Youtrading UK
Português Español русский
Register Login
  • Markets
  • Charts
  • Economic Calendar
  • World
  • Economy
  • Insights
  • About Us
No Result
View All Result
Youtrading UK
  • Markets
  • Charts
  • Economic Calendar
  • World
  • Economy
  • Insights
  • About Us
No Result
View All Result
Youtrading UK
No Result
View All Result

Silver is creating an accumulation base, after August’s flash crash

by Neville Hornsey
31 August 2021
in Commodities
0
Silver is creating an accumulation base, after August’s flash crash

Photo by Sid Suratia.

326
SHARES
8.9k
VIEWS
Share on FacebookShare on TwitterShare on WhatsApp

Commodity Analysis – Silver

The markets can go up, down and sideways and currently the silver chart shows that the precious metal is in a sideways range between the $21.60 and $30 price levels. When a market goes into a corrective mode, it can be in price or through time and for the silver market it has mainly been across the x-axis rather than the y-axis of your charts.

In the mainstream media we often hear stories about manipulation, whether it be from the cohort of retail traders on Wall St. Bets pushing meme stocks, or their preferred broker (jokes) Robinhood who sell flow data to funds like Citadel. There was talk this year that the Reddit forums could be pushing the price of spot silver higher due to the well documented short paper interest and lack of physical supply. What hasn’t been mentioned in much detail across CNBC is what caused the precious metals markets to flash crash earlier this month at the start of trading on the 9th of August.

A few months earlier the media and market watchers had been talking up the impending Basel 3 regulations that were going to reclassify physical metals from a Tier-3 risky asset to a Tier 1 zero-risk asset that European banks could hold as part of their Net Stable Funding Ratio (NSFR).

NSFR’s wider objective, within the Capital Requirements Regulation (CRR) II framework, is to oblige banks to finance long-term assets with long-term money in order to avoid the liquidity failures seen during the 2007/08 global financial crisis. For precious metals, NSFR will require 85% of Required Stable Funding (RSF) to be held against the financing and the clearing and settlement of precious metals transactions.

Un-allocated or paper metal contracts would be deemed riskier assets and the banks would need to hold more reserves to keep them on the books within the regulatory guidelines. As stated above, the banks would need to hold 85% of the value of un-allocated contracts in zero-risk assets to back up the paper.

The London Bullion Market Association (LBMA) successfully negotiated out of having to be fully compliant but should be moving towards full compliance by the end of this year.

Because there are a lot of unallocated positions which make up the futures markets, it is reasonable to suspect that a co-ordinated effort to move prices lower was done during this holiday markets for some institutions to square their books as they move towards regulatory compliance. The effect was to instigate covering of unallocated by buying physical, but to buy physical you need someone to sell back to you.

During the flash crash early in August there would have been an opportunity for such an act as institutional traders could have Exchanged Futures for Physical which is known as EFP. – EFP is a backdoor for paper trades to get converted to physical contracts, where you can lock in a physical price through exchanging at a paper price. 

Those traders that went into the weekend of the 7th of August long gold and un-hedged probably puked their position as the price dropped like a stone, and as prices accelerated lower, speculators would have opened up more shorts pushing prices even lower meaning you don’t need to use a lot of contracts to move the market in a major way, you just need to trigger a speculators algo that chases momentum.

All of this with the intention of buying the physical contracts in the liquidity event as institutions got the price they wanted through the EFP. The bids would have been placed at the price the weak hands of the physical (spot price) would have had the majority of their stops. The overall result would be those looking to get rid of unallocated contracts would have raided those with physical positions and made them sell the physical to them. A.K.A a switcheroo!

See real-time quotes provided by our partner.

What we now can deduct from this activity is that the lows seen at the beginning of August are more than likely the base level for everything to build upon until the end of the year. If this is true, the lows of 2020 are the inception of the current rally, the swing high from the beginning of 2021 is the anchor and the August flash crash low is the pull-back, which if you use in conjunction with a fib extension tool, the next levels for take profit are $40-$41/oz for the measured move then 161.8% extension comes in at $53/oz.

Even if the rally stalls at the first set of fib extensions that still brings in $31-$36/oz which is 3x the lows of 2020.

In the commitment of traders reports we are also seeing that commercial reporters are decreasing their short positions, which in March 2020 led to the start of the rise in silver from $12/oz to $30/oz. There are also mentions of refiners who make up part of the commercial reporting cohort, buying back deliverable silver contracts which are running at a discount to spot, to then redistribute to buyers and fulfil orders at a premium, because the physical market is so tight and there is a high demand.

US dollars has been in the safe haven flows as worries around the fed tightening were abundant since the Hawkish June FOMC. The silver to greenback ratio in safe haven flows have equalled each other out as prices have gone sideways in the XAGUSD but gold has had a lot of flows during these uncertain times.

With the uncertainty in the markets around transitory inflation, COVID-19 delta variant disruptions and the “will they, won’t they” raise rates from Fed watchers, gold is likely to receive safe haven flows as is the US dollar for longer. That has been the trend so far at least. When we know more about what the Fed are planning with monetary policy, we should eventually move to a US dollar bear trend resumption and the spot prices for silver and gold should once again rise.

See real-time quotes provided by our partner.

