Silver’s Brutal Crash Sets Up Its Biggest Rally in 25 Years, Ed Steer Says
Ed Steer, the longtime precious metals analyst behind the Ed Steer Gold and Silver Digest, told Liberty and Finance that the latest silver selloff is unlike anything he has seen in a quarter century. Silver plunged from around $120 to the $50 area, yet the biggest commercial traders on the COMEX have barely reduced their massive short positions. “Despite the significant price drops we have seen, we have not seen any short covering by the top eight trading firms to match,” Steer said. “This is the first time in the cycle of repeated swings over the past quarter century that we have not seen the Big Eight traders covering massive amounts of their short positions.”
Steer believes this unusual behavior means the current decline is not a normal market driven correction. “This time it’s completely different,” he stated. “We are simply following the path dictated to us by these eight major traders, but sooner or later the markets will recover and rise to new record levels.” He added that he is more optimistic now than ever, especially because managed money traders appear to be approaching a rare net short position in silver.
That setup has occurred only twice before in the last 25 years and has previously preceded powerful rallies. “I’m just sitting here waiting for this thing to explode loudly, and one day it will definitely happen,” Steer said.
The veteran analyst framed the entire episode against a longer backdrop of price management. He noted that since the United States abandoned the gold standard in 1971, major central banks and financial institutions have worked to suppress precious metals prices through paper markets. That scheme, he argued, is nearing its end as physical demand from countries such as China, India, and Russia continues to rise and as no major fiat currency has ever held its purchasing power over decades.
Steer pointed out that when silver and gold were near recent highs the top eight short holders were sitting on paper losses in the range of $78 to $80 billion. He also highlighted hundreds of thousands of gold call options with strikes reaching as high as $20,000, a structure that could amplify any sudden move higher if a major financial, monetary, or geopolitical event occurs.
Steer invoked the old Rothschild maxim about buying when there is blood in the streets, even if it is your own, and said he was personally buying mining stocks just minutes before the interview because prices looked unusually cheap.
He expects both gold and silver to eventually break to new highs once the decades long suppression effort can no longer contain physical demand and the concentrated short positions are forced to unwind.
In his view the brutal crash has created the conditions for the largest silver advance of the past 25 years.
