Silver Prices Are About to Fall 80 comments
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Don’t get me wrong. I love silver. As a very long term investment, you cannot find anything better. If you ignore short and medium term volatility, and simply hold your metal for a long term of years, you will probably do okay. The world is running out of silver. The painful part of this "buy and hold" strategy, however, is in watching prices get periodically clobbered.
Another strategy is to keep a “core” long term portfolio, while, at the same time, keeping a non-core or speculative portfolio. In the speculative portfolio you attempt to profit by buying and selling on the price swings. In both cases, you will buy on the lows, but, instead of just holding for years, you buy low and sell high on a regular basis.
On March 6, 2009, I wrote an article which was titled “Silver Backwardation: Prices About to Soar.” That was the time to buy silver. Now is the time to sell. One of the silver stocks I mentioned was Hecla Mining (HL), and it was selling for $1.27 per share, back then. If you had bought Hecla, at that time, your profit now is immense. Don’t get greedy. Greedy investors who cannot part with their investments often lose money. Silver is now much more likely to go down than up, as I will explain.
Gold is mined primarily in specialized gold mines. It is getting harder and more costly to locate new gold mines. In contrast, 60% of all silver is a byproduct of base metal mines, which are abundant. Another 10% of silver is produced as a byproduct of gold mining. After having been devastated in the wake of the post-Lehman Brothers metals crash, base metals mining has made a remarkable recovery, and has ramped up again, by leaps and bounds. Silver production is up again. If base metal prices go down, again, it will take time before mines start closing again, and for silver production to fall. That means there will be a temporary end to the shortages which culminated in the recent big price rise.
Many people will point to the U.S. dollar and use its inevitable implosion as a reason to buy silver. That is true, in the very long run. However, we will not see high or hyperinflation in America until we have a currency event involving the U.S. dollar. There will be no implosion of the currency, right away, in spite of our irresponsible Federal Reserve. The Fed has certainly set the stage for a catastrophic dollar collapse, but European bank demand for dollars, for purposes of covering debts relating to imploding dollar denominated assets is preventing immediate implosion of the currency itself. This same foreign demand will fuel a dollar rally as soon as the Fed slows down its printing press. All assets, including gold, silver and stocks, have been artificially lifted since last March, by an influx of Fed liquidity (newly printed dollars).
Recently, the Fed's FOMC got a bit of "religion", and promised to stop monetizing Treasury bills. It has also slightly reduced the amount of agency debt it will monetize to $175 billion from $200 billion, and it has announced that it will buy agency bonds over a longer period of time. In addition, the rumor is that they will attempt to drain some of the excess reserves in the next few months. I don't think Bernanke and his minions have the stomach for financial Kaopectate, over a long period of time. But, a lot of the "liquidity" that has been driving Wall Street's rally-party could temporarily dry out. I am sure that when the pain starts monetary diarhhea will return. But, in the meantime, silver could fall very deeply.
Interest rates, like LIBOR, are going to start to rise. Most important to precious metals prices, however, is the fact that the steady stream of funny-money dollars is about to slow down. That, in turn, means that fewer newly printed bucks will be making the journey to Europe. European banks will have fewer dollars to buy for purposes of fulfilling their obligations to American banks, on defaulting dollar based assets. This means more will be paid for the dollars that are still available. All the big banks analysts are saying that the dollar will continue down, and most of the banks that are not connected to the Federal Reserve are short on the dollar. However, it seems to me that the dollar is about to go up dramatically, NOT down, at least in the next few months. While I think this will have a marginal effect on gold, it will probably have a profound effect on silver prices.
Normally, gold and silver prices travel together. I feel that this relationship is going to change very shortly, at least for a while. Sovereign demand can potentially support gold against both artificial price suppression, and its inverse relationship to the dollar. There is no sovereign demand for silver, however, and industrial demand continues to be depressed. I do not believe that investors, alone, in the face of a massive rise in the dollar, will be able to stop it from falling substantially. So, while I believe that gold may drop somewhat from its current record high, silver is going to drop much more in percentage terms, both because it is inherently more volatile, and because new fundamentals will be affecting both metals.
I believe we are about to see some temporary carnage in the stock and commodities markets, and that will deeply affect silver prices. There will be a lot of selling to cover margin calls, for example, over lengthy periods of time. I may be overly pessimistic, but, based on charts I've examined, the way I see things, silver prices could temporarily fall to $11 per troy, again, or even lower, before March 2010. Prognostications as to exact prices, of course, are seldom accurate.
