Silver: Playing Catch-up or Canary in Coal Mine?
Silver Today:
Silver Rejects $18 Area Again; But For How Long?
The answer it turned out was 2 days, so far. The question is, will Silver break $1854. Read on for the analysis
via Sarah Benali and Kitco News
When it comes to the white metal, Vince Lanci, owner of NY-based Echobay Partners, told Kitco News the metal is out of its “comfort zone” and ready to make a larger move than seen Monday.
“The direction is still unknown if past is any indication. There is a $2.00 move in the works here. We are long volatility and feel this is the pullback before a spike to $21, or the flat out top,” Lanci said in an interview. May Comex silver futures settled at $17.915 an ounce, down more than 1% on that day.
The next day, it basically erased those losses. Today, the market is again strong, but still below important hedging levels.
[The chart explains the rationale and possibilities better than we can- Soren K ]
Silver after Friday's sell off.
Silver Still Not Out of the Rough
“[Silver] producers typically hedge concurrently. For the last few weeks, we saw that many producers had sell orders in the $18 area,” Lanci said.
He went on to add more caution, “Based on our industry contacts and a large sale of June $21.00 calls in February before the $18 level wash out soon after, we do not think silver will breach $21.00.”
He added that banks know about these orders and are tempted to sell ahead of producer hedges. “This is a recipe for a violent rejection lower, as we are seeing today. But it is not the first time.”
Above $1854 Should be a Rocket Ship Ride
According to Lanci’s research, silver has a tendency of rejecting the $18 area “quite violently,” although he added that “rejection” does not always mean lower prices.
“If too many shorts front-run the producer sales, and an event like Brexit occurs as in July 2016, the rally can be a disaster for shorts. When silver pushed back to $18 in July 2016, those producer hedges were gobbled up by fresh money and the shorts were bagged and tagged,” he explained. “There was little to stop silver from rallying as high as it did. That was a bonafide short squeeze by players who got cut front running producer hedges.”
Good Luck
About the Author:
Vince Lanci has 27 years’ experience trading Commodity Derivatives. Retired from active trading in 2008, Vince now manages personal investments through his Echobay entity. He advises natural resource firms on market risk. Over the years, his expertise and testimony have been requested in energy, precious metals, and derivative fraud cases. Lanci is known for his passion in identifying unfairness in market structure and uneven playing fields. He is a frequent contributor to Zerohedge and Marketslant on such topics. Vince contributes to Bloomberg and Reuters finance articles as well. He continues to lead the Soren K. Group of writers on Marketslant.
Twitter: VlanciPictures
Website: Echobay.com
Email: vlanci@echobay.com
About:The Soren K. Group of writers are currently 5 persons writing collectively. Backgrounds are professional, ranging from Finance to Banking to Real Estate. Topics include politics, markets, and Global Macro situations with a libertarian bent. Some posts are collaborative, some individually written.
Email: Sorenk@marketslant.com
Twitter: @Sorenthek
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