So, Marku asks:
Category: Economics Page 1 of 96
In my long post about silver prices, I talked about a reversion to the mean. This is something that frequently happens in life: something overshoots the norm and then it swings back and overshoots the abnormal. Slowly but surely it finally settles smack in the middle of the bell curve, to use a shit metaphor.
This is what we’re seeing in silver right now. For 150 years silver has underpinned a great deal of US monetary decisions. Then, for the last 50 years the United States fostered and protected a rentiers silver market by turning a blind eye to manipulations in the paper markets at the Comex and simultaneously creating a rentier situation for the distributors of silver buillon in the country. If I went into detail how that happened this post would never end. Needless to say it was a very cozy arrangement that is unraveling every day and it’s something that has the large silver distributors very, very worried.
I’ll give you the short version: the US mint prints the coins, proofs, bars, etc. It then sells that silver to about five large national distributors for a little bit under the spot price of silver. Then those large distributors turn around and mark up the silver bulliion by about 25% and charge huge premiums for every coin, bar, proof, etc., Cozy! Like I said, and like all good rent markets it produces no value. N0w, sometimes this has been done to keep silver in a stable range for industrial purposes, but after the US wholesale deindustrialized beginning with Clinton but turbocharging under Bush–to fund our illegal wars–the justitication fell apart.
While we sold off all our capital stock to China, its demand for silver became unslakable. As I noted in a previous post one gigawatt [error corrected, mea culpa, SPK] hour of power from solar panels requires 1,000,000 ounces of silver and that’s just for solar panels. Silver goes into so many more things than we can possibly imagine. Pick someting electronic in your house; its got silver in it. Silver is the single most important industrial metal in the world because it is the most conductive and oxidizes less than only one other metal: gold.
But I’ve digressed from my argument.
For at least 150 years, starting with the opium wars, the balance of trade from East to west was very much skewed to the west: let’s call it what it was: economic pillage masquerading as lifting up all our little brown sisters and brothers. All of the wealth in the east, and that includes India, was over the course of 350 years, siphoned west. That’s economic fact, although people don’t teach economic history, which is a shame. They should.
I say all of this because the Comex has literally become a casino. For example, the total number of registered bars, registered meaning it’s in the vaults and it’s there for delivery has fallen under 100,000,000 ounces it’s now 98,000,000 ounces.
To make matters worse, there are 65,000 contracts of open interest on silver futures at the Comex right now, due in two weeks, that if optioned require the delivery of 325,000,000 ounces of physical silver. Where is that kind of silver going to come from? Pawn shops? Coin dealers? GTFO! Comex is in the grips of a slow, existential crisis, that it’s going to lose.
If those contracts are exercised at the end of February, because they’re March contracts, there is absolutely no telling what kind of chaos the US financial system might endure. Why do I say the entire financial system? The dreaded ‘D’ word.
Remember mortgage backed securities, CDOs, CDO2, synthetic CDOs etc. . .
There are similar derivatives in the silver market, but they exist in a black box, undisclosed so nobody really knows how much the open interest or notional value really is or who owns the risk—although the prevailing guess is about $1trillion USD notional. If the Comex implodes the cascade effects might well resemble what happened to those two Bear Stearns Hedge Funds in the summer of 2007 that set off the 2008 Financial Crisis.
Even if the Comex manages to extend contracts out a few more months, the physical supply of silver does not exist. I repeat there is no physical supply anywhere that can meet this year‘s demand for silver. Only two places comes close to the silver necessary for global demand: one is already fully allocated in the Canadian vaults in Ottawa in Toronto and that silver is not going to be let go of. The other is silver owned by retail investors. But as I have said before: silverbugs aren’t going to sell for $95, not $120, not $175. Not going to happen.
So in two weeks time, it looks like the Comex is going to implode.
How about over in the East? What’s China doing?
Chinese market regulators are actually doing their job. Here’s how, as I am quoting Dario at this link:
“What the Shanghai future exchange just did and what they did yesterday is effectively saying that starting from the last month of February that (it’s not a coincidence is the same day when the settlement for March 2026 futures contracts and the Comex begins starting) from that day any participant in the exchange that is not purchasing contracts for [physical] hedging purposes and even if purchased for hedging purposes they haven’t been allocated [a] physical delivery quota all their quota for silver in the front end contract is going to be brought down to zero.