All of this being said, in the very long run, silver will be a good investment, regardless of what happens over the next few months.
DISCLOSURE: Author is long gold. Mostly short silver, but with some long-term "core" long positions.
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This article has 80 comments:
How can that be bearish for Silver? Hmmm!
"Lover of silver", eh? If that's true, then I think your article is a great example of the old phrase, "can't see the forest for the trees".
Beyond fiat currencies, beyond discerning what's real and what's not (money-wise), besides the fact that they don't call him "Helicopter" for nothing... you did not mention the "elephant in the room": JPMorgan short 190 million ounces of COMEX silver futures.
There is going to be a High Noon moment before this month is over with CFTC Commissioner Bart Chilton and Chairman Gary Gensler baring their six guns.
Silver to $11? You're a funny guy, Mr. Goodman. A very funny guy.
For those wishing to get a better view of the forest, I recommend a visit to the mind of Ted Butler: www.investmentrarities...
On Nov 05 09:25 AM EE wrote:
> You are ignoring the huge illegal short position of the few concentrated
> banks which may be just JPM. The move to correct illegal futures
> manipulations by the SEC could release info at any time that would
> extend silver & gold much higher. However, the right thing to
> do would collapse JPM and the treasury will try to prevent that.
> So only 1/2 way measures will likely be done, but silver is primed
> for a surprise up move at any time. You guessed it, I follow Ted
> Butler. You can read him at www.investmenrarities.com The
> silver spot trade has been a $16-$18 range and I figure a pop to
> $18-$20 is the next range before the big bang up. If silver drops
> as you think, and your points are valid, it is a buying opportunity
> that won't last long.
On Nov 05 09:15 AM xearther wrote:
> Whenever I see an article begin with "don't get me wrong" the caution
> light glows bright. Same with that subtly manipulative word "clearly"
> (takk for not using it).
>
> "Lover of silver", eh? If that's true, then I think your article
> is a great example of the old phrase, "can't see the forest for the
> trees".
>
> Beyond fiat currencies, beyond discerning what's real and what's
> not (money-wise), besides the fact that they don't call him "Helicopter"
> for nothing... you did not mention the "elephant in the room": JPMorgan
> short 190 million ounces of COMEX silver futures.
>
> There is going to be a High Noon moment before this month is over
> with CFTC Commissioner Bart Chilton and Chairman Gary Gensler baring
> their six guns.
>
> Silver to $11? You're a funny guy, Mr. Goodman. A very funny guy.
>
>
> For those wishing to get a better view of the forest, I recommend
> a visit to the mind of Ted Butler: www.investmentrarities...
What if JPMorgan, one of, if not the, largest silver dealer and market maker on the planet, holds physical silver in New York and London, equal to, or even close, to the 190 million ounces they are short on COMEX. London warehouse statistics are not reported, so they could have silver there to cover their "Commercial Trader" a.k.a "hedger" short position in New York.
If the CFTC decides that JPMorgan has to close their shorts and JPMorgan says "fine, we'll just deliver against all our shorts" and they move 100 million or 150 million oz from London to NY (it costs about 6 or 7 cents to move it by ship). Then all those who are long are going to get delivered against and many are speculators who sure don't want five 70 pound bars of silver to have to deal with and pay for. Who do they sell to?
What if?
A long term "core" position is very different. Long term, you may choose to hold stocks, bonds, metals, and so on. You've determined that the long term positions are worth sticking to for a very long time, regardless of whether they move up and down a bit, while you are holding them. Income can be generated from long term holdings in the form of dividends, and/or by selling covered calls at appropriate times.
In contrast, speculative trades are short-term ones that have a reasonable likelihood of resulting in a spectacular gain. You take a big chance, and are willing to lose the value of the entire investment in exchange for the prospect of a big gain. You should not bet any more money than you can afford to lose on speculative trades.
Acting on the opinion that silver was going to soar, back in March, and, now, acting on the opinion that silver is about to go down substantially, are both examples of speculative trades.
I think silver will go higher, than break lower. If the dollar strengthens, silver will fall, too.
However, the Fed may not slow down the quantitative easing for some time, especially if unemployment needs a boost. Additionally, granted that banks and hedge funds have artificially lifted the stock market to unreasonable heights, the commodities and gold prices have been rising due to the lack of confidence in the U.S. dollar. The two are separated by intent and may show a divergence if the market begins to fall with gold and silver going higher.
