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Silver in Freefall- Gold not far behind? What's next?

 

If silver tops around $50, then based on previous corrections we would expect it to correct to the $27 - $30 range.

 

Being long silver was quite painful and certainly was worse than what was felt by those holding gold. Silver does appear at this time to be close to a local bottom though not necessarily its final bottom.

 

http://www.marketoracle.co.uk/Article27992.html

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.../...

 

Take a look at the action in palladium since the early 09 lows:

 

 

pdagstudyiv.gif

 

 

a – confined to an upward channel

b – breakout of channel resistance

c – testing channel exterior as support

d – rising fast and ultimately too quickly

e – violent move down and ultimately re-testing channel exterior as support

f – and the bulls have it

g – hitting long-term trendline resistance (see previous charts in this thread for palladium)

 

.../...

 

 

(Please note this model is now work in progress, so expect revision and updates as appropriate)

 

Hypothesis: The silver price pattern is replicating that of palladium.

 

Testing: The testing of this hypothesis will occur in real time as we follow the action in the price of silver.

 

Analysis: The palladium price 'model' as displayed above has certain key points (a-g) that have either happened with silver (a-d) or that may occur in the future (e-g).

 

(a-d): It took palladium approx. 18 months to move from the 08 crash bottom to the intermediate high (d). The move was approx. 250%

 

It took silver approx. 29 months to move from the 08 crash bottom to move to the intermediate high (d). The move was approx. 400%

 

Intermediate Conclusion: In terms of the model time-line, silver is replicating palladium by a factor of x 1.6. In terms of price, silver is replicating palladium by a factor of (have you guessed it yet) 1.6.

 

Going forward (current testing): It took palladium 10 months to go move from the intermediate high (d) to the current high (g). Therefore, if the model is viable, silver will hit a new high in 16 months.

 

How to test this going forward: First and foremost, if silver is replicating the action in palladium, we need to see a h&s pattern avoided in this consolidation period. Furthermore, it took palladium approx. 5 months after the intermediate high to get back to the same level. This would equate to the silver price being approx. $50, 8 months from now.

 

Possible variation within the model: If the model holds true, it should be noted that volatility in the silver price (esp. on the final move up to 'g') can result in a quicker move to the trendline high 'g' which should be treated as a constant for the sake of this model.

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Essentially, the upward correction in the ratio seems to have stopped at the red line for now, and we seem to be bouncing back down again.

 

http://gold.approximity.com/gold-silver_watch.html

Gold-Silver-Ratio_GUESS.png

 

this was perhaps the most amazing call ever to grace these boards *(pix's gold 'lines' coming a close second)

 

when the sideways move out of the trendline suggested that 35:1 was not going to happen, i must admit i had my doubts (and thought some sort of slower descending channel was emerging).

 

I guess the problem with TA sometimes is that you have to trust your longer view (chart analysis) over shorter term noise.

 

Sometimes, just 'saying what you see' in the immediate term can prove misleading as this video demonstrates :)

 

 

(apologies in advance for 'lowering the tone!')

 

http://www.youtube.com/watch?v=7UA-egInRi0

 

*edit

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http://maxkeiser.com/2011/05/08/rick-rule-im-buying-silver/

 

Rick Rule: “I’m buying silver” - (Rick Rule: Founder of Global Resource Investments LP (GRIL) - Rick is known as one of the most “street-smart” people in the natural resource sector and gold world with nearly 40 years of experience. Global is involved in securities brokerage investment management, corporate finance focussed on natural resources and basic industries. Rick / Global Resource Investments LP (GRIL) are also successfully involved in agriculture, alternative energy, conventional energy, forestry, infrastructure, mining and water resources investing on a world wide basis. GRIL manages over a billion and through recent acquisition is now part of the $9 billion Sprott Asset Management.)

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Sprott loads cannon against Wall St. scum; new product set to acquire HUGE quantity of physical silver

 

http://maxkeiser.com/2011/05/09/sprott-loads-the-cannon-against-wall-st-scum-new-product-set-to-buy-huge-quantity-of-physical-silver/

I interviewed Eric Sprott today for Thursday’s “Keiser Report.” He goes into some detail about this new offering.

