We all know that over at least the last few years, there has been a pretty obvious pattern to how gold and silver have traded. Gold usually leads rallies and after a lag silver joins in and near the end silver goes on to outperform in percentage terms.

When you get a little more granular, for much of those moves the futures traders on the Comex almost always play one metal vs. the other. The fact that the large bullion banks have mostly been short silver contracts as a longstanding positon, with the degree of their short position fluctuating inversely to what they are doing with gold. They hedge their main short silver positions by being long gold almost all the time.

When it finally comes time for silver to catch up and outperform on the upside, for the brief but explosive rallies, they reduce some of their long gold positions and plow that capital into covering some of their silver shorts and going long additional silver contracts. This is where the wash, rinse, repeat mantra comes in. I believe that is where we now are, and partly explains my call yesterday where I said the GSR topped at 92+.

So having had the huge rally in gold the last few months with it approaching the round number of $3000 per ounce, and being technically overbought, it is time for the silver catch up and outperform phase to play out. Silver is set up to pop and run above $35 to a new high in either the high 30’s or low 40’s, while gold should take out $3000 but not go too far above for now.

The twist could be that gold barely moves higher, or even drifts down after a $3000 print, with all the media hoopla that would take place, while silver has it’s surge. It would allow the bullion banksters to continue their playbook of shorting one metal while being long the other, just this time the opposite of the usual long term positioning of letting gold go higher while capping and pushing down silver.