An acceleration higher in SLV lies ahead, spurred by the Currency War that has now become off-gauntlet blatant. SLV is 2013's top pick for me, by far, with exciting leverage and asymmetric risk, whether in the cash or options markets.
The Japanese have finally retaliated to printing around the world, by predictably firing the pent-up "bazooka" (see link above). Bernanke will fire bullets back at Japan this week, I believe, and retaliation to retaliation is war. War, indeed.
Thanks to Big Ben, Americans will be happy to hear that the government is spending his paper on giving the east coast what it needs to rebuild. Without at all comparing the respective events' size or effects, aggressive Japanese printing followed the tsunami. An economic boost is coming in the U.S. due to rebuilding.
The U.S. challenges the world to not support the Dollar, allowing it the greatest range for monetization.
Politicians are seen arguing a staged drama. The U.S. discusses tax hikes, but nothing really transpires, by international standards. As I have explained, this U.S. default drama ends with a lot of globally accepted printing. What's good for the U.S. is good for the metals. Leaders and bankers lie in this war, so the precious metals market will no longer key-in to comments as much, but, rather, focus on the trend. All of the major central banks want to monetize no less than the other. That's the trend.
This war is driving silver substantially higher, since the war's boost to gold has an even greater effect on silver, as the gold:silver ratio shows. Multi-millennia buyers of gold in its different forms, Indians are now increasingly turning to silver due to price, an example of silver's increase in relative value due to preciousness. The industrial metal story has yet to offer its positively compounding effect, according to Tom Luongo.
This time, I am not writing anything about solar panels, auto electronic instrumentation, nothing. Not this time. Just the currency war. I write again that understanding the currency war is the key to the forecasting and timing of special turning points.
Technically, each year, the silver chart has a "theme," by including the heart of an entire wave count. In Elliott terminology (preferred technical "language"), the past year included the A, B, and C-waves of Wave-2. Therefore, 2013 delivers Wave-3 (the biggest move), by definition, and, perhaps, the unsatisfied forecast of $60.
Recently, I did not think the SLV would break $31.50, but nothing has changed the pattern's interpretation. What could a $3 decline change? Consistently, Wave-3 could carry the SLV to levels above $40 during the year, perhaps easily. The metal will advance with its customary volatile price swings, perhaps developing a parabolic chart later. (The March 24, 2010 article projecting gold at 1500, illustrates relevant 50-year to 1-year charts that annotate trends and Wave counts.)
January strength in silver will come on strongly improving and positively-divergent momentum indicators; the SLV may advance through overbought readings his month. January could conclude an initial and "relatively" minor move, which would imply powerful action into the 2nd-quarter.
This currency war will build and accelerate into the end of the quarter, as mistrust builds, benefiting silver and gold the most. My view is that one should own SLV in a 2:1 ratio with the GLD, to the general exclusion of other paper assets.
Multi-years' SLV call options help offset the potentially higher cost incurred later, by an investor who wishes to wait before owning cash SLV. The durations of the expiry dates allow for greater investment, which in turn allows one to defray larger investment amounts (for the purchase of non-derivatives). It also allows writing opportunities ("dividends").
The Japanese Yen has indeed fallen from the 124-127 area (basis FXY), cutting even beyond the low end of the initially targeted range. The "Japanese bazooka" has already brought discussion of economic upheaval that could lead to globally unstable financial markets, due to the speed of the Yen's collapse. The rhetoric tells me 2 things:
Firstly, at 110, one should take huge gains. However, the Yen is going much lower over the next 18 months. Views may change regarding time and price, but not regarding directionality. The U.S. is simply managing their printing to keep a financial and economic balance between Europe and Japan, having the effect of a neutral DXY. Through the process, private and public debt in the U.S. is being spun off, and foreign leaders know it. Everybody knows -- except the public, for now.
In discussing the Currency War's acceleration, I forecast the euro would fall from the 130-131 zone, ultimately under 120, before rallying to 140. The 125.50 - 126 target for the b-wave (countertrend) did prove to be support, but the ensuing rally went too far too fast to allow for shorting, based on the initial interpretation. Now, evidently, 119 should FOLLOW 140. I believe that the Yen and euro will continue to behave asymmetrically, leaving the Dollar to be "balanced" by Bernanke.
A reported asset allocation recommendation to Japanese Postal funds to increase gold ownership by 100%, from a pittance to a pittance, smells. Based on a 25-year record of understanding and forecasting Japanese politicians' actions rather well, THIS IS A REUSE. It is a foregone conclusion that Japan must get into the multi-central bank race to own gold; their multi-trillion Yen printing spree makes their demand even greater.
Each aspect of Currency War is consistent with full-steam-ahead printing and, by extension, the acceleration higher in silver.
If Bernanke does not accelerate the Currency War this week, one's strategic approach should be the same anyway, since continued global monetary madness remains a matter of course. That madness could cause the Dow to double-top around 14,000, before the huge equity fallout. Delaying the inevitable Dow decline would help global psychology, as precious metal advances could be seen as fear indicators.
In that scenario, at the top everyone will believe that printing equates to sustained higher nominal equity price levels. That will be the tip-off. The selling of bonds will have been to the favour of precious metals far more than equities, in relative terms. Market watchers are focused on bond-to-stock flows.
So, in the end, why risk that price-accelerating comments will not take place this week, when such comments could be the match to gasoline? Not being sanguine is especially valuable, given that Bernanke has given a "clear signal" that he may indeed pump-prime this week, by having indicated the opposite just recently.
The predictable swing from undervalued to overvalued option premiums in all global asset classes has already begun! This is a sign of volatility. Volatility is the stuff of Wave-3 movements, whether up or down. For silver, I believe that it is up.
Each year has a theme, and this one's should be the breakout in gold, and acceleration higher in silver.
Disclosure: I am long SLV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.