in for the year, we’re experiencing what we witnessed in 2020. We saw a huge amount of physical silver go into the hands of investors last year, over 500 million ounces; if the data shows a similar trajectory, then that is a very good sign.
Whether this silver squeeze materializes depends on a number of factors. It depends on how many people participate, what the margins are, and how much excess “silver” is available in physical form to meet the demand. I suspect that there is sufficient silver supply to meet the retail demand and possibly force the price somewhat higher.
When will silver breakout above the $30/ounce mark?
If we reach above a $28/ounce price, and see that figure on above-average volume, staying above that level for three consecutive days, then we have a position that suggests we are on our way to breaking through the $30 mark.
I covered this topic in detail in my appearance on the MoneyShow last week. You can watch the full presentation here. I also spoke more about this subject and answered some questions submitted by viewers in my recent interview on Liberty and Finance. You can watch the full interview here.
Tesla needs silver: where will Elon Musk get it?
I wrote an open letter to Elon Musk, published late last month. In case you haven’t read it, you can find it here. However, I’d like to offer some more insight about what the letter is about.
The purpose behind this letter was truly to bring awareness to him and everybody else. The U.S. Geological Survey has stated that silver will be the first element to go off the periodic table; that may be an exaggeration, but what they’re attempting to convey is that there isn’t a lot of economic silver left in the ground from what the USGS states. Of all the elements that we mine, silver is the one that is of the shortest supply at current conditions.
This letter was not directed only to Elon; it’s to silver industrial users that do not have a direct relationship with a refiner to enable them to receive their supply seamlessly. Musk, alongside various leaders of new industries, will have to turn to the open market to source and secure their silver, and that suggests competition for the remaining silver.
For that reason, I suggested Musk explore the LODE Project, an initiative that creates tokenized versions of precious metals like silver, and also gold. These digital assets are backed by real bullion, stored in LODE’s secure vaults around the world, and are redeemable for the physical metal at the request of the owner.
LODE is also now actively taking a role in the May silver campaign, with their Silver “Squeeze” Week offer. For every 100 ounces of digital silver purchased from the platform, LODE has pledged to double down and take 200 ounces of physical silver off the streets. This offer is only available until May 10, and on May 14, they will publish their receipts to be fully transparent. Disclaimer: I have been an ambassador for the LODE Project since its founding, and I am invested in the Project.
To hear more of my thoughts, you can watch my most recent interview with Investing News Network here.
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