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Stonecap Securities in a silver share report on BNN, they talk about Revett Minerals, Great Panther, ECU Silver, First Majestic & Silver Wheaton. All of which seem favourites on here, worth a listen;

 

http://watch.bnn.ca/#clip463471

edit: Maybe ECU is only a favourite in my eyes on here. tongue.gif

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A letter from the CEO of ECU Silver to the shareholders was published today, which makes for interesting reading.

 

Here's is Dave in Denvers take on it;

 

ECU Silver May Be Ready To Make A Big Move

...In that regard, let's compare ECU to Great Panther (GPL), one of the silver market darlings. We own GPL as a trading play, by the way. GPL sports a $450 million market cap and reports having 12.8 million "measured and indicated" ounces of silver (including silver equivalent) and a total of 21 million ounces, including inferred. $21/total ounces per share of valuation. Hmmmm....let's look at ECU (and I would like to say that ECU makes it significantly easier to find this information). ECU has a market cap of $237 million on top of a resource of 40 million "measured and indicated" and 430 million including inferred. 55 cents/oz per share. If you're like me, you're scratching your head on that one. Now, granted there's story behind GPL and they are producing silver and that production is on target for some nice increases. But the disparity in valuation is absurd. And in my valuation assessment of ECU, I'm not giving any credit for "potential" resource as outlined by Micon...

 

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A letter from the CEO of ECU Silver to the shareholders was published today, which makes for interesting reading.

 

Here's is Dave in Denvers take on it;

 

ECU Silver May Be Ready To Make A Big Move

 

I still don't get why they don't disclose cash costs?

 

Sounds interesting nonetheless. Are you in Pix?

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Superb long article from ZH. The noose is tightening:

 

On Friday, May 6, 2011, the short sellers must have been proud of themselves. They were able to deliver 243 contracts, or 1.2 million ounces of silver, which is a huge amount. But, the open interest for May delivery only declined by 13 contracts, which means that the artificially cheap prices attracted 230 new long contract buyers who paid cash. The new contracts will need to be delivered this month. As hard as it must have been to find the silver for May 6th delivery, they are now forced to find another 1.15 million ounces somewhere.

 

The so-called “spot” price is now largely irrelevant, but short sellers have still not acknowledged that fact to themselves. Intense physical silver demand continues. This is amply illustrated by continued backwardation. Dealers at COMEX and the LBMA may create fake prices at will, but the cash market is their achilles' heel. Short sellers have put paper silver on a fire sale at the futures exchanges. Yet they have not improved their position by doing so. They have, instead, insured a worse problem. Cash buyers put the fear of God in the hearts of silver manipulators. Cash buyers can put them into bankruptcy, destroy their power over the market, and discredit the futures markets, LBMA and the central bankers by inducing multiple defaults....

 

http://www.zerohedge.com/article/guest-post-anatomy-silver-manipulation-how-low-can-it-go

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according to the CFTC, the level of non-commercial net longs in silver is, in the week ending May 3, at the lowest since July 28, 2009. So while one could speculate that silver may have been in some pseudo-bubble back in October 2010, when net specs hit over 50,000 contracts, the most recent reading of 23,354, which is merely the latest in a downward sloping trend starting in February, alas throws a lot of very cold water over the whole silver bubble popping thesis.

 

http://www.zerohedge.com/article/so-about-speculative-and-undisputed-silver-bubble

 

& if a protracted worldwide class action ever succeeded the payout would be in .................... :D

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I still don't get why they don't disclose cash costs?

 

Sounds interesting nonetheless. Are you in Pix?

Yes I am in and they have explained why they don't disclose cash costs is due to the Canadian accounting laws. As they are an exploration/development stage Company and so all revenues are supposed to be recorded as an offset against mining properties and exploration costs.

 

Here is something from their investor relations, they answered my questions on the day I sent them. - http://www.24knews.c...=8&t=533#p12088

 

I appears they are making themselves self funding for their exploration which is the part that excites me about this company. They have what looks to be a massive silver deposit and appear to have a way of funding the proving up of the deposit without needing additional funds. This can only lead to an increase in their valuation as they move more of their deposit from the inferred category to the measured and indicated. The location of their property seems very good, they are surrounded by larger payers and have very good access and power which bodes well for a future JV or buyout.