Sometimes wishes do come true.
Short term possibility, but long haul silver on a tear.
On Nov 05 12:27 PM doubleguns wrote:
> Rumors of a collapse of the dollar carry trade are starting and that
> will cause exactly what this article says. I love silver but if this
> starts to happen I suggest stops in your paper silver and wait patiently
> with an eagerness to back the truck up.
>
> Sometimes wishes do come true.
>
> Short term possibility, but long haul silver on a tear.
I've sold my AGQ and am now waiting for the big pullback with more cash than I've had in quite a while.
Personally, I won't wait for 11 per ounce. I'll buy some at around 14.50 and more if it moves a couple dollars below that.
But, damn, it's painful to hold cash.
On Nov 05 12:46 PM yellowhoard wrote:
> I agree with the author on nearly everything.
>
> I've sold my AGQ and am now waiting for the big pullback with more
> cash than I've had in quite a while.
>
> Personally, I won't wait for 11 per ounce. I'll buy some at around
> 14.50 and more if it moves a couple dollars below that.
>
> But, damn, it's painful to hold cash.
Please give us a web site that shows the silver charts you are following. That would be a good start.
You're answer to most of the comments here read like a politician. Silver may go down, but don't make excuses for your remarks, as you've written...
"It's not pulling back very much. And it's not giving people who haven't yet invested a chance to get in at a lower price.That tends to happen in a bull market; people wait around for a correction, but it never goes down far enough to give people an opportunity to get in at a more favorable price."
....
Dec gold open interest dropped yesterday by 2500 lots.
It's kinda difficult to keep a rally going based on short covering.
These metals will need fresh long buyers to keep prices moving higher.
Until there's a dollar event? Good heavens--look at the dollar chart. This is the event. The dollar is sliding, sliding, sliding. That's an event.
And you trust the Fed to stop monetizing the debt? On what planet?
As for the Buffet bet on Burlington Northern, that's a bet on peak oil, not a bet on growth. It' a bet on diminished trucking and an interesting step at that.
Commercials got trapped in the wheat market a couple years ago and March Minneapolis wheat futures went to $25. That was about $17.50 above the previous record high of $7.50.
Amazing to think about. Anyone have Jamie Dimon's phone number?
On Nov 05 03:07 PM kohalakid wrote:
> Those interested in such things may find it interesting that open
> interest in Dec silver has declined each of the last 2 days by a
> total of about 4000 lots.
>
> Dec gold open interest dropped yesterday by 2500 lots.
>
> It's kinda difficult to keep a rally going based on short covering.
>
> These metals will need fresh long buyers to keep prices moving higher.
On Nov 05 09:59 AM kohalakid wrote:
> Why are the large short positions of the banks "illegal"???
On Nov 05 04:45 PM Joe Bruin wrote:
> Many people think the banks are making naked shorts.
On Nov 05 02:31 PM Russell Upsomgrubb wrote:
> Warren Buffett is perhaps the most successful investor of all time
> and just bough Burlington Northern, making a huge bet going forward
> on the growth of the American economy over the next 5-10 years. If
> he is correct, I see the dollar strengthening over time. The consensus
> on Wall Street is so often wrong and the vast majority of traders
> are short the dollar. Buffett is an investor, not a trader. He believes
> in the long term creation of wealth, not trying to get rich overnight.
> Mark Faber, a doomsayer, claims the value of the dollar will eventually
> fall to zero. Gee, I'll bet he owns a lot of gold.
On Nov 05 12:27 PM doubleguns wrote:
> Rumors of a collapse of the dollar carry trade are starting and that
> will cause exactly what this article says. I love silver but if this
> starts to happen I suggest stops in your paper silver and wait patiently
> with an eagerness to back the truck up.
>
> Sometimes wishes do come true.
>
> Short term possibility, but long haul silver on a tear.
As far as base metal mine increases, you need to look at the OBVIOUS fact that silver demand is FAR FAR higher than mine supply, by at LEAST 200-300 million ozs per annum. Recyling old scrap has been the ONLY thing keeping silver low for 2 decades and it's ALMOST run out. New precious metal investment will SUCK UP all that silver faster than you can say "Hi ho Silver!"
