Always remember that parabolic rises can encounter severe downturns particularly in silver which tends to be volatile. Let's wait for long term support and a shakeout to reinitiate our short term positions.
Investors don't know what to do with commodities. Traders are asking, “is it too late?” and “have we gone too high?” The question, of course, isn't easy to answer, but the simple reality is that there won't be too high of prices until the dollar becomes too low.
“The real measure of your wealth is how much you'd be worth if you lost all your money“
Investors don't know what to do with commodities. Traders are asking, “is it too late?” and “have we gone too high?” The question, of course, isn't easy to answer, but the simple reality is that there won't be too high of prices until the dollar becomes too low.Is this a secular long term top in gold and silver? We do not believe so. We are witnessing a powerful up move in gold and especially silver, where a healthy correction would be normal. There is a flight to quality away from fiat currency namely U.S. dollars. If the dollar continues to lose value, our holdings of precious metals and mining stocks will prove to be a prudent decision
In light of recent events around the world, the Fed has remained incredibly lax in its policy to push interest rates and the dollar to zero. Most every central bank has tightened, is expected to tighten, or must tighten (think China) to keep their currencies from plunging to zero.
The virtues of gold (GLD) and silver (SLV) are being addressed far and wide. The driving forces behind silver's price come from investors, industrial demands and a global shortage. The world simply is using more silver than the mines produce and new silver discoveries are becoming difficult to find. These factors are becoming truisms for public consumption. A parabolic rise has formed in silver as gold advances on to our measured target of $1600.
Please note that at these times of extreme optimism volatile pullbacks become more prevalent. Parabolic rises must be approached with caution. Silver has rallied moving exponentially while gold is still moving linear.
There will be unavoidable pullbacks in silver's secular uptrend and it would not be wise initiating long positions at these extremely overbought levels. Silver has a very high probability of shaking out investors as pullbacks follow overbought conditions. Silver is reaching extremely risky levels, yet miners are still poised to breakout. One of the reasons for such volatile action in the white metal is the large short position in silver taken by major financial institutions such as JP Morgan and HSBC, which are the subject of a new lawsuit that charges them with price manipulation of the silver market.
Conclusion: From my experience it is prudent to wait for technical corrections before getting aggressive with any commodity. We firmly believe that any corrections on the way up will represent more reasonable entry points on this uptrend. Always remember that parabolic rises can encounter severe downturns particularly in silver which tends to be volatile. Let's wait for long term support and a shakeout to reinitiate our short term positions.
We feel a pullback may be in order as the recycling of scrap increases. I don't expect it to last very long. Above all do not even think of shorting silver. I reiterate buy on dips as the price of silver is capable of doubling in the next twenty four months. I do not expect the silver to gold ratio to drop below 30:1 in the short term.
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“The real measure of your wealth is how much you'd be worth if you lost all your money“
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