So what the Shanghai future exchange here is saying is like okay game is over. We have to restrict the physical silver that we have left here for settlement for those that need it from an industrial perspective. So for hedging purposes and we need to keep the real purpose of the exchange going otherwise if things continue in this way we can effectively shut for business and that is going to be a huge mayhem not only across China but across Asia.
What’s China doing? Well, those communist bureaucrats that oversee the Shanghai Futures Exchange are doing something remarkable: they are working as hard as they can to preserve the sanctity of a free and fairly functioning market dedicated to true price discovery. Listen to the full podcast. You’ll listen in disbelief. The Chinese are better free-marketeers than the corrupt managers of the SEC. I’m dead serious. Chinese regulators make our SEC look like a collection of jackasses at a rodeo-clown show.
So, here is how this plays out: if Comex implodes—which is probable—but Shanghai muddles through, which given its bottom of the barrel minimum silver reserves is going to be extremely hard to pull off, but not impossible, massive amounts of wealth will accelerate their repatriation into the mainland. For over a thousand years silver formed the basis of Chinese monetary policy. They know what they are doing.
And the West? The West will reap what it sowed for near on 500 years. Our wealth is soon to be a multi-century river filling the current account surplus of the East.
Just watch.
IT SHOULD GO WITHOUT SAYING, EXCEPT IT MUST BE SAID: THIS IS NOT INVESTMENT ADVICE. THIS IS OPINION, FULL STOP. DYOR.
This “issue” has flaired up again as Trump attacks Canada again.
The short answer is that in the short term Canada is moderately dependent on the US and the long term it is hardly dependent on America at all.
Right now we (Canada) have a lot of trade with the US. We buy mostly finished goods, and pay fees to American tech and copyright holders. The US buys oil (which it cannot easily substitute away from in the short term). The US buys cars from us (#2, but deceptive, since they’re made by US companies in Canada), a small amount of machinery like nuclear power equipment, and a grab bag of other industrial goods. We also sell Potash (about 80% of what the US needs) and aluminum to the US, for which there is no easy substitute: these things are in global shortage, and the best alternative for potash is Russia and despite various bullshit about American/Russian alliances, Russia doesn’t trust the US at all and would not be a reliable trade partner. Without potash American farmers are screwed, since it’s used for fertilizer. America can’t significantly improve domestic potash production, there isn’t enough in America.
There’s substantially nothing we buy from the US that we can’t get from China for less or Europe for a bit more. And what the US sells Canada is high value add goods, not resources. We’re a valuable customer.
And, at the brass tacks level, if all trade stopped tomorrow, Canada could feed itself and would have plenty of energy. Our houses would stay hot in the winter and cool in the summer, our trucks would have gasoline and diesel, our trains would run and our planes would fly.
Canadian dependence on America is about 80 to 90% a legacy issue. We currently do a lot of trade with America, but we don’t have to. We can sell manufactured goods to Europe, and resources to China and buy from China and Europe and various other nations. Nothing we get from the US is a “must have with no feasible replacement.”
So the game is very much along the lines of the old joke about saying nice things to a barking dog while you find a rock. Not that we will ever fight the US unless they invade, but we just need time to disentangle our economies and move to reliable trade partners.
America could hurt us a lot if they cut of trade, but it wouldn’t be a mortal blow and we would recover. We’d prefer to do it slow, but if we have to do it on an emergency basis it can be done.
Canada doesn’t need the US. It just needs some time to change trade partners, and that’s what Carney is doing, because as he has said, it no longer makes sense to do business with the US.
We’ll talk a bit more about trade with the US from a global perspective soon, but basically the US has a legacy trade position: no one needs to buy from it any more unless they’re stupid (Europe refusing to buy Russian gas). Selling to it is still necessary for many nations, but that will become less true over time.
America’s prosperity and power are both legacies, they have no solid foundation to stand on any more. Ironically Canada is in a better position in the middle to long term than America simply because it only has 40 million people and is a continent sized country with a continent’s worth or resources. The only significant danger is an American invasion.
