Going Down!?
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Permalink Reply by Buffalo on -
Definitely not an expert, but I have been thinking we were due for a 10% or so correction in silver for a while (couple of weeks), but for different reasons than I think has actually been the case. The OBL situation might have had some impact, since the immediate market response seemed to be that global risks had been lowered as a result. Maybe, maybe not, but sometimes perceptions move markets before results are actually seen. Economic, debt, and currency issues have also played some part although I don't believe for as much of the correction as I had expected those factors would. A big part seems to be margin requirement changes by the CME Group/COMEX in the last week. A friend of mine on a PM forum posted this morning he thinks the correction could bottom at $38 +/- a little and he could very well be right. I didn't expect to see anything lower than $41-42, but trend does seem like it could go closer to what he is guessing.
IMO, silver at $38 would be very attractive to buy, so close to that is kind of what I am looking for right now. Might never get there, lol. None of this correction changes my longer term view, I still think silver will go much higher this year than we have seen so far and the $70 range is not out of the question. Before the end of the year, physical silver supply versus consumption will have a much larger role to play in pricing than it does right now in my opinion.
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Permalink Reply by Buffalo on
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One other comment and it remains to be seen how it plays out, but we seem to have also seen a sudden shift in market sentiment, and increasing concerns about volatility and just how self-sustaining our economic "recovery" really is. Already seeing statements by asset managers that we might have already seen the 2011 US stock market highs, the CBOE volatility index VIX is up more than 17% in just the last 4 sessions, several recent economic reports indicating a slowing to maybe 2% GDP growth if that, employment growth tapering off, etc. We might find out soon just how much the Fed's money creation really has been propping everything up, and just how convinced Bernanke really was when he said in effect he doubted the benefits of more new QE outweighed the inflation risks. If the economy shows serious signs of tanking again, I think the Fed will likely fire the printing presses right back up.
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Permalink Reply by Indentured Servant on -
Don't forget it went up $10 in as many days. Have banks suddenly cleared out all the CDO's/CDS's? Has the housing market recovered? Is real unemployment getting better? Is the debt/deficit reduced? Has the FED quit printing money? Are foods, goods and services getting cheaper? Has JPM/HSBC covered all of their naked shorts in silver? Will the ever be able to?
I guess it depends on why you were buying silver in the first place. Me? I'm in it for the long term. Not to get rich, but to protect what I have. The $$$ is toast! I'm buying with both fists. Physical only! Silver is on sale right now.
YMMV,
Bill
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Permalink Reply by Indentured Servant on
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I should add that IMO and that of many others, JPM/HSBC have been selling more silver on paper than actually exists. Some say that paper exceeds physical by a billion ounces or more. Every month when the contracts come due they pull out the stops to bring the price down thereby scaring people out of their positions. If a big investor ever decides to take actual delivery of physical and the banks cannot cover, the game will be over and those holding physical will become rich. However, very high inflation or maybe even hyperinflation will temper the sense of being rich when milk is $30 a gallon.
Volatility will rule the markets for some time to come. It will not be for the faint of heart. As with anything in life, never invest more than you are willing to lose. After many long discussions, my wife and I have recently decided we are willing to lose just about everything so we have secured "plan B" and went all in or as I call it "stupid in". It's quite exhilarating but never for a single second during the last five years have I considered selling a single ounce of silver. We just keep stacking it up.
Bill
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Permalink Reply by Indentured Servant on
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One more thing then I'm off to bed. Go check out the 6 month and 1 year dollar charts shown here. Pathetic huh? I can't find anybody with a logical explanation that gives me hope this trend will reverse......ever.
Bill
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Permalink Reply by Buffalo on
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The US dollar a few days ago was also at the lowest against the inflation adjusted version of the Fed's broad trade-weighted index since the end of the Bretton Woods sysyem in 1973. The Fed and the government's repeated assurances they still believe in the "strong dollar" policy doesn't seem to match reality. Geithner today suggested a US borrowing limit increase of $2 trillion to keep the US from defaulting before the 2012 elections. That sounds like more of the same to me, borrow and spend, print more as desired. Rinse, lather, repeat, and I think the logical outcome is the same we have been seeing, the dollar losing more value.
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Permalink Reply by Steve on -
Well guys, I really enjoy your insight. But bottom line, our debt is still there, the dollar is losing it's value...so yes, I see a silver price below $40 as a short term thing and a buying opportunity.
If you recall, silver started the year at around $30.90, then dropped back to around $26...a great opportunity I missed. I really think that a year from now we may look back as say "remember back in early May 2011, when silver dropped below $40, dang, I wish I would of loaded up then." And I think 2 or 3 years from now, we will be saying, "dang, remember when silver was under a $100 and i could/should of bought it then".