Let's not forget only 8 times more silver is produced than gold annually (600-650 mil ozs vs 80 mil gold)! Why the ratio is 62:1 is a MYSTERY to me considering all the gold ever mined is STILL THERE whereas 90% of silver is IRRETRIEVABLE.
Let fools goahead and sell silver - and gold too while you're at it! What are you going to do? Hold fiat money with every world central bank in QE modes?!??! Don't you realize USA is BANKRUPT - regardless of Fed/Treasury RHETORIC. Do you honestly think general equities will hedge effectively knowing somewhere down the line the economy will NOT get much better, people are BROKE, and the consumer is DEAD?
People without tangible assets will be up S**T CREEK without a paddle!
Sam
On Nov 05 11:48 AM Avery Goodman wrote:
> This piece was intended as presenting some thoughts on a speculative
> trade. It was never intended as a primer on investing strategy. A
> very limited part of anyone's portfolio, in relation to overall wealth,
> can be devoted to speculative trades. The risk of being wiped out
> is too high to devote a large part of your portfolio to this type
> of activity. Remember, your family must eat, regardless of whether
> you win or lose in the market.
>
> A long term "core" position is very different. Long term, you may
> choose to hold stocks, bonds, metals, and so on. You've determined
> that the long term positions are worth sticking to for a very long
> time, regardless of whether they move up and down a bit, while you
> are holding them. Income can be generated from long term holdings
> in the form of dividends, and/or by selling covered calls at appropriate
> times.
>
> In contrast, speculative trades are short-term ones that have a reasonable
> likelihood of resulting in a spectacular gain. You take a big chance,
> and are willing to lose the value of the entire investment in exchange
> for the prospect of a big gain. You should not bet any more money
> than you can afford to lose on speculative trades.
>
> Acting on the opinion that silver was going to soar, back in March,
> and, now, acting on the opinion that silver is about to go down substantially,
> are both examples of speculative trades.
What universe is he in? I just looked at his photo,
that strange, crooked smile and know there's some crooked agenda there ... is he a relative of Kitco's
Jon Nadler?
On Nov 05 11:43 AM kohalakid wrote:
> From the "What if..." category.
>
> What if JPMorgan, one of, if not the, largest silver dealer and market
> maker on the planet, holds physical silver in New York and London,
> equal to, or even close, to the 190 million ounces they are short
> on COMEX. London warehouse statistics are not reported, so they could
> have silver there to cover their "Commercial Trader" a.k.a "hedger"
> short position in New York.
> If the CFTC decides that JPMorgan has to close their shorts and JPMorgan
> says "fine, we'll just deliver against all our shorts" and they move
> 100 million or 150 million oz from London to NY (it costs about 6
> or 7 cents to move it by ship). Then all those who are long are going
> to get delivered against and many are speculators who sure don't
> want five 70 pound bars of silver to have to deal with and pay for.
> Who do they sell to?
>
>
> What if?
> Warren Buffett is perhaps the most successful investor of all time
> and just bough Burlington Northern, making a huge bet going forward
> on the growth of the American economy over the next 5-10 years.
The BN purchase can just as easily be viewed as a bet that commodities (i.e. coal, grain) will be transported by rail to our west coast ports en route to China and India. Moreover, it can be viewed as shorting the U.S dollar inasmuch as BH will be using cash (and borrowing some as well) to purchase a hard asset (the railroad).
> Mark Faber, a doomsayer, claims the value of the
> dollar will eventually fall to zero. Gee, I'll bet he owns a lot
> of gold.
Dr. Faber is correct: all fiat currencies eventually fall to zero. Gold, on the other hand, is money and has been so for 5,000 years. I disagree with Dr. Faber that we will experience hyperinflation in the next few years, but I do believe that we will experience high inflation here in America given the Fed's relentless money printing.
Let us assume you are correct. Currently, the silver-gold ratio is at 62-1. The most recent peak was about 80-1 in Feb-03. If gold remains at about $1100 and the ratio revisits 80-1, that calls for a $13.75/oz. silver price. An $11/oz. price (with gold at $1100) would mean a 100-1 ratio; not impossible, but highly unlikely.
Now, if gold were to retrace some gains, obviously silver could fall as well. However, with the Indian and Chinese "puts" on gold now extant, any correction in the gold price would seem to be short-lived.
On Nov 05 01:53 PM jimbo's gravy train wrote:
> As for taking a different path
> than gold, that is simply wrong. These two are brothers and along
> with each other for the ride.