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Jaysus on a popsicle, Mary and all the Saints do I have some egg on my face. Since January 27 silver has been on one seriously wicked ride. I’ve been banging my head to Metallica’s Whiplash for the last ten days.
So, WTF happened?
In short: from where I sit the paper markets are trying to create a force majeure situaiton for March contracts. The market is incredibly volatile and highly illiquid. Traders are draining the vaults of bullion. Indeed, as Dario notes, “Silver physical deliveries at the Comex just crossed 4,000 contracts (~20m/oz)and we are only 6 days into February.” That’s nucking futs.
If the Comex defaults to force majeure (SHFE is a bit of a different matter) the Comex will lose all credibility as a fair functioning market dedicated to price true discovery. Never mind that silver prices in the USA has been a cozy Fed-supplied rentiers market for decades, should this happen businesses will begin a mad scramble to source silver for themselves. That leads to supply and demand chaos. Bad. Vewwy bad.
On the SHFE–Shanghai–one day last week over 1.3 billion ounces of silver volume were traded. That’s one year of global demand in a day. The Chinese government’s motto regarding traders shorting silver on the SHFE seems to be FAFO. The Chinese are cracking down hard. Why? Well, to produce one gigawatt of power using solar panels requires 1 million ounces of silver.
You read that right. One million ounces.
Fundamentals matter. Global demand is strong. Businesses need silver for industrial applications beyond just solar panels and dentistry. But traders can keel-haul fundamentals sometimes with epically shitty consquences. Watch this video by Dario starting at minute 6:43 for how this possibly plays out.
It’s ugly. And it seems to me that maintaining a viable silver market is now fully in the hands of the Chinese. US traders are determined to destroy price discovery and reinstate the cozy rentiers market in the US.
I have no idea how this will end.
It’s common to slap all the blame on Boomers, but it’s not really fair, though they certainly did plenty of harm. (Yes, some Boomers, elites are more to blame, yadda, yadda.)
But it wasn’t just the boomers. The so-called Reagan Republicans included a ton of GI Generation and Silents. The issue is that the people who created the FDR system weren’t GI Gen, they were Lost and Missionary generation. GI Gen and later lived in the economy created by those generations, but they didn’t really understand how and why it worked because they weren’t adults during the 1920s, so they didn’t get what it was reacting against or what it was trying to fix and avoid a recurrence of.
GI Gen and Silent leaders looked at all the rules FDR and co had put in place and they didn’t really understand why they existed: the rules looked stupid, there seemed to be tons of them, and they figured “we’re smarter than they were, we won’t do stupid things and life will be a lot easier with less regulation.”
Well that was the rationalization: the other issue was simple enough. Getting rid of the rules let a lot of people become rich and even the middle class thought they’d benefit (and many did, with rising housing and stock prices and lower taxes.) The rules had, quite explicitly, been intended to make sure there couldn’t be another Gilded Age nor another roaring twenties — no stock bubbles, no super rich.
But, of course, a lot of people, especially with power, wanted to become super-rich, or at least richer and getting rid of the rules that were meant to stop that was a no-brainer. Enough middle class people were convinced to go along, and enough racists also joined in (Reagan and Nixon ran heavily on racism.) So a coalition was created which destroyed what had come before.
This started before Reagan, as someone will chime in to tell us, but Reagan was the formalization, the big break.
It happened because people wanted unearned wealth, and because the old system had broken (oil spikes, end of Bretton Woods, end of gold money, staglfation, and no one knew how to fix it (or no one anyone was willing to listen to) because the architects were all old or dead.)
So when offered “you can get rich or at least affluent without work and stick it to the niggers too” a lot of people took that deal. It wasn’t just the Boomers—Silents and GI were key to it, more key than the Boomers in the early years. It’s just that they’re all dead now so we blame the Boomers. Gen-X was complicit, but were still children when the key changes were made.
Boomers get all the blame, but they didn’t start the fire that burned down the old order, they simply threw fuel on it (Clinton, especially) when they could.
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One of the most important things to understand about companies and countries both is the difference between sustainable prosperity and burning down the house.
