Silver Remains a Contrarian's Dream

Gold: The dollar fell sharply against most currencies yesterday and gold was strong in all currencies and held above $1,015/oz for most of the day. Both the London AM and PM fixes were higher from the day both in euro and pound terms (21-Sep-09 AM $999.25,£618.233, €681.756, PM $997.00,£616.307, €680.871 and 22-Sep-09 AM $1015.75,£622.396, €686.550 PM $1,014.00,£620.639, €686.109 - see here). Thus, while the pound and dollar have fallen against the euro, they have fallen by even more against gold.

The recent London fixes at comfortably over $1,000/oz,£600/oz and €680/oz show that physical demand remains significant. Gold needs to show more stamina and will need to move up to, and hold above, its recent high of $1,023/oz in order to herald a move to new record highs. If it does not, a correction could be expected, albeit likely short term before a fresh assault on new highs.

With so many analysts and investors expecting a sell off, the market is liable to do the opposite of what is expected by the majority. With investment demand remaining robust, any sell off is likely to again be short and shallow. Our own, and other bullion brokers' experience in recent days, is that investors, particularly smaller ones, are taking profits and there are more sellers than buyers at these levels.

Unfortunately, retail investors tend to be on the wrong side of the market. Rather than waiting for perfect entry points, astute investors will cost average in to positions and gradually assume a position over a period of weeks.

Silver: Silver is trading at $17.18/oz and is trading as a stubborn mule refusing to go down. The silver market smells different and a short squeeze and spike to over $20/oz before year end remains possible - especially as the big picture supply/demand fundamentals remain compelling.

The record high of $50/oz remains a viable price target in the coming years. As ever the analysts remain overwhelmingly bearish on silver and silver remains a true contrarian's dream with little or no public involvement and negative or no media coverage.

Platinum group metals: Platinum is trading at $1,331/oz. Palladium holdings surged overnight pushing the metal through $300/oz and it is currently trading at $302/oz. Rhodium is at $1,575/$1,675/oz.

Disclosure: No positions

Comments

[Jimbo:]

Deflation now but inflation in the long run. We may also have stagflation in place of deflation. Pre-1965 silver coins are best for the uncertain times ahead. If the currency implodes, silver coins should be able to be used for everyday commerce.

Sep 23 09:11 AM

[Richard K:]

No one can prove that silver will not reach $50 or even more someday. Obviously the future is unknown and anything can happen.

But it is misleading to refer to $50 as a "record high." That was an anomoly, a very short sharp spike resulting from an attempted (and failed) market manipulation scheme. Yes, it did happen, but it tells us nothing about the overall silver market or its prospects.

Sep 23 11:24 AM

[ussmls7:]

The supply side at the flee market that comes around every month has shown a big drop in 90% junk silver bags.2009 ASE's Rolls are averaging $420.00 to 450.00! Ten dollars of 90% halfs fetch $150.00 or more. People are trading in all the Fiat they can afford for US 90% Silver & Gold coins from any nation,but they want the smaller units, unless they are a serious collector for a certain pre 1933 Gold coin! But the biggest worries that is talked about is inflation & the debt that this Nation has not delt with & Obama's obsession with health care & cap & tax!!!!?!

Sep 23 02:01 PM

[Plebian:]

Actually, $50/oz for silver is hardly a misleading high, as that was the dollar price of silver back in 1980's peak! If adjusted for dollar inflation, the actual record high would be closer to something like $130/oz for silver in 2009 dollars (and that's using the massaged 'official' CPI figures). Back then, silver reverted back to 16:1 ratio compared to gold, another sign that it was not a misleading high.

By the same token, dollar prices for gold are hardly at all-time highs in 2009 (as so many like to claim). Adjusted for dollar inflation, the $800/oz gold price in 1980 would be $2,080/oz in 2009 dollars!

Therefore, both silver and gold are still way under their 'record highs' at present dollar prices. Short of some kind of direct intervention, more and more people will start to see the safe haven status of saving wealth in the form of the precious metals, especially silver and gold (historically the only true sound money).


On Sep 23 11:24 AM Richard K wrote:

> No one can prove that silver will not reach $50 or even more someday.
> Obviously the future is unknown and anything can happen.
>
> But it is misleading to refer to $50 as a "record high." That was
> an anomoly, a very short sharp spike resulting from an attempted
> (and failed) market manipulation scheme. Yes, it did happen, but
> it tells us nothing about the overall silver market or its prospects.

Sep 23 02:50 PM

[Jeff Nielson:]

Goldcore, as the "buzz" about silver continues to get louder, I'm not sure this can be called a "contrarian" play any more.

Sep 23 06:10 PM

[The Geoffster:]

You should rally on out of here.


On Sep 23 08:39 PM If only... wrote:

> We should rally for the remainder of the week
>
> good articles 4 slow news day: tinyurl.com/n854tt

Sep 23 09:45 PM

[HA65MPH:]

SILVER, YESSSSSSSS !

Sep 24 12:46 AM