Soaring Silver, Stalling Gold

Today was very profitable for me despite spending part of my day caught up in the madness that is Boxing Day in Vancouver. I actually didn’t buy anything, but the retailers have managed to turn it into Boxing Week, so I’m sure they’ll get my money yet.

Silver bounced exactly where it needed to today, off of the symmetrical triangle, lifting shares of silver stocks to big gains. I was in gold stocks until the close today when I took my profits, but entered a few silver stocks (PAAS, SLW, SSRI) towards the end of the day looking for a continuation of today’s gains next week. I probably should have held my gold shares as there doesn’t seem to be any reason for them to stall, but I felt like I should take the gains that are given to me before the market quickly snatches them away.

Volume was light across the board but I feel the price action is really painting a bullish picture for precious metals heading into 2009.

Comments

[bold4gold:]

Excellent article but Everyone Needs God !

2008 Dec 27 08:16 AM

[silverwood:]

Jeff, take a look at MVG, Mag Silver. It is a junior explorer with maybe the largest/richest discovery this decade. It has received a stink bid from its jv partner and IMO they are trying to manipulate the share price, I don't believe they will be successful. Once silver makes a strong move back up Mag will explode to the upside.

2008 Dec 27 08:29 AM

[fireball:]

jeff
i hold silver and gold long term like insurance. i was buying in the 90's when the market was booming and metals were down.
i don't quite trust the paper markets especially in silver. there seem to be discrepancies in physical supplies and shares and futures.
lately i have been doing pretty good on gold explorers. to me playing with any stock is very different from physical holdings. i think there may be some problems that will eventually surface with things like slv and gld.
silverwood
thanx. i will take a closer look at mvg.

2008 Dec 27 09:53 AM

[KBowen7736:]

Not sure what to say besides thanks for the info on Boxing Day. Not much else there to pick over!

2008 Dec 27 10:31 AM

[kelvin8:]

bobtrader1967-
Silver is both an industrial metal and a precious metal. Over 70% of silver is created as a byproduct from mining other base metals. With so many base metals mines going off line, silver will be in short supply just when a rush to "poor man's gold" picks up, IMO.


On Dec 27 03:55 AM BobTrader1967 wrote:

> Thanks for the info Jeff, but what makes you think Silver, as opposed
> to Gold, will be the play in 2009. Industrial demand will be abysmal...
> check out this trading quiz, very cool freetradingquiz.com

2008 Dec 27 10:40 AM

[surferonice:]

800 million silver oz's versus 100 million gold oz's produced per year and going down possibly soon.That to me is an 8-1 ratio. Currantly an 80 to one ration exists. If you believe that gold will crash to 100 an oz or so then I suppose you could believe Oil in the ground is infinite. If you believe that your government does not lie to you daily you could believe that your logical mathematical commonsense makes no difference eventually.
We shall see who can add and subtract eventually.

2008 Dec 27 10:52 AM

[GMiki1:]

I like Jesse Livermore's statement that he made more sitting than he did trading and Mr. Partridge's comment that he didn't want to lose his position. Why sell for a small profit in a rising market? It really is true that you can't time the markets. I think this year surprised most PM investors in the rapidity of deleveraging.

This will surely be an interesting year. Best to all.

2008 Dec 27 11:26 AM

[Greg Pinelli:]

We can only hope that is USERwhatevers first and last senseless rant.
While I share some of Jeffs sentiments concerning silver I'm lost as to what he analyzed..really not much. How did he determine gold is stalling and silver soaring?? From Dec 2006 to Aug 2008 the Gold:Silver ratio rolled between 46 and 56:1..It's now at 83 and change....Don't get me wrong..I think this ratio is largely useless..in part because we're talking about about 2 very different metals.
I use gold as a store of value..period. It always has been and ALWAYS will be a bulwark against paper money/credit expansion and defacto default.
Silvers a different animal..incredibly useful stuff with a phenomenal future. Potable water is virtually impossible without it.

2008 Dec 27 11:27 AM

[NOWHEREMAN:]

Mr. Pinelli, do you make up science on the fly to justify your opinions?

Silver: "Potable water is virtually impossible without it".

Lets, see Boil water before drinking it and don't forget to add the Silver. Or, Bottled water, see those shiny little flecks. Total unabased inanity.

Silver has a really good use for Survivalists who know what they are doing. Taking a silver coin with them, they are able to discern whether the mushrooms they picked for supper are poisonous or safe to eat.

2008 Dec 27 12:03 PM

[John Polomny:]

Don't worry with the amount of paper the world's central banks are creating both gold and silver will soar in the upcoming years.

2008 Dec 27 12:37 PM

[William Feader:]

Kind of a non article, isnt it

2008 Dec 27 12:42 PM

[CLH:]

Silver and gold are having their last gasp before heading back down as we tip into deflation with no sign of inflation.

2008 Dec 27 01:24 PM

[Did U Think...:]

BE CAREFUL. I like silver. I own physical silver. But that chart you show looks a lot like a horizontal triangle which has a,b,c,d and e played out. It looks like a throwover has occurred and if I am right expect a sudden and dramatic downturn to occur next. History shows that silver trades with the economy and the economy is swirling the bowl. On the other hand, gold coins at Monex are selling today for about what they were going for at the start of the year.

