I have rarely seen a weekend where the social media has been so busy focusing on silver. The white metal has now rallied by more than 16% since last Wednesday when the rWallStreetBets group on Reddit began focusing on silver as another potential candidate for a major short squeeze. The reason being the expected existence of a massive bullion bank short in both gold and silver futures that for years and allegedly supported by central banks has helped keep the price down. This due to the narrative that rising gold and silver prices would reflect an increasing lack of confidence in the financial system and specifically in the dollar. This driving a belief held by many, that the big banks work with the Federal Reserve in maintaining confidence in the dollar and the system at large by suppressing the price of precious metals.
I believe this is a false narrative but whether or not it is true does not matter in the short term. The belief that it is possible to push the market has taken hold and so far today the COMEX silver future trades up more than 10% and in the process it has taken out the high from last August. Momentum, especially in silver can drive the market very far within a short period of time. Last year silver experienced three bear market moves of 39, 21 and 25 percent and three bull market moves of 156, 23 and 29 percent. With this in mind silver could easily extend its current gains, especially if the hedge funds start joining the bid, especially following the break $28/oz, the high from early January.
The long term chart is pointing to some resistance on spot silver at $30.5/oz, the 50% retracement of the 2011 to 2020 sell-off. Above that level, the next major level of resistance is not before $35/oz. Failure to forge higher, however could see a dramatic turnaround with the market then focusing on closing the gap to Friday's high at $27.65/oz.