The silver crash continues on an almost daily basis, with the shiny metal down another 2.66% around mid-day today. The total decline from the peak is now just over 33%. Because of the dramatic nature of the nearly threefold rise in the price of the precious metal over the prior 12 months, I previously called for an exit from speculative long positions and an entry of speculative short positions at about the $45 mark.
At that time, a downside target of $25 to $30 was given as a likely bottoming range and re-entry point for long-term silver bulls.
The $25-$30 range is now just $3 away. How time flies when you are having fun.
A bottom around $25 an ounce still gives long-term investors a nearly 40% return over the prior 12 months. How can we really complain about that?
Silver can be expected to chop around a bit over the summer to consolidate gains in the $25 to $35 range. The hot money traders (i.e. hedge funds and momentum traders) will be off to the next trade du jour in coffee, pork bellies, Apple (AAPL), or frozen concentrated orange juice, so don't expect a quick return to the $50 range. The market will be left to industrial consumers and long-term silver investors.
Expect a retest of the $50 resistance level some time next year (i.e. 2012) with very healthy profits going to those who re-enter long positions in the high 20s as the crash continues in the days and weeks ahead.
Additional disclosure: Long physical silver