As JP Morgan once said, "Gold is money, and nothing else is".

Silver will fly again once the bottom is in for the economy.

2008 Dec 27 04:04 PM

[Jeff Pierce:]

Bob,

I like gold very much and I'm picking either one to outperform the other. Disregard the title as Seeking Alpha altered it. The point of the article was to say that I like Silver right now. I just happened to sell out of some gold positions I had because I had nice gains in them. But the more I look over gold charts this weekend the more I wish I would have held them.


On Dec 27 03:55 AM BobTrader1967 wrote:

> Thanks for the info Jeff, but what makes you think Silver, as opposed
> to Gold, will be the play in 2009. Industrial demand will be abysmal...
> check out this trading quiz, very cool freetradingquiz.com

2008 Dec 27 06:01 PM

[secmaven:]

JP Morgan and its COMEX traders will have the last say on both silver and gold prices unless some big money decides to go physical and takes the Comex stocks out of play. That will end the ability of this paper trader to cap the price of PMs.

2008 Dec 28 01:06 AM

[CitizenPete:]

Gold and Silver (and Oil) will get a boost from middle east tensions. As Israel continues to kill hundreds of Gazans - Arab nations and the U.N. can't just sit by and watch this escalate, as Hamas will retaliate. With Bush and Cheney still in the WH I would guess they will fan the flames from behind the scenes the best they can.

2008 Dec 28 02:03 AM

[otbricki:]

Middle East tensions are a non-story when there is an oil glut.

2008 Dec 28 09:56 AM

[morph366:]

What exactly is the point of the chart in the article?

2008 Dec 28 10:30 AM

[Henrique Si...:]

Gold is up 3.7% in the last 52 weeks. Oil is down 60%. That`s quite an overperformer in the commodities arena. Performance data here:

oiltradersblog.blogspo...

But why is Gold holding up better than anything else?

2008 Dec 28 11:58 AM

[NOWHEREMAN:]

Morph: The chart looks nice. There is no point to make from such a miniscule period of time. Silver can go up, down or sideways depending on your view.

Since the volume is light, using trading indicators such as MACD or stochastics would help in indicating near term direction. Otherwise, I personally use Money Flow since I'm more inclined to holding for the longer term than trading.

Just because I don't like to trade, doesn't mean I don't know how to use Trading tools.

2008 Dec 28 11:58 AM

[PeteK:]

There are more Jewelery shops than anything else.
Not only in the US but every country in the world.
Especially in Asia.
90% customers are women.
How can you miss ?

2008 Dec 28 12:10 PM

[montross515:]

Silver appears to be in extremely short supply in coin shops. On Ebay the price per ounce is clearly over 50% above the Comex price. Uses for silver are growing in proportion to the growth in the use of electricity worldwide ( look at India and Asia growth) PLUS new uses in medicine, hygiene, and computers. If the current Comex price of silver was $25 an ounce I think reasonable people would think they understood the market forces. As it is, we have to think that Bush/Cheney are playing games with the market, along with the C7. Ever wonder how much money the Bush Administration is losing everyday as they play the markets? What is a billion dollars to people who blow through a trillion in a few months?

2008 Dec 28 05:29 PM

[Smarty_Pants:]

" I like Jesse Livermore's statement that he made more sitting than he did trading and Mr. Partridge's comment that he didn't want to lose his position. Why sell for a small profit in a rising market?" - GMiki

Amen to that. One of my favorite books and full of useful information once you get your nose bloodied in the markets a couple times figuring it out.

Line of least resistance for gold turned up just recently, until that reverses I would trade from the long side only. That doesn't necessarily mean gold will go up to $5,000/oz, but for now it's going up and that's where the profits will be most easily found.

(I hope Alan B. has closed out his recent short GLD position before it got out of hand.)


"It really is true that you can't time the markets." - Gmiki

Depends on what you mean by "timing". Livermore essentially timed the markets at some level by reading the tape and recognizing changes in the trends, or as he called it, the "line of least resistance".

True, it's very difficult to predict turns in the market, but with practice you can observe them and react appropriately. I'd call that some sort of 'timing'.

Its not an easy thing to learn though and mistakes abound even after you think you've got it down to a usable skill. At least mistakes still happen for me, but it works after a fashion.

2008 Dec 28 11:08 PM

[User 200039:]

Congress has caused essentially ALL our economic woes, and has not a clue how to fix them- nor do they even have a clue what they have caused. They only see pie-in-the-sky dreams which they think make them look so good the people will surely re-elect them

2008 Dec 29 01:56 PM

[Mad Hedge F...:]

With gold bugs, survivalists, and garden variety hedge funds running victory laps over the yellow metal’s recent breach of $1,000, it is easy to miss the move in silver that has been twice as impressive. Silver has run 30% this year to $14.60 an ounce, despite the steady deterioration in industrial demand. Silver ETF buying has exploded by 1,676 tonnes to bring their total to 9,929 tonnes. Sales of silver American eagle coins have doubled to four million ounces so far this year. The metal may have more to run. Hedge fund longs, which peaked last year at 50,000 futures contracts, have so far reached only 23,100 contracts in this round. But risk managers are going to have to keep an extra sharp eye on silver positions. A turnaround by the Dow or the yen against the dollar could suddenly take the air out of this bubble.

Feb 27 02:07 PM