You’re probably aware that Boeing has serious problems. Those problems have been obviously “on the way” for a long time. When Boeing moved its headquarters from Seattle (where it makes most of its planes) to Chicago, the writing was on the wall.
BUT it was also a good time to buy Boeing stock:
The move to Chicago meant that Boeing’s executives had moved away from the manufacturing floor. It was the sign that Boeing’s culture was no longer “Engineering from top to bottom” but finance driven. And that emphasis on finance, on juicing profits, increasing executive salaries and driving up stock prices (those stock options don’t pay otherwise) had an effect. You can see it in the chart above.
Here’s a more recent chart:
Ouch.
What had happened is that Boeing was forced by the Clinton administration to merge with its competitor McDonnell Douglas in 1997. McDonnell Douglas was an “MBA” firm. Boeing was an engineering firm. The takeover changed Boeing’s culture and leadership, engineering became secondary and for over 20 years, it was good to be a stockholder.
But Boeing’s ability to make and design planes took a huge hit, there were massive quality problems and employees below the executive rank were angry and demoralized. Boeing planes started falling out of the sky. They were unable to make reliable rockets any more and eventually spending all their time on juicing profits blew up in the face.
This is a general law. The same thing happened at General Electric. If you’re old enough you remember GE as an American industrial giant, making everything from turbines to washing machines. It was a technological pioneer. Then Jack Welch took over, started firing 10% of employees every year (the “lowest performers”, supposedly) and turned GE into a finance company. After all, profits from finance are much higher than profits from manufacturing.
Unfortunately, as with American car companies, GE wasn’t really a bank. Its financial profits were still dependent on being a major industrial company, but Welch didn’t believe in manufacturing. And now GE is a shadow of itself. Jack Welch? Well he got rich, he was lionized as one of the great CEOs of the era, and he retired before GE went completely to hell.
GE will never recover, and with it went a big chunk of America’s industrial and technological might.
And it’s unlikely Boeing will really recover. If it wasn’t for China, it would be possible. But China’s building its own civilian airliners now. They’re not caught up yet: they can’t make the jet engines, but they will be able to soon. (They make excellent jet fighters, probably better than the equivalent American planes, as performance in the recent India/Pakistan border incident showed.)
So China’s likely five years out from producing cheaper more reliable planes than Boeing, which is to say, cheaper and more reliable than American jets. The European market is going to turn hard away from Boeing due to Trump’s games and their having Airbus jets as an alternative. So what’s left for Boeing? Geopolitical risk is too high for anyone but Americans to buy their planes, and Chinese jets will cost less. If you don’t want Chinese, buy European.
They screwed up the rocket they were building for NASA, giving the market to SpaceX by default (and perhaps soon other new companies.) American fighter jets are worse than Chinese jets, and even if they’re better than some other alternatives, the market is crashing on them, because with modern software, you can’t use them if the US decides to stop you. They effectively have a kill switch. Given the US has recently threatened both Europe (Greenland) and Canada, who the Hell wants to buy an American jet, when America is the danger?
Buy Russian. Buy Chinese. Buy European. But American? You’d have to be a moron.
Now let’s look at the US economy overall:
The entire US economy is being burned down. Those high profits aren’t a sign of health, they are a sign that excess profits are being taken at the expense of reinvestment in production and tech; of too high cost structures that make producing in America too expensive (because those profits indicate higher prices); of non-competitive markets, and, generally speaking, of burning down companies or the economy, or both, to make unsustainable profits.
The problem is simple enough. China’s now ahead in 89% of techs. Prices for its goods are much lower. Who the Hell is going to buy American goods? Two years ago there was an answer. American allies would, even at higher costs, because they were scared of China and wanted to stay on America’s good side. But now? After America has proved more dangerous than China to Europe and Canada and after Trump’s on-again, off-again tariffs and other insane trade moves?
China’s looking mighty good, and America is the threat.
Oh people will still “invest” in the US, if you want to call it that. If America’s in its final stages of burning down the house to generate high profits, why not? But I suspect that even that is going to drop significantly because the geopolitical and exchange rate risk is just too high. As America declines, the US dollar will as well, and when you adjust for drops in the dollar, those returns aren’t going to look so great to non Americans.
