Silver Sentiment Is So Bad, It’s Good
2025.01.24 11:58
Investors’ extreme bearish sentiment on is ironically bullish from a contrarian perspective.
I strongly believe in applying contrarian logic to analyze financial markets and investments. The core idea behind this approach is that “the crowd” or so-called “dumb money” tends to be wrong more often than it is right, especially at major market turning points.
At market peaks, they become excessively bullish, and at market bottoms, overly bearish. Consequently, adopting a strategy that goes against the crowd often proves successful—this is precisely the approach taken by insiders or “smart money.”
Currently, the crowd’s sentiment toward silver is deeply bearish, which should be music to the ears of contrarians and silver bulls alike.
Contrarian investors use various methods for analyzing financial markets, often focusing on gauging market sentiment through surveys, polls, or patterns of bullish and bearish trading behavior.
One effective approach is examining short interest—the number of shares sold short and yet to be covered for a particular financial instrument.
When short interest is unusually high, for example, it signals that the crowd has adopted an excessively bearish stance. This often indicates a strong likelihood that a market bottom is near, paving the way for a bullish reversal.
An analysis of the popular iShares Silver ETF (ticker symbol: SLV) reveals a significant spike in short interest immediately following the U.S. presidential election, reaching approximately 47 million shares—the highest level since August 2022 and notably elevated compared to much of the past 15 years.
This surge is also reflected in the short interest ratio, which divides short interest by the stock’s average daily trading volume. The ratio climbed to 3, an unusually high level for this ETF, signaling extreme bearish sentiment.
The spike in short interest in the iShares Silver ETF aligns with what I’ve observed through managing a large social media presence and this newsletter: retail investors have grown increasingly frustrated and disinterested in silver following the U.S. presidential election, marking a dramatic shift in sentiment toward precious metals.
However, I firmly believe that the future is bright for both and silver. I encourage everyone to remain patient and steadfast.
The current wave of extreme bearish sentiment in silver is setting the stage for a short squeeze, where bearish investors are forced to cover their short positions, driving prices sharply higher.
One reason for the pessimistic sentiment toward silver since the election is the Trump administration’s focus on supporting cryptocurrencies while largely ignoring precious metals—a shortsighted and foolish approach, in my view.
Consequently, nearly every cryptocurrency, from to , has soared in value since the election, creating eye-popping gains—at least on paper—for many speculators.
Highlighting the current climate of reckless speculation, “Fartcoin”—yes, you read that correctly—has astonishingly skyrocketed by 18,500% since its launch on October 21st.
This phenomenon has made prudent investing appear laughable to many retail investors who might otherwise have shown greater interest in precious metals, particularly silver.
Amid the frenzy surrounding the current crypto mania, it’s important to recognize that many retail investors are falling into the classic trap: becoming overly bullish on flimsy assets that have already experienced significant price increases, a behavior that typically results in serious losses.
Additionally, much of the cryptocurrency space is gripped in a massive speculative bubble, with most cryptocurrencies trading at prices far exceeding their intrinsic value.
The current infatuation with crypto, combined with the neglect of gold and silver, is deeply misguided. In my view, investors would be wise to take the opposite approach.
From a technical standpoint, silver continues to trade within the same consolidation pattern it has been stuck in since the election. This lack of movement has contributed to investor boredom, as many tend to lose interest when an asset is quietly “coiling” like a spring, preparing for its next significant move.
That’s exactly how I view silver right now. This is not the time to lose focus but rather to recognize the great opportunity forming. I’m watching closely for silver to break out of its current consolidation pattern, which I believe will signal the start of a substantial rally.
I’ve developed an indicator to help confirm price movements in silver, called the Synthetic Silver Price Index (SSPI). This index averages the prices of and gold, with copper adjusted by a factor of 540 to prevent gold from disproportionately influencing the index.
The SSPI closely mirrors silver’s price movement, even though silver itself is not an input. I’m encouraged to see that the SSPI recently bounced off its uptrend line, signaling underlying strength.
The SSPI is rapidly approaching the 2,600–2,640 resistance zone, which has served as a key ceiling for much of the past year. A decisive close above this zone would signal a strong bullish breakout, indicating a likely upward move for silver itself.
Gold, one of the two components of the Synthetic Silver Price Index, has recently broken out of a triangle pattern, signaling the start of the next phase in its bull market.
This breakout is also bullish for silver, given gold’s strong influence on silver’s price movements.
, the other component of the Synthetic Silver Price Index, is also showing positive signs as it recently rebounded off the $4 support level, as I had expected. It is currently trading within a triangle pattern, and a breakout to the upside should provide a strong tailwind for silver.
Copper demand is projected to surge over the coming decades and why this trend is also likely to be bullish for silver.
I’m also keeping an eye on the , which has been on a relentless surge since October. Its strength has exerted downward pressure on commodities like gold, silver, and copper. A major driver of this rally has been anticipation of President Trump’s protectionist policies.
However, the index experienced a sharp pullback on inauguration day in a classic “sell the news” reaction. I’m closely monitoring the 107.5 support level—if this level is breached, it would signal a deeper correction in the Dollar Index, which would be bullish for commodities.
In summary, retail investors are overwhelmingly bearish on silver at the moment, distracted by the allure of speculative cryptocurrencies and tech stocks.
However, for contrarian investors—the “smart money”—this widespread negativity is a strong indicator that silver’s best days are still ahead. Staying committed to sound money assets like gold and silver requires faith and vision, especially while the crowd chases fleeting trends in assets with no historical track record as reliable stores of value.
I am confident that when the world inevitably returns its focus to fundamentals, these timeless assets will richly reward those who remain steadfast in their belief.
Republished on Money Metals Exchange.
