Tim Murphy
Precious Metals Advisor
Tim Murphy is a Precious Metals Advisor with over 15 years of experience. He started on the New York Commodity Exchange floor before founding his own brokerage firm. Tim joined Scottsdale Bullion & Coin to leverage the small-company feel with national exposure, focusing on personalized, client-first service and fostering long-term relationships.
If you’ve been reading my articles for the last few months, you should not be surprised by the recent surge in gold and silver prices. Since mid-summer, I have been jumping up and down, emphasizing that gold and silver were putting in major bottoms. As mentioned in my article, Gold Has Never Been So Attractive, I stated:
“The signs of gold and silver nearing a major bottom are most evident. The bullish sentiment is quite low, which is best illustrated in the COMEX “open interest” levels. At 132,000 contracts, silver is as oversold as it was in early May 2020, just before the price rocketed higher from under $15, doubling in only three months. Plus, physical gold and silver inventories on the COMEX have all but dried up AND physical demand for gold and silver, via the central banks, is VERY strong worldwide.”
“I know predicting anything short term is folly, but it wouldn’t surprise me to see the gold market get hit one more time, break technical support at $1,675oz, and drop another $50oz or so. (And in doing so, confusing the “street” even further and further demoralizing bullish sentiment). Regardless, gold and silver are at their bottoms or very close. The public currently has little interest in gold and that is so typical at major bottoms. Along with the major top spikes now in place in the stock and bond markets, the artificially low gold and silver prices will very soon be a thing of the past, and gold and silver should trend sharply higher for years to come.”
Additionally, in my article, Gold and Silver Are Ripe to Explode, I mentioned:
“Simply put, the Open Interest measures the total number of open long and short “futures” positions in each market. When the Open Interest is at an extreme high, the price and market sentiment is typically strong and the market is prone for a big correction. When the Open Interest is low, the price and market sentiment is typically weak and the market is ripe for a big rally. Over many years, the open interest range for silver is a low of 135,000 contracts to a high of 250,000 contacts. In 2010, when the sentiment for silver was weak and the open interest was a lowly 135,000 contracts, silver proceeded to go from $20 to $50 in just nine months! With the silver open interest currently standing at 126,000 contracts, we could be in for some fireworks very soon.”
So, fast forwarding to last week, the Open Interest dropped even further, to 121,000 contracts. When silver rallied sharply on Thursday, the Open Interest hardly budged, which means the potential for a continued big rise in prices is staggering, before we get any meaningful price correction.
In briefly summarizing, the supply demand fundamentals are hugely bullish. Central banks worldwide are buying record amounts of gold and silver, and just one example of this massive demand was illustrated this weekend by Alasdair Macleod,
“Turning to silver, we can see that a combination of industrial demand and strong demand from India is forcing industry analysts to revise their estimates of shortages for 2022 and the next few years as well. Reflected in local premiums, Indian demand is so strong that bullion is being flown in, as opposed to being shipped by sea.”
Adding insult to injury, worldwide silver demand has exceeded silver supply for four years running. Plus, Alasdair Macleod had this to say,
“If you look at global exchange stocks of silver they have collapsed. We’ve lost something like 400 million ounces between London and COMEX. You can see that we have the potential to see what we saw on the London Metals Exchange with nickel, when the metal tripled in price.”
As mentioned on The Gold Spot, I have been working with a large number of individuals over the past few months who want to own physical gold and silver, but are still on the fence – waiting for the “right time” to buy gold and silver. So again, the potential for fresh new buying to come in as prices rise is staggering!
In conjunction with Macleod’s keen observations, Mike Savage had this to say,
“I cannot overstate how concerned I am right now about those who have their heads in the sand and are just “holding on for the long term”. We just had a 40-year bubble in bonds likely burst, as rates fell and asset prices rose for 40 years, and we are now likely on the other side of that hill. I believe that caution is warranted and that the most likely way to protect ourselves is with HARD assets and NOT DEBT instruments.”
Finally, the recent rise in gold and silver prices was partly due to a statement by Fed Chairman Powell in which he stated the Fed would likely be getting less hawkish going forward. Of course, Powell’s statement is also bearish for the dollar, of which Alasdair Macleod had a few things to add:
“America is facing a coordinated attack by Russia and China on its dollar hegemony. The Russians are planning a replacement trade settlement currency, which if it succeeds, could unleash a flood of foreign-owned dollars onto the foreign exchange. We have no way of knowing how advanced this plan is, but the indications point to gold-based digital currency. Moscow establishing a new gold exchange, Asian central banks accumulating additional gold reserves, and Saudi Arabia seeking non-dollar payments for oil sales are all circumstantial evidence. As well as these plans, there has been an underlying shift away from a long-term everything financial bubble, with the prospects of higher interest rate levels in time. The reasons for foreign ownership of fiat dollars are diminishing, and a successful new Asian trade currency will only add to the dollar’s woes.”