The “Burning Down the House To Generate Heat” metaphor is one for our age. Not just for Boeing or America and its economy, but for humanity and ecosphere.
Welcome to the end of American Empire.
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Chinese and American flags
The period around 1980 was pivotal to the fate of nations. In the West Thatcher and Reagan came to power and finished the destruction of the post-world War II order, setting the West on a new path. This process had been ongoing since 1968, but the form of the new consensus was not clear until Reagan’s victory: financialization, crushing workers, destroying the middle class, asset bubbles and so on.
In 1978 Deng came to power in China and instituted reforms, especially market ones. This coincided with the West, and especially America, wanting to offshore and outsource their industry. This increased profits and impoverished the working and middle class. It financialized the economy: you could have the profits without the production and without dealing with uppity and powerful workers.
Reagan went after unions hard, Thatcher broke the miner’s union, the most powerful in Britain. The Federal Reserve started a long term policy of raising interest rates every time wages rose faster than inflation, meaning that over a period of decades wages rose less than inflation, and thus were reduced in real terms. The BLS moved towards understating inflation systematically, to undercut things like pensions with cost of live adjustments and to help “boil the frog”. Every change in how inflation was measured, for decades, which I am aware of, reduced the measured inflation rate. That doesn’t happen randomly or if your goal is the accurate measure of inflation.
Deng lucked into a geopolitical moment, and knew exactly how to take advantage of it. “Tired of dealing with uppity workers? Hate environmental regulations? Want more profits without the work of production? Move your production to China and we’ll make you rich!”
Deng exactly spotted the West’s weakness and knew how to take advantage of it. He also delivered: offshoring and outsourcing did make the West’s elites, and especially US and British elites filthy rich.
In exchange China got the industry and with the industry came the know-how and the technology. The technological lead always (always) moves to the country with the factory floor, and so it did in this case. It took quite a while for this to become obvious, so people could fool themselves, but the movement was inexorable. The same thing had happened when the industrial base moved from Britain to America (with tons of British financing). It took about 30 years for the tech lead to follow the industrial base. In this case it seems to have been about 20 years from China taking the industrial lead to tech supremacy, but the movement was the same.
American elites, wanting to be rich without real work and to destroy their internal enemies, those pesky workers who wanted a cut, got what they wanted. In exchange they destroyed their empire, because the real basis of the American empire was industry and technology.
The Chinese got what they wanted: China became the world’s leading industrial and technological power and a billion people were lifted out poverty.
The Gods often grant want we desire, if we’re willing to work for it. American elites got their wish. So did the Chinese.
Welcome to the Chinese century.
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Everyone is talking about gold topping $5k an ounce. The yellow metal is captivating and big moves by it tend to suck all the oxygen out of the media space regarding other metals. In 2025 gold rose a whopping 64% against all comers, i.e the dollar, the S&P 500, oil, Bitcoin and on and on.
Gold’s meteoric rise last year is a fucking piker compared to what silver did. Silver was the best performing asset of 2025 rising an astonishing 147%. Yeah you read that right. 147% from January 1, 2025 to December 31, 2025. This raises some important questions, such as why did silver, after decades of disappointing performance, blow past every asset this planet has to offer and consequently how high can it go? Does silver have a ceiling?
So, questions asked, let’s now examine the known and/or knowable variables affecting silver prices at present.
First, what’s silver’s all time inflation adjusted high? This depends on who you ask and how you measure inflation. By our current CPI measurement silver’s all time, inflation adjusted high was roughly $150 an ounce. This was in February 1980 when the Hunt Brother’s tried to corner the silver market. Now, as most of you know, Ian and I both distrust current inflation measures, like the CPI, because it overweights consumer goods with stable or falling prices, using accounting legerdemain like hedonic pricing which equates increasing computer chip power and/or efficiency as disinflationary. At the same time the CPI underweights prices of goods that are rising, like food and other non-durables.
Seriously, I defy anyone to tell me food prices are stable or falling: you can’t do it. The CPI does this primarily to avoid COLA adjustments on entitlements, cheating retirees.