Certainly the USD$ short trade has gotten WAAAAAAAY overcrowded, and the buck is due for some kind of bounce to shake out the market. But the crazy calls for a 30% plus US$ rally ignore that the world is now VERY aware that US fiscal and monetary policy that is, has been, and will almost certainly be a
house of cards. Any US$ rally will be met with ample supply of sellers. US$ buyers will need to be EXTREMELY nimble to extract any profit from a rally and not be caught holding a hot potato.
And let me say I'm NOT being political. Almost none of the "tea party" types cared about fiscal and monetary issues until a democrat was elected, so I don't really see them as intellectual brethren so much as pawns of right who would not care one iota if it was one of their guys running up the red ink.
Equally funny is the reasoning given for a significant dollar rally. These volk say that the dollar is going to get so cheap (because of the FED printing it at record pace) that everyone will just rush to get more. And the debt does not matter because we owe it to ourselves. And the economy is going to get better as we print more dollars. Any day now.
On Nov 05 12:46 PM yellowhoard wrote:
> I agree with the author on nearly everything.
>
> I've sold my AGQ and am now waiting for the big pullback with more
> cash than I've had in quite a while.
>
> Personally, I won't wait for 11 per ounce. I'll buy some at around
> 14.50 and more if it moves a couple dollars below that.
>
> But, damn, it's painful to hold cash.
On Nov 05 04:45 PM Joe Bruin wrote:
> Many people think the banks are making naked shorts.
What backs up a bond?? 100% money? No, a bond is a promise to pay dollars due in the future. It may be backed by physical assets or only the hope of the issuer to be able to earn profits to pay back the bond. And the buyer should understand that.
Silver futures contracts are promises to deliver silver in the future. You don't, by any stretch of what is legal or logical, have to have physical silver now to fulfill an obligation to deliver it in July of 2010.
You could, if you were a hedger and protecting against price risk, but there is no obligation.
For all those who criticize COMEX as being a scam or somehow "illegal", they simply don't understand its function. if you want physical spot silver, go get it somewhere else. That's fine. That's what the spot OTC market is for. COMEX is for something else.
It's like criticizing your dentist for not being a good orthopedist.
On Nov 06 11:32 AM optionsgirl wrote:
> Because there is no physical silver to back it up.
China hasnt spent billions on commodities because they wanted to keep dollars.
If we raise our interest rates the housing markets will get creamed further.
Where or where is the logic of our dollar going up. to send precious alternative metals down...
this essay just doesnt make any sense..
If China decides to start buying silver as well as gold. The shows over. The rest of the world will be puny compared to this 900 pound goliath .
and they are very nervous about the dollar. For good reason.
there will come a time with many investors when gold will just be too rich for consumption and one of the major beneficiaries is silver.
I buy silver as i think gold is too high by comparison.
and many others do the same .. but more will do this inthe future as Gold goes to the roof.
JPM is holding the silver shorts in check and depressing the price .
so i think never more than now is the time to buy..
I keep reading this and believe you. But can you explain it better, with examples, so I can understand it, rather than simply agreeing with it.
Where do you find this information? What does the process look like?
Dec gold open interest dropped by almost 6000 lots yesterday.
Silver up a little.
Just remember...you can't keep a rally going on just short covering.
Maybe a correction coming due???
And you will writing articles for your High School newspaper !! (lol , just kidding..the further)
On Nov 06 01:03 PM thotdoc wrote:
> "The Fed has certainly set the stage for a catastrophic dollar collapse,
> but European bank demand for dollars, for purposes of covering debts
> relating to imploding dollar denominated assets is preventing immediate
> implosion of the currency itself."
>
> I keep reading this and believe you. But can you explain it better,
> with examples, so I can understand it, rather than simply agreeing
> with it.
>
> Where do you find this information? What does the process look like?
Whether you agree with the reasons or not is a different matter, but he does point out that silver exhibits more price volitility (correct, IMO) and that silver and gold may be entering a period of "new fundamentals".
Disagree with him on his conclusions if you wish, but he does make a case for singling out silver.
On Nov 06 03:17 PM Jeff Nielson wrote:
> I found virtually no redeemable value in this article. The author's
> comments about silver production demonstrate he has no understanding
> of silver mining - at all.
