Silver Not Done With Run Up

A silver dollar, from back when America used real money.

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People have been asking me if silver is about done with its big run up. It has gained about 70% since August. In terms of price, its gone from $18 to $28 or $29. I don't think its done either. Here's why...

JP Morgan has been holding massive "short" positions in the silver market which have artificially lowered the price. That one bank once held 40% of all COMEX shorts on silver according to many sources. Recently, they have tried to unwind from these positions. The rise in silver price means they are likely taking a savage beating on them. It could not happen to a nicer bunch of market manipulators. We have very little information, but what little we have indicates that they are only 1/3 of the way done with the unwinding. This unwinding will allow silver to go up to its true, unmanipulated, price. It should continue to gain there over time, but more on par with the dollar's decline rather than racing ahead of it for real gains.

If, and there are always ifs, the remaining unwinds have a proportional effect as the unwinds so far then silver should see roughly another $21 in gains before its rate of gain levels off. How fast will this be? We don't know, but it took from August till December to unload the first third. If they continue the same pace, we are looking at $50 silver by the end of 2011.

That's a lot of ifs, and the future does not always continue past trends, but its how I'm betting.