Other measures of inflation, indices, weighting using purchasing power parity or other yardsticks, delivers an all time silver high closer to $190. So, I’m going to channel King Solomon and split the baby in half and call the all time high at $170. But however you measure inflation it’s clear silver isn’t even close to its 1980 Hunt Brother’s high.
Second, price moves in gold and silver are not coupled and have not been for at least 150 years. They don’t correlate. Gold is considered a safe-haven against fiat currency hyper-inflation or economic collapse. Silver, on the other hand, is essential to modern electronic manufacturing. So gold had a nice run last year, but silver was number one by a very, very wide margin, outperforming gold, the way Shohei Ohtani outclasses everyone else on a baseball diamond. Even as silver and gold have been decoupled since the late 19th century evidence is mounting that last year’s silver move might have been the opening act of their long awaited re-coupling.
Perhaps a précis on how and why they decoupled and what a re-coupling would look like is in order.
The first question is to ask, “how long were gold and silver coupled?” Well, from ancient times—yes, fucking Greeks and Romans ancient times—until the 19th century silver and gold traded at a 15:1 ratio.
Don’t believe me?
Consider then how the 1792 US Coinage Act established a 15:1 ratio between the two in our newly constituted republic. That said, during the next century—the 19th—a handful of rare developments coalesced to break the two thousand year old linkage between the two royal metals, thereby widening the ratio nearly exponentially.
First, the gold standard for measuring currency values between nations was established. It soon became the, well, gold standard for all international trade.
Second, the conventional wisdom prophesied the end of America’s silver boom—never mind that the aggregate value of silver mined in Arizona and Nevada had a notional dollar value greater than the California, Yukon, Deadwood, Montana and Alaska gold rushes combined. Gold’s price during the 19th century, due in large part by its merciless acquisition by European banks, blew out the ratio, decoupling the two metals for a century and a half. The ratio between the newly decoupled metals had widened from 15:1 to 50:1 by the turn of the 20th century. By the turn of the 21st the gap was nearly 100:1, in large part due to US government manipulation of silver prices. The US government sheltered a rentiers market in silver bullion for decades. Wholesalers got silver at spot prices. They then charged retail buyers high premiums and pocketed the sizable difference. This cozy arrangement, due to silver’s recent price moves is breaking down, and fast. Good I say.
That said, I argue, based on a reasonable man’s assumption, that the spread, now roughly 50:1, will continue narrowing and sometime in the next few years complete a reversion to its 2,000 year historical mean. That puts a potential price of an ounce of silver at $320 an ounce and might even overshoot a little bit, as reversions are wont to do at times. Overcorrections are a real thing. Hitting the Hunt Brother’s high of $170 an ounce is just a mental milestone, nothing more. The silver bugs are getting their revenge and how.
Now, my assumption is based on a single premise, a reversion to the mean/norm. Not a bad premise to base an assumption on, but not enough for intellectual coherence and honesty. So, let’s explore another variable: silver’s supply versus demand forecast.
What is the global supply versus demand picture like? In short, extremely unbalanced. The numbers are staggering. Aggregate global demand per year is 1.3 billion ounces. Annual global mining supply maxes out at roughly 850 million ounces. Let’s be generous and toss in recycling raising global supply to 1 billion ounces of silver a year available for industrial purposes.
The maths paints a grim supply picture: a whopping 23% gap between supply and demand. Because silver is the single most important industrial metal—it is in every electronic we own— demand is not going down any time soon. A single tomahawk missile requires 500 ounces of .999 grade silver. Yes, 500 ounces. See where I’m headed with this demand equation?
Why is it in everyt
hing? It’s the goldilocks of metals. Silver might not be as conductive as some but it’s less resistant than most. It doesn’t overheat like some and burn through plastic coating, but its best left exposed and uninsulated. It’s place in the bell curve of the electrical performance of all metals is right before the big bulge grows. Most of the time we want things good and fast. In reality, however, we must choose between good or fast, but silver? Well, silver gives you good and fast together. Goldilocks!