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BullionVault customers have been buying the dip

 

From BullionVault:

 

Notice on Silver Stocks - 9 May 2011

 

As you will know on the BullionVault Order Board we only sell physical bullion which we own in the vault.

 

After 3 days of exceptionally heavy demand our stock of silver in the vault has been temporarily exhausted. We have further substantial deliveries scheduled this week.

 

Please be aware that in this situation offer prices can be unusually high as some sellers may seek materially higher margins than we ordinarily do.

 

Whether buyer or seller if you are dealing in a sum in excess of 10,000 oz we would be delighted to hear from you on +44 208 600 0130 and we should be able to assist you with our telephone dealing service.

 

BullionVault

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http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/5/10_Richard_Russell_-_Expect_Huge_Rebound_in_Silver.html

Richard Russell, the Godfather of newsletter writers had this to say in his latest commentary, “There was the incredible cheering and gloating about the fall of silver. The media and various experts were laughing and giving the "high sign" in reaction to the 30% decline in silver. The only regret seemed to be that gold didn't sink 30% along with silver. And I wondered why all the cheering over silver's decline. My conclusion was that actually very few people were "in" silver and when silver rocketed up to near 50 dollars an ounce, most investors' reactions was "sour grapes."

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There seems to be a lot of fuss about silvers fall of 30% wiping out a month or so of gains. Big deal. I missed the opportunity to play the G/S ratio after watching it like a hawk come to a kilo to an ounce and was too slow to respond. (well done GF btw-great guns). I didn't make the same mistake in helping myself to handfuls more though despite higher premiums for silver and gold (physical).

But credit to people like Richard Russell/David Morgan and others on KWN/ZH for their knowledge from years past about this bull market. A learning experience. Is it over for silver? Who knows? I'd welcome some more downside tbh. Nothing has changed really except I've got a little more. Sure it could have been a lot more if I had played my cards right. But no worries. If it goes down again, I'll pick up some more till the game changes significantly.

Hats off to you though, GF. You played a perfect hand. AND had a holiday. Bugger! :)

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There seems to be a lot of fuss about silvers fall of 30% wiping out a month or so of gains. Big deal. I missed the opportunity to play the G/S ratio after watching it like a hawk come to a kilo to an ounce and was too slow to respond. (well done GF btw-great guns). I didn't make the same mistake in helping myself to handfuls more though despite higher premiums for silver and gold (physical).

But credit to people like Richard Russell/David Morgan and others on KWN/ZH for their knowledge from years past about this bull market. A learning experience. Is it over for silver? Who knows? I'd welcome some more downside tbh. Nothing has changed really except I've got a little more. Sure it could have been a lot more if I had played my cards right. But no worries. If it goes down again, I'll pick up some more till the game changes significantly.

Hats off to you though, GF. You played a perfect hand. AND had a holiday. Bugger! :)

I am getting the feeling that we will see silver rise through the rest of May towards $50 again but will then see more margin hikes, so hopefully we will see some cheap silver again in June.

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I am getting the feeling that we will see silver rise through the rest of May towards $50 again but will then see more margin hikes, so hopefully we will see some cheap silver again in June.

 

Pix (or anyone), interested in ideas for trading that view outside holding physical. Myself I opted for LSIL yesterday, as I found switching some 25% of my Physical Silver to Gold was not so easy and missed some of the bonus ounces.

 

So I'm sticking with the physical swap, but want to trade the Silver drop with other funds. Any other simple ideas aside from options(which I have never devoted enough time to understand).

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Pix (or anyone), interested in ideas for trading that view outside holding physical. Myself I opted for LSIL yesterday, as I found switching some 25% of my Physical Silver to Gold was not so easy and missed some of the bonus ounces.

 

So I'm sticking with the physical swap, but want to trade the Silver drop with other funds. Any other simple ideas aside from options(which I have never devoted enough time to understand).

Do you have a goldmoney holding, it makes swapping physical very easy and a lot cheaper than you initial buy commission? Both the sell and the buy are conducted at the same time and the prices are locked in. That is how I do any swaps between physical metals.