>
> As for his central argument of "why" silver is poised for a fall,
> what he essentially said is that he expects ALL commodities and ALL
> equities to fall. Based on this extremely general (and simplistic)
> reasoning there is utterly NO justification for singling out silver
> as an asset-class.
>
> It would be like expressing an opinion that ALL the share prices
> of U.S. banks were set to decline, and then titling the article "Goldman
> Sachs going down".
>
> Apparently the ONLY point in singling out silver is simply to attract
> attention to an otherwise banal post - which offers no real insights
> of any kind.
in the case of margin calls, everything gets clobbered.
it was only a year ago that we saw mind blowing margin call devastation.
So zip it Nielson, it is time to stop padding your pockets on the dime of the helpless fools who follow your advice and think what you say has any merit.
GreatWhite
On Nov 06 03:17 PM Jeff Nielson wrote:
> I found virtually no redeemable value in this article. The author's
> comments about silver production demonstrate he has no understanding
> of silver mining - at all.
>
> As for his central argument of "why" silver is poised for a fall,
> what he essentially said is that he expects ALL commodities and ALL
> equities to fall. Based on this extremely general (and simplistic)
> reasoning there is utterly NO justification for singling out silver
> as an asset-class.
>
> It would be like expressing an opinion that ALL the share prices
> of U.S. banks were set to decline, and then titling the article "Goldman
> Sachs going down".
>
> Apparently the ONLY point in singling out silver is simply to attract
> attention to an otherwise banal post - which offers no real insights
> of any kind.
Silver will follow gold if there is sufficient investment demand for silver. Period. Investment demand is the only factor that matters to this debate.
Gold is built on investment demand, and silver is its volatile second cousin. However, it's hard to imagine significant weakness in silver if investment demand in gold stays strong. I am most confident in gold for all of the obvious reasons, but I certainly believe that strong gold supports the silver price, regardless of industrial demand, new supply, etc., in the silver sector.
In other words, in the face of rising investment demand, the supply of gold and silver are both very limited compared to what...? Dollars, Euros, Pounds, Yuan, Yen, etc.? For sure, the supply of silver is limited in this context.
Well, according to MY chart analysis, silver may pull back to around $14.50 (NOT $11)...and then continue upward to $20. Sure, I could trade around that and attempt to avoid a maybe 10-15% decline in paper gains...but instead I think I'll take the opportunity to ADD to my silver position on weakness.
"Prognostications as to exact prices, of course, are seldom accurate."
At least you got that part right. Still, I say silver will hit $20 before it sees $11.
On Nov 05 08:39 AM Mike Landfair aka Mover Mike wrote:
> The indicator that led you to be bullish on Silver, backwardation,
> hasn't changed for the better it's gotten more narrow. Yesterday
> according to Bill Murphy's column at Le Metropole Cafe, "There is
> only 1 cents of contango in silver NOV/DEC contracts and only 2 cents
> NOV/JAN contracts. The contango in gold NOV/DEC remained at only
> $0.6 and $1.2 for NOV/FEB."
> How can that be bearish for Silver? Hmmm!
The dollar also appears on the verge of rallying very strongly but it has continued to disappoint those expecting a reversal, the Fed's last statement makes it obvious the dollar will continue down in the short run, too obvious perhaps. Maybe markets will just frustrate both sides sides for a few months.
Disclosure: long gold, long dollar against aussie, kiwi, loonie .
China is still taking batting practice; for them, the game hasn't even begun.
For the U.S., the game is long-ago over, and the "team" is still on the field trying to figure out how they lost.
On Nov 07 09:15 AM Echute88 wrote:
> The guy who wrote..."Two words. Beijing put" is right on the money.
> China has advertised on TV for its citizens to invest in silver/gold.
> Mr. Goodman obviously knows nothing about Chinese culture or losing
> face. China WILL support/maintain the price of gold and silver at
> certain levels.....and trust me.....they won't let it go to $11 bucks
> and piss off the peasants.
-Tim Roller (available for employment) tim8rolls@yahoo.com
On Nov 05 11:48 AM Avery Goodman wrote:
> This piece was intended as presenting some thoughts on a speculative
> trade. It was never intended as a primer on investing strategy. A
> very limited part of anyone's portfolio, in relation to overall wealth,
> can be devoted to speculative trades. The risk of being wiped out
> is too high to devote a large part of your portfolio to this type
> of activity. Remember, your family must eat, regardless of whether
> you win or lose in the market.