One big variable exists concerning global silver supply that has no easy short or even medium term fix. It’s physically impossible for global mining companies to ramp up mining production enough to even begin closing a 23% gap between supply and demand in any time frame less than 2-3 years. And this assumes no economic growth leading to increased global demand. That is some wicked nasty inelastic demand for silver and it has zero supply side answers, except very high prices that lead to retail silver owners cashing out. Central banks would have to print precisely three metric shit-tons of fiat currency to induce silver bugs to sell. I know some of them—they make rabid dogs seem like puppies—and they are adamant: no selling until the ratio reverts to 15:1. Until they get their ring there will be no huggy or kissy.
Another fundamental we ought mention are draconian export controls on bullion instituted by the Chinese central government. Note: China is the world’s leading consumer of industrial silver. It also has an extremely long and complex history using silver as its monetary base. Much, much less so with gold. If you want a book recommendation on the subject just ask.
Then there is our southern neighbor, Mexico, our number one supplier of silver to this day, is considering retaliatory tariffs on silver for United States because of Trumpian fuckery. Much fuckery there and I applaud Mexico’s president for sticking to her guns.
Consider as well dollar weakness and potential QE. Both point directly towards higher silver prices. Add to all this a wildcard fundamental hiding in plain sight: the magic price point that compels the addition of physical silver to the portfolios of Central, Commercial and Investment Banks around the globe. It’s a simple equation: storage costs fall as prices rise. At $40 an ounce there is no reason to hold silver in a vault. At $170? We’re getting close. At $300? Bingo! You’re goddamned right there is a reason. Such a development would spike demand by an order of magnitude as it would reinforce the powerful upward trend already in place. This is the dynamic that could at long last force the reversion of the gold to silver ratio back towards 15:1. Gold’s present price of $5000 an ounce implies a target of $333 per ounce of silver. In my opinion, and this is not investment advice, this is where we are heading. Right now. It may take 18-24 months, but it’s going to happen.
These are just some of the fundamentals. I can’t cover them all. If you think I missed an important one, add it in the comments, please.
Let’s talk about some technicals followed by sentiment.
Late in 2025 silver achieved a triple top breakout. Triple top breakouts are very rare in any asset. But when they occur they are an extremely bullish signal, conveying that there is no predictable upper limit to the assets potential advance. This is silver today. Silver hit $50 in October, backed down to the low $40s, made another run in November to try and overcome $50 and didn’t make it. But then in late November and all of December during the Santa Claus Rally silver blew through $50 and ended the year at $72.05. Market observers I respect, all unsure but all equally intuitive, explained the triple top breakout as the result of a handful of factors coalescing in the short term, such as Chinese export control tightening, high retail demand, Mexico threatening tariffs on silver, and a short squeeze on the Comex. This confluence makes sense to me.
The underlying technicals that lead to triple top breakouts are usually either a short squeeze or a gamma squeeze. In late 2025 silver underwent a short squeeze. But in early 2026 led by a bank frenzy to cover what were in essence some very large naked shorts in the SLV and PSLV ETFs, coupled by a bizarre change in margin requirements—from a straight percentage to one based on the notional value of the contracts (I mean, WTF?)—backfired spectacularly, leading to the rarest of rare technical developments, one I’ve only seen once in my life as an investor—the mythical unicorn, the gamma squeeze.
In short, a gamma squeeze “is a rapid [asset] price surge from [futures] trading, where heavy retail (read: investment banks, spk) call buying forces market makers to buy shares to hedge risk, creating a feedback loop that pushes the price even higher.” A gamma squeeze can be viewed as one powerful force intent on creating and sustaining an upwardly positive feedback loop “[where the] cycle escalates because as the [asset] price rises, market makers must buy more [futures or the hard asset] to cover their increasing delta risk, driving prices up further and attracting more call buying, often in low-float, i.e. low-volume [assets].” Silver is now, for all intents and purposes, in a virtuous rising feedback loop, leading to higher prices which force more buying to cover expected demand thus leading to higher prices. When it comes to shorting a gamma squeeze FAFO. You will lose your ass.
These developments all serve to reinforce my call late last year that silver is not on a cyclical bull run. It is engaged in a secular bull stampede.
Cyclical trends last between 3-5 years, represent basic price discovery and a market composed of two healthy opposing forces: supply and demand. Cyclical bull or bear runs tend to predict the business cycle as well, serving as a leading economic indicator.
