Readers of Gold Stock Trades continue to express an abiding
interest in the “poor
man’s gold” known as silver(SLV). Prominent among the questions they raise are: Quo Vadis Silver?
Recently, the noble white metal,
experienced a rapid run up to the halcyon heights
of $50 only to retreat precipitously to the low
30’s. Please read
my article predicting this pullback in silver prices. This on again, off again action was due to a technical response to silver’s inherent volatility as both an industrial and a safe haven metal.
order to quell such ebullient action, the
Comex lowered the boom by a series
of increasing margin requirements similar to what is occurring
now in gold futures. GST subscribers
were alerted well in advance that such moves were in the cards with silver(AGQ) in late April and gold (GLD) recently.
Too much hot, speculative monies were entering this market in late April and early August in
gold. Moreover, the big banks and hedge funds grew uncomfortable
with their growing short interest
positions. The actions of the Comex arrived just in time to save the day for the big fellows.
Furthermore, the $50 area represents
formidable overhead resistance
dating back to January
1980, then the Hunt Brothers
drove prices from $11 to $50 an ounce.
It did not come as a surprise to our readers when
we alerted them to the possibility that this overhead
resistance would be subject to a Newtonian “equal and
opposite reaction” to the mean
that had been established in the low $30
area. This is where
GST readers were informed to reposition themselves under $35.
Where do we go from here? Short and
Medium term: Recently silver has broken its 10 week base and in the
short term may have gotten ahead of itself on the breakout as the
50 day moving average flattens and commences
an upward slope.
for a rendezvous with the
20 or 50 day moving average or its short term uptrend for a secondary buypoint. Long Term: Gold Stock Trades believes that silver will recapture the $50 heights sooner rather than later
as we have often stated. The establishment of a base in the low $30 area has been a healthy
and a necessary one for the technical
resumption of the upward
long term trend.
confirmation, silver has made a triple
top breakout on the point and figure chart. This formation is
one of the strongest of technical
indicators that auger a pending upward rise.
Readers have asked whether silver is rising too
fast in comparison to
gold. Response: We
have only to look at the
What had been historically a dominating ratio of gold to silver
is readjusting to reduce the preponderance of
gold in this formula. It might
appear that silver is rising
too fast, however it is
playing catch up to what is a narrowing of the gold to silver proportion. GST believes
that since the historic breakout in silver in 2010, that the gold to silver metric would significantly decrease.
response to the bullish
and bearish factors in this scenario.
Bullish: Silver operates from a dual base
acting as a safe haven
for the rising middle class as well
as its vital use in industry.
Demand is soaring, while supply from existing
mines is diminishing.
This supports the bullish thesis.
Whether the U.S. dollar(UUP) can
maintain its safe haven status
is questionable. Add to this the tenuous position of the Eurozone
and the future of the Euro(FXE). The supply
of silver is extremely tight. There
are few pure silver plays
as it is mostly produced as a byproduct. For these reasons demand exceeds existing supply. Investors unable to do specific stock research should take a look at the silver miners etf (SIL).
silver the new gold and is
it going to be more of a safe haven as margin requirement increases hit
gold? Interestingly, the biblical
terms for money and silver
are synonymous. GST believes
that the appellation “poor
man’s gold” is not derogatory.
Instead it refers to universality and fungibility as a medium of easy
exchange in the banking and public sectors.
When Dr. Paul asked Dr. Bernanke, “Is gold money?” The answer might have been, “Yes, but silver is more so.” By Federal Law silver is money, exchangeable more easily than gold for goods and services such as in supermarkets, banks and gas stations.
What does this all mean for GST readers? Silver represents a rising area of
importance in our everyday
lives. It is ever present and growing in the age of the plagues of uncertainty, instability, turbulence, revolutions
and fiat money. We expect
silver to hit new highs along with the miners in 2011. Stay tuned to my daily bulletin for specific
stock research and market