I think the $50 barrier for silver is like the $1000 barrier was for gold...once it's broken, it won't go back!!
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Permalink Reply by Buffalo on
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Here is a recap of the 4 most recent margin increases, including the one planned for May 9th. Matching this against the recent silver charts clearly shows what the effects have been. I think the planned May 9th increase could push short term price down to around $34. The question now might be does the CME/Comex have a target price in mind, and will they keep raising margins until it drops to that price? If so, we could see silver below $30 short term, pressure from all this on gold maybe not having as much impact by itself but maybe dropping prices to $1480 or so short term.
Initial margins are what traders put up, maintenance margins are what hedgers put up, and these numbers are per 1 contract of 5,000 ounces. Here is a recap of the 4 most recent ones in this round of margin increases:
Date Initial Maintenance
4/27 $11,745 raised to $12,825 $8,700 raised to $9,500
4/29 $12,825 raised to $14,513 $9,500 raised to $10,750
5/3 $14,513 raised to $16,200 $10,750 raised to $12,000
5/9 $16,200 will be raised to $21,600 $12,000 will be raised to $16,000
These increases have almost doubled margin requirements in a very short time, apparently scaring off a lot of people especially the ones who bought into the silver rally late and probably quite a few who maybe had more on margin than they should have.
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Permalink Reply by Buffalo on
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Gold was around $1515 when I wrote the above, but has already bounced off of $1480 since, so maybe impact there will be bigger than I thought.
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Permalink Reply by True Money on -
All of this is stemming from an agenda by Obama to get re-elected. He is seeking public appeal with the death of Bin Laden. He is hoping that this will stimulate the markets and give the illusion of a recovering market. What he needs to do is print $15 Trillion, pay off the nation's debt with this money, and discontinue the dollar as our monetary system. Once this happens, all VALID U.S. Citizens will be allowed a period of 6 months to 1 year to convert all monetary funds to the new sound and stable monetary system that will most probably be backed by commodities such as gold and silver. I can definitely tell you that I absolutely have had no problem the last few years handing over $2 to someone for a silver quarter that they pull out of a vending machine in change. Most people have absolutely no clue about what is happening right now. They think they are getting a super deal when I give them 8 times face value for a silver quarter minted before 1965. I started this back when silver was trading at $4 per ounce. As gold and silver continue to rise (YES - they are still on a rising trend even as I write this) at much higher rates than the stock market, the dollar continues to weaken. For example: over a period of 1 year, the stock market may rise 10%. During this time, commodities may have risen 20%. Both have risen. BUT, the analysts will tell you that you have made a profit in the stock market. How is this possible if the dollar has lost 20% of its purchasing power? In all actuality, the stock market is failing even as it gains in point value due to the ever-weakening dollar. Are any of you seeing the picture now?
-True Money!
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Permalink Reply by Buffalo on
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I don't think you will get much argument about inflation or the value of PM assets here. I agree we will have to change our monetary system at some point, but I don't have a lot of hope we will do so until it is forced on us and we simply have no other alternative. I think it is likely to be after things break down, maybe a total loss of confidence in the dollar and hyperinflation, and a last resort to pick up the pieces. I hope we never see it, but the way we are going it seems to me there will be a real loss of confidence in the US dollar one day. But, the two problems I've not been able to get past with going back to a precious metal backed currency prior to that kind of scenario are:
1. How is there enough gold and/or silver available to do so versus US money supply and assets? Those numbers are huge, much larger than the value of all claimed US held precious metals. So do we devalue everything by a factor of 100:1 (?), 1000:1 (?), or do some kind of fractional PM backing that could be so small as to be irrelevant in many ways as a real "backing" for the new paper?
2. How would global trade function if the US unilaterally did something like this, but no other country was on a gold or bi-metal currency standard? Why would the value be stable if there was still a conversion issue into other currencies that aren't stable or PM based to function in trade? Considering the huge negative trade balances the US has been running, wouldn't that have the effect of bleeding these gold/silver reserves away from the US over time? If the new currency was truly "backed" by precious metals, wouldn't that imply some convertability? And I think the economic damage from the US printing $15T in paper, paying off our debt, and then basically immediately making it obsolete would be extreme.
I'm not meaning to argue any points, just personally have not been able to get though my head how all of this would work without either being the result of an economic collapse worse than anything that has ever happened, or maybe producing a pretty bad one if we did the "pay off the debt" scenario you mentioned.
I'd buy all the silver quarters I could find for $2 each too!
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Permalink Reply by IndianGoldEagle on
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A new global currency comes to mind.
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