Secular trends, however, are a different animal altogether. Like Earl Campbell, that human rhinoceros, running over middle linebackers like they were children, a secular bull or bear is powerful, based on large scale structural economic rearrangements, demographic realignments, and/or crushing but ‘unforeseeable’ externalities—like the Arab Oil Embargo of the 1970s or losing wars like Vietnam, Iraq, and Afghanistan——that leave robust long-term consequences, like inflation, busted supply chains, broken armies, revanchist politicians, rising internal violence and other variables, in their wake. Secular bulls or bears last decades, some as long as 40 years.
Now a word on sentiment. Sentiment is a fickle bitch, much like the muse. Nothing can bankrupt an investor with more rapidity and totality than a sudden turn in sentiment. Two forces, ultimately rule investing: fear and greed. Beware the latter and respect the former, said my mentor at Morgan Stanley.
Right now silver is flying under the radar. Everyone is talking about gold. It’s gold, why the hell not? Gold makes people febrile. I’ve literally seen it with my own eyes. I’ve felt my forehead warm up and my fingers get a sudden subtle itch when I’ve held certain gold coins in my life. I had a Julius Caesar gold aureus in the palm of my hand once. Wow! So I get why silver remains the red headed step-child of the metals market. And the lack of commentary on silver reinforces my conviction of silver’s inevitable rise to $250-$300. As I used to say when I worked on Wall Street, “buy the rumor, sell the news.”
It worked every time. And right now silver is hardly a whisper much less a rumor.
So, realistically at what price would I begin selling my silver?
$275-$300 an ounce.
I’m patient.
And certain.
But aren’t most of those contracts never expecting to take physical delivery? Just gambling, er excuse me, investment hedging?
Or is the problem that given that Comex price is under the real, that all those contracts *want* to be exercised in delivery so they can arbitrage to China (who has a real price?)
I’ve always found futures confusing, thanks for any help.
Answer is complex by I’ll do my best to simplify. I’m going to base my answer on much of what Dario says in this video, so it might be worth a watch for anyone interested in how the contracts are viewed at the Comex versus SHFE.
All contracts traded on Comex are designed to take physical delivery. Understood? They are designed for industrial hedging so corporations can smooth out their expenses on needed commodities. That said, under Clinton and accelerating under Bush, the CTFC made a whole raft of rule changes that changed the PRIME AIM of the commodities markets from honest price discovery into something resembling a casino. I’ll spare you the details, but I was in the business at the time and I still can’t believe what they did.
As for arbitraging Comex prices over those on the SHFE. Rumor is someone tried it–a Chinese trader–and got hammered hard. Main reason: the cost of shipping and arranging for delivery, even if, as rumored, he made the trade when there was a $20 USD premium at SHFE, and all the subsequent logistics of physical delivery, added up rather too quickly. But as a former arbitrage clerk myself, kudos to the brother for trying. Fortune does favor the bold. Until she doesn’t: fickle bitch she is.
Futures are identical to stock options: calls-are the expectation a stock will rise-and puts are the opposite. On the commodities exchanges you buy long exepcting the price to go up, but your buying price of the long give you the right to exercise it at that price not its current high, if it did go up. Buying short means you expect the commodity to go lower. You can also combine the two into a hedging bridge of sorts, where you give yourself the right to exercise the contracts within a range. This is what hedging truly is. Not hedgefund bullshit. I used to know the head commodities trader at Pioneer Flour Mills here in San Antonio and how he explained it was elegant. One of the reasons I went into the business.
I’ve never mentioned this before but what made me leave was a long time ago I was sitting first class next to a former international business man. He asked most of the questions, but the upshot is I was sitting next to John Perkins and the questions he asked me opened my eyes to what I was truly participating in. It was only a matter of time til I left.
The US commodities exchanges were originally established, and this was hammered into me when I took my commodities trader’s exam, for price discovery and sanctity of the market mechanism. Used to be you had to own or expect to take delivery of the underlying commodity you were hedging/selling/buying. Now you don’t.
At the SHFE the rules are much similar to the pre-Clinton era rule changes. And Chinese regulators are hardcore. They’ve shutdown at least 25 trading groups accounts last week alone for breaking the rules, which Dario explains in his video.
Hope this helped.