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Silver dropped... so what

May 08, 2011 9:16 PM ET
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Silver dropped... so what... is anyone really all that surprised? Did everyone think silver was going to shoot up to triple figures by the end of the year? Did anyone really think this plunge was not going to happen????
Silver dropped like a rock because it was climbing too high, too fast and short term investors simply felt it was time to thank their lucky stars and take profits and as that sentiment took hold it snowballed. Using logic with silver is far better and more effective than babbling about charts and trends.

A lot of short-term bandwagon jumpers got out last week along with a bunch of investors that simply didn't want to push their luck any longer. Finally, a third group, the panic stricken jumped off as the price plunged. So, what does this mean using logic? It means that the price of silver will not drop off a cliff this week like it did last week. It means that there is still some uncertainty out there so a lot of people will be watching this week which means the volatility will likely simmer down. No one knows where the bottom is and charts won't tell us either. Again using logic, it would seem that we need to watch Monday and Tuesday to see if Friday's slight upturn holds. If so, I think we can conclude by Wednesday that the tailspin is over. If it continues to drop then grab a beer, sit back and watch another few days ... the bottom is very near. It is either here already or perhaps it will drop into the high 20s but thats it. Silver is not returning to the teens like some idiots project. Now, where does silver go from there? I would imagine it will head north again but at a much slower rate than it has these last 18 months. Silver is still undervalued and still below the ratio to gold that is expected. Rather than silver "correcting" itself every few weeks these past 18 months, it did it all at once. While silver will always be volatile it should be a bit calmer for a while. Silver belongs in the 40s and so look for the price to climb back up slowly but surely. I can see another small run upward in the fall and early winter and maybe it spends some time in the 50s by year's end. After that, who knows... 2012 is too far away to even offer and educated guess.

To sum it up... silver did what everyone knew it would eventually do.. it corrected itself... now its back to moderate volatility and a slow rise back up so put you charts and trends away and for once use simple logic. Every graph and trend in the book was wrong regarding silver for the past 18 months so why will they suddenly predict the future now... Use your head folks.. its by far the best investing tool you own.

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