(MENAFN- Daily Forex)

• Silver surged sharply again on Monday as short sellers were squeezed and demand for physical metal intensified.
• While momentum points higher toward $60, extreme volatility and overstretched conditions make chasing the rally hazardous without disciplined sizing and value entries.

Silver has screamed to the upside yet again during the trading session on Monday, as we continue to see the short sellers get punished, and there is a run towards physical silver. Whether or not that actually ends up being sustainable, I think, is a completely different question, but as things stand right now, the paper markets, the futures markets, for example, are screaming to the upside. Short-term pullbacks I think, open up the possibility of buying opportunities, especially near the $55 level. Ultimately, if we do continue like this, we will test $60 an ounce, which, of course, is a major victory for the bulls. I have no interest in shorting silver, but I also recognize a market that is running away, and it can be very dangerous. With this, I think you have to look at the fact that volume has picked up. And once you see volume starting to drop again, that is a very bad sign.

Runaway Momentum and Systemic Risk Concerns

All things being equal, though, this is a market that's very dangerous to short, and I would not be doing so, but it's extraordinarily dangerous to chase. Since the 25th of November, we're up about 21% in silver, and that's not normal. If this continues, it will cause major damage to the financial system, and then you'll see everything implode. I don't expect that to be the case, but. You never know, it is a fear out there as large firms catch themselves on the wrong side of the trade, you'll see massive liquidation and blow-ups.

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So, I think volatility continues to be a major issue here. But if you want to get long of silver, which you certainly can't get short, you need a little bit of value. You can't just chase a move like this and expect good things to happen. The position sizing of a silver trade will be crucial as well. So, pay close attention to that. Ultimately, I think you have to look at this as a market that has just gone insane. These are the types of markets that you will see retail traders make a ton of money only to give it back. Be careful.

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