>
> A long term "core" position is very different. Long term, you may
> choose to hold stocks, bonds, metals, and so on. You've determined
> that the long term positions are worth sticking to for a very long
> time, regardless of whether they move up and down a bit, while you
> are holding them. Income can be generated from long term holdings
> in the form of dividends, and/or by selling covered calls at appropriate
> times.
>
> In contrast, speculative trades are short-term ones that have a reasonable
> likelihood of resulting in a spectacular gain. You take a big chance,
> and are willing to lose the value of the entire investment in exchange
> for the prospect of a big gain. You should not bet any more money
> than you can afford to lose on speculative trades.
>
> Acting on the opinion that silver was going to soar, back in March,
> and, now, acting on the opinion that silver is about to go down substantially,
> are both examples of speculative trades.
As a long term silver investor, you will need to grit your teeth as it gets periodically clobbered. The reason for the volatility is a topic for a book, or, at minimum, an article, because historically silver and gold are the most stable commodities. Not anymore. Without a long explanation of why, we can simply say that lack of effective regulation of the futures markets casino clearly has something to do with it.
Decent men do what they can to make the world a fairer place. But, practical men will also deal with the world as it is. Practical men will not engage in swordfights against windmills. It is not always pleasant to deal with reality.
One reality that an author on seekingalpha must deal with is the requirement of disclosing long or short positioning, I DO NOT endorse the idea of people taking short positions in silver. Generally, that should be left to people who have the knowledge to do it without putting themselves at risk. One can be both hedge existing silver investments, or become overtly short silver in many ways, including buying puts.
The essence of this article is simply an explanation of why I reversed my opinion, temporarily, on a bullish speculative trade suggested in an article I wrote in early March. Nothing more.
objects on graphs etc. What I am trying to say is that after 2010 there can be more bear movements in the markets because I don't think our economy can properly rebound without our exportations improving and that shall be after the C.I.S. of Moscow joins the WTO!
Piece of cake, praise unto the Lord, Amen.
I believe one expert has stated the law of averages for gold prices comes out something similar to every 82 days for a bear, and every 95 days for a bull. Could someone please correct my poor sense of recall?
On Nov 05 09:41 AM Jimbo wrote:
> As a holder of physical silver and an investor in a broad collection
> of miners, You arguments sound plausible to me. I plan to sit tight
> since I believe the destruction of the U.S. currency lies ahead.
1. In times of panic, thoughts turn to gold, which is useful as a preservation of wealth in an inflationary period [or dollar depreciation period, which by all accounts has been going on since 1913]
2. Gold, Silver and most miners will prosper and good for them.
3. If the SHTF, loads of folks will be sitting on a mountain of gold, which if it becomes an alternate currency, could be interesting. Seems a lot more gold has been hoarded over the years, so it may not be quite as scarce as the pundits would have you believe.
4. Silver has been IGNORED [as have the pgms] Why?
5. Methinks that the bankster/FED mob wants the sheeple in gold and they are going for silver. Has a lot more room to go higher and historically [pre-1913 Fed at ratios of 15-20:1. Seems grossly under-priced to me. Once silver spikes, perhaps some institutions will have their own mystery hoards that will help bail them out from their devastating balance sheets [Including the Treasury?]
6. While silver industrial use has dropped, its decline was due in part to less folks buying wedding silver AND decline in traditional photo film processes as people went digital. Currently, it's been proven effective for water sterilization [have a silver ionizer in the hot tub!] and emergency wound treatment. Both of the aforementioned have a market and excellent potential growth. Coupled with investor demand which has been significant, I don't think the miners can get it out of the ground quickly enough.
So maybe a fall back, but I don't see a tumbling price to 11 or so, nor do I see any fallback position lasting long.
Even if the dollar has an immaculate rising, ask yourself, 'If the fed has been debasing the greenback for 90 years, why stop now?' All they would do is slow down the rate of descent. Frankly at this point, enough people are just too well-informed and will not trust the paper.
I foresee folks hiring contractors for work around the house and paying in silver coins.
Another note, I read that SA is shipping fractional Krugerrand in rather large quantity to the States. A first in this sort of volume.
Now I'm going to throw darts at the board to make my next commodity forecast, lol.
www.marketwatch.com/st...
On Nov 14 11:55 AM User 429609 wrote:
> Very Interesting Article:
> www.marketwatch.com/st...
btwos.com/silver.html
btwos.com/gold.html