 

I am always dubious of the leveraged ETFs after being burnt a few times, they seem not to track the price that well and definitely not 2x to the upside as they claim to. I my experience they perform 2x to the downside but about 1.5x to the upside, which can loss you money if you hold them for any amount of time. For short trades only I think.

 

I am probably not the best to ask about trading the movements in silver. tongue.gif

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Do you have a goldmoney holding, it makes swapping physical very easy and a lot cheaper than you initial buy commission? Both the sell and the buy are conducted at the same time and the prices are locked in. That is how I do any swaps between physical metals.

 

I am always dubious of the leveraged ETFs after being burnt a few times, they seem not to track the price that well and definitely not 2x to the upside as they claim to. I my experience they perform 2x to the downside but about 1.5x to the upside, which can loss you money if you hold them for any amount of time. For short trades only I think.

 

I am probably not the best to ask about trading the movements in silver. tongue.gif

 

No I have only held physical until recent, but Silver looked a bit toppy on the surge past 40 and I thought a jolt possible. So I'd been dummy trading LSIL since the surge past 40c and in theory would have made a reasonable profit, though I was a little slow on the theoretical cash in :lol: Do know what you mean on the leveraged ETF's, my favourite SUK2 works much the same and only short term.

 

Incidentally the reason for asking was my problem being in the country, I found reacting, organising a swap and even getting to a good dealer took me almost 2 days(so costing me a fair few extra ounces in the exchange). Learning experience gained though.

 

Thanks for the reply all the same.

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No I have only held physical until recent, but Silver looked a bit toppy on the surge past 40 and I thought a jolt possible. So I'd been dummy trading LSIL since the surge past 40c and in theory would have made a reasonable profit, though I was a little slow on the theoretical cash in :lol: Do know what you mean on the leveraged ETF's, my favourite SUK2 works much the same and only short term.

 

Incidentally the reason for asking was my problem being in the country, I found reacting, organising a swap and even getting to a good dealer took me almost 2 days(so costing me a fair few extra ounces in the exchange). Learning experience gained though.

 

Thanks for the reply all the same.

I classify a holding in goldmoney as physical, it is actual metal held allocated in a vault which is audited & insured and is your property not anyone elses. It also makes trading between metals much easier and cheaper than trading coins or bars.

 

I do keep some coins personally as a SHTF fallback and also to save on CGT, but hold the majority of my metal at GM.

 

 

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Inflation is very high, going to rise. Growth in China and Germany bigger than expected. QUICK, SELL ALL COMMODITIES!!

 

You couldn't make this stuff up.

 

http://www.bloomberg.com/news/2011-05-11/asian-stocks-gain-on-economic-outlook.html

Commodities fell for the first time in three days, led by silver, gasoline and oil, and U.S. stocks retreated as reports on inflation from London to Beijing boosted expectations that interest rates will rise. The euro slid amid concern Greece will be forced to restructure debt.

...

The pound rose as Bank of England Governor Mervyn King said inflation remains “uncomfortably high” and officials signaled they may raise rates later this year. Reports showed growth in prices in Germany and China topped estimates and Poland unexpectedly increased its benchmark rate.

:lol: :lol: :lol:

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Earlier I was going to ask why the sudden dive in Ag & Au, but I didn't want to appear even dumber than usual.

 

Thxs Gf, all is now clear - it makes no sense :D

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Inflation is very high, going to rise. Growth in China and Germany bigger than expected. QUICK, SELL ALL COMMODITIES!!

 

You couldn't make this stuff up.

 

http://www.bloomberg.com/news/2011-05-11/asian-stocks-gain-on-economic-outlook.html

 

:lol: :lol: :lol:

Central bankers raising rates to curb inflation is like locking the stable door after the horse has bolted continuously month after month.

 

Some posters here I notice seem to think that this will be bad for Gold, But of course we know this is not true and gold will shine.

 

BTFD.

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Inflation is very high, going to rise. Growth in China and Germany bigger than expected. QUICK, SELL ALL COMMODITIES!!

 

You couldn't make this stuff up.

 

http://www.bloomberg.com/news/2011-05-11/asian-stocks-gain-on-economic-outlook.html

 

:lol: :lol: :lol:

 

i agree, it really is a joke.

 

short term the volatility is huge, long term the trend is obvious.

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