The US dollar index daily chart is showing that the 50-period exponential average and a previous swing low are currently acting as technical support. Watching for a break lower than today’s low price or better still below the daily 200 ema in blue, would be a good continuation trade for silver longs. Whilst the US dollar is receiving favourable flows to the long side, the silver traders should be waiting for the XAGUSD to come down to a support level to buy the dips.

Gold could be at $2300-$2500 on the Comex exchange as the likes of LBMA become physically backed by end of 2021 beginning of 2022 as per Basel 3 requirements. As the LBMA move from unallocated to allocated contracts the demand for physical will push prices higher. Two more delivery dates to keep an eye on are the October 2021 and December 2021 with the latter being a very busy month.

If the gold spot price were to rise, the 10-year trend for the Gold/Silver ratio could be 100:1 which would be silver remaining at current prices, but realistically 75:1 would have silver trading above $30/oz by the end of the year. Many silver investors believe the real (unmanipulated ratio) should be 16:1, which is why so many silver stackers get excited about the end of unallocated markets and rising precious metal prices. At a ratio of 16:1 and gold prices around $2300 by the end of the year, silver spot could be $143/oz which would be more than 10x the price in March 2020.

See real-time quotes provided by our partner.

$23/oz is a good line in the sand with every move down to that level being bought up in August. Obviously if we get above the current range highs for August and make a clear break, retest, and set up for a continuation higher that would also be bullish for the coming months. For now, my expectation is for this current channel to be tested a few more times before it is released and that will no doubt come with some market turmoil that puts most retail investors off. Keep an eye on the Sunday raids as these events can be good buying opportunities.

Tags: GOLDSilverUS DOLLAR INDEX
Previous Post

Stocks continued to glean support in wake of last week’s dovish Powell

Next Post

US dollar index bounces off support but the US equities markets dip from ATHs

Next Post
US dollar action muted during Bank Holiday Monday

US dollar index bounces off support but the US equities markets dip from ATHs

CALL US

Categories
  • Commodities
  • Economy
  • Forex
  • Index
  • Insights
  • Markets
  • Opening of the Week
  • Sem categoria
  • Stocks
  • World

Site Map

  • Home
  • Markets
  • Charts
  • Economic Calendar
  • World
  • Economy
  • Insights
  • About Us
Português Español русский

A comprehensive website for traders, both experienced and new! Checkout our content and learn how to invest and speculate in the markets using margin traded products. Our team of educators has extensive experience and is here to help. Enjoy!

Follow us on social media

Risk Warning

All financial products traded on margin carry a high degree of risk to your capital. They are not suited to all investors, please ensure that you fully understand the risks involved, and seek independent advice if necessary.

All Rights Reserved - YouTrading UK 2020

Privacy Policy and Terms and Conditions
  • Home
  • My Academy
    • Register Now
    • Login
  • Markets
    • Opening of the Week
    • Stocks
    • Commodities
    • Forex
    • Index
  • Charts
  • Economic Calendar
  • Economy
  • World
  • Insights
  • About Us
No Result
View All Result

© 2020 YouTrading UK - Leaders in Trader Training.

We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
Do not sell my personal information.
Cookie settingsACCEPT
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
__cfduid1 monthThe cookie is used by cdn services like CloudFare to identify individual clients behind a shared IP address and apply security settings on a per-client basis. It does not correspond to any user ID in the web application and does not store any personally identifiable information.
_wpfuuid11 yearsThis cookie is used by the WPForms WordPress plugin. The cookie is used to allows the paid version of the plugin to connect entries by the same user and is used for some additional features like the Form Abandonment addon.
cf_use_obThis cookie is set by the provider Cloudflare content delivery network. This cookie is used for determining whether it should continue serving "Always Online" until the cookie expires.
cookielawinfo-checbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-advertisement1 yearThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Advertisement".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
CookieDurationDescription
YSCsessionThis cookies is set by Youtube and is used to track the views of embedded videos.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
CookieDurationDescription
_ga2 yearsThis cookie is installed by Google Analytics. The cookie is used to calculate visitor, session, campaign data and keep track of site usage for the site's analytics report. The cookies store information anonymously and assign a randomly generated number to identify unique visitors.
_gid1 dayThis cookie is installed by Google Analytics. The cookie is used to store information of how visitors use a website and helps in creating an analytics report of how the website is doing. The data collected including the number visitors, the source where they have come from, and the pages visted in an anonymous form.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
CookieDurationDescription
_fbp3 monthsThis cookie is set by Facebook to deliver advertisement when they are on Facebook or a digital platform powered by Facebook advertising after visiting this website.
fr3 monthsThe cookie is set by Facebook to show relevant advertisments to the users and measure and improve the advertisements. The cookie also tracks the behavior of the user across the web on sites that have Facebook pixel or Facebook social plugin.
IDE1 year 24 daysUsed by Google DoubleClick and stores information about how the user uses the website and any other advertisement before visiting the website. This is used to present users with ads that are relevant to them according to the user profile.
test_cookie15 minutesThis cookie is set by doubleclick.net. The purpose of the cookie is to determine if the user's browser supports cookies.
VISITOR_INFO1_LIVE5 months 27 daysThis cookie is set by Youtube. Used to track the information of the embedded YouTube videos on a website.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
CookieDurationDescription
_gat_UA-42160853-21 minuteNo description
cf_ob_infoNo description
CONSENT16 years 8 months 3 days 6 hours 2 minutesNo description
SAVE & ACCEPT
Powered by CookieYes Logo