An epic gold and silver set up

A sad reality for owners of physical gold and silver is the price is driven more by ‘paper’ speculators as they sell and buy unreal amounts, rarely exchanging an ounce of physical metal.  But right now these speculators may just have set up and extraordinary situation within the context of a world dealing with the end of QE, Euro recession, wars, ebola, etc

The 2 graphs below show quite clearly the repeated actions of both markets after heavy short selling.  You can see the incredible levels of shorting in both gold and silver and how strong covering rallies have followed each of the shorting peaks of the past. (multiply ETF share price by about 10 to get equivalent real price)

In this regard analyst Adam Hamilton had this to say:

“The bottom line is the recent extreme gold and silver futures shorting looks to have peaked. And extreme shorting is always followed by frantic short covering of these highly-leveraged bets. Speculators who bet wrong by selling low in extreme bearishness rush to buy to close those losing positions. This process feeds on itself and attracts in new long-side buyers, always resulting in large and impressive gold uplegs.

And this time around with the Fed-spawned stock market levitation finally rolling over, the precious metals' upside potential is extraordinary. Gold and silver are on the verge of regaining favor, as investors once again remember prudent portfolio diversification is not only wise but essential. As capital floods back into this left-for-dead dirt-cheap asset class, led by stock investors, the sky is the limit for precious metals.”