The Next Time Silver Crosses Above $30.00 Will Be The Last Time

TMO ^ | 7-6-2012 | Bob Kirtley

[blam]

The Next Time Silver Crosses Above $30.00 Will Be The Last Time

Commodities / Gold and Silver 2012
Jul 06, 2012 - 05:41 AM
By: Bob Kirtley

It has been an interesting week on the economic stimulus front with what looks like a co-ordinated effort by the major powers to ignite their respective economies.

The European Central Bank (ECB) made the headlines with a widely anticipated cut to its key interest rate of a quarter of a percentage point to a record low 0.75 per cent in an attempt to ease Europe's financial crisis and boost its stagnating economy. This move by the ECB will make it cheaper for people and the business community to borrow and ultimately spend this cheap cash.

Next up to the plate was The Bank of England (BoE) chipping in with STG50 billion or US$77.62 as part of its Quantitative Easing stimulus package to boost Britain's recession-torn economy. The BoE also decided to keep its main interest rate at a record low of 0.50 per cent after a two-day monetary policy meeting.

Then we have The People’s Bank of China who decided to cut its benchmark lending rate by 31 basis points to 6.0 per cent.

Now we wait patiently for the next shoe to drop, which belongs to the United States. This Friday another set of Non Farm Payroll (NFP) will be announced with the hope that they are somewhere north of 120,000 jobs. However, should this figure come in at sub 120,000 then the heat is back on the Fed to take action.(This Friday, 7-6-2012, number is 79,000 = 8.2% unemployment) If this figure is as low as 60,000, then Chairman Ben Bernanke will be required to move and move quickly.
Our own opinion is that it will be a low number and therefore some form of QE3 will make an appearance albeit in drag if necessary. Any indication that QE3 is on the cards will ignite gold prices with a subsequent knock on effect lifting silver prices as the demand for both of these precious metals gains traction.

All of the above represents a policy of cheaper money and more money, which is inflationary through the continuing debasement of our spending power. The lack of confidence in fiat currencies still exists despite the short term rally in the US dollar.

You may recall the last time we updated the silver chart we said: “that silver could go as low $26.00, so acquire gently.” That level is holding for now as the chart shows and the longer this sideways action continues, the bigger the move will be when it comes. Also note that the RSI has dipped below the '30' level and that silver prices did rise, but not in a convincing fashion, the 'tease' for silver bugs continues. However, rather like a bouncing ball the oscillations are getting smaller with every bounce.
The trading range is narrowing and in the near term silver prices will break out of this range and move almost violently to new ground. As we see it the odds are skewed towards an increase in silver prices rather then a fall and once they do catch fire it will be dramatic. The regulators may well move to limit the rate of change that occurs, however, once through the $30.00/oz level the ensuing pullbacks, real or manipulated will not bring the price back to this level again.

To conclude we politely suggest that you accumulate as and when you can and that you do not sell any of your physical silver bars or coins, you might be just offering someone else a real bargain. As for the stocks we remain skeptical about their ability to perform, its not happening for them at the moment and we need to see some signs of investor interest in the producers before we decide to increase our exposure to them. At the same time we are not selling any of our silver producers as we purchased them early in this bull market and they owe us nothing.

Now for those of you who are adrenalin junkies you may want to consider allocating some of your funds to a few well thought out options trades. As we see it options are the only vehicle offering leverage to the underlying movement of silver prices. You will need to be highly selective, totally focused and disciplined. Once you have made a purchase the clock is working against you and Theta is your enemy as the time premium erodes with each passing day. Options do not fit a 'buy and hold' strategy its a buy, wait until your target has been achieved and sell regardless of how much further you think that they may have to run.

So if we have stimulated your interest drop by and see us some time.

We hope that you all had a very good Thanks Giving break, however, its behind us now so get your game face on, the second half promises to be explosive, one way or another.

[blam]

Measuring Global Econcomic Health, How is Dr Copper Feeling?

[Attention Surplus Disorder]

Yeah. And should silver break down under $25 down towards $22, high teens could be in the offing. Same degree of technical analysis. And I have kilos of the stuff, I’m not pooh-poohing the bulls.

As I’ve pointed out many times, those who are familiar with silver know it is a wild ride. More saliently, silver has a way of taking a long time to digest upwards moves unless it is in a frenzy and I see no great motivator for frenzy. But I acknowledge, that could be my shortcoming of vision.

Remember well: Silver only left $10 decisively behind in 2009 and traded under $10 for 1/3rd of 2008. So silver is in elevated territory. It could take a few more years to prove it can stay up here in the highish 20’s. And that happens to be my view of things.

I do NOT believe there is now nor will there be any great hurry to acquire metals at these levels. IMO one will be able to buy these metals at these prices +/- 10% for quite a while. On the other hand, if the condition that supposedly will drive these metals to their projected heights occurs, with green cash one will be able to buy things at prices you can’t imagine right now.

All just my opinion, of course. Nobody can predict the future.

[Steamburg]

I’ve heard 30 pieces can buy a lot. I’ve also heard that it’s a little on the brittle side for good casting.
With today’s word that Japan is in trouble, again, I’m not so sure what the next few months will hold.

[ChildOfThe60s]

And should silver break down under $25 down towards $22, high teens could be in the offing

I'd be surprised to see that. But.....I will not deny the possibility.

Since for me, physical silver is a disaster hedge more than a tradable investment, I am not getting too twitchy on this ride.

If it were to go into the teens, I'd scarf the stuff up. The low 20s and I'd still grab another several hundred ounces.

[blam]

Posted yesterday:

Silver, Gold And The Coming Deflation (The Great Tribulation)

[Attention Surplus Disorder]

I probably would, too. My post was meant strictly as a warning against price prediction based upon traditional TA, particularly for silver and by proxy, gold. Don’t get me wrong, I love silver and think it is a valid investment; but I am also acquainted with its “DNA” and we who wish to accumulate it for the type(s) of reasons you cite must remember that the spot price for silver is determined not by what a few million us wish to happen; it is driven by a very few who can trade millions of times what you and I can afford or would ever ponder affording.

You and I cannot and probably would not trade in and out of physical silver for a price change of a buck; the spreads would kill us. But in the futures market, money can be made on a move of a dime, a move small enough that we could never hope to capture it on physical. And we must never forget that miners are in general and in effect permanent high volume shorts in the market as they hedge their production to meet current cash requirements. Though there may well be one, there’s no “grand conspiracy” required to produce the type of price action we observe on the spot market.

[Jet Jaguar]

Blast from the past.

Goldbug ping.

[RebelTex]

bookmark

[bert]

-—— I’ve also heard that it’s a little on the brittle side for good casting.——

Actually, silver is a real easy metal to cast and makes beautiful castings that remain quite malleable. I vacuum cast the metal regularly

[ExSoldier]

Question: I have been contemplating buying a bag of 90% silver from MONEX for portability and melt value. A bag will set me back $1,000 and at current melt value for the silver is worth about $24K. I currently own about 3 KILOS of silver bar bullion. Was worried this might not be very divisible in case of monetary collapse and thought about trading to MONEX for the bag of 90% silver. What do you guys think of this strategy? Should I hold onto my bullion? I bought when it was just under $15.

[Attention Surplus Disorder]

I, myself, would not make that trade, but I am not the big believer in “silver to $1000 therefore you won’t be able to make change”. I own plenty of it, a lot more than 3 kg, though it just so happens that I own about half a bag of junk silver-—because I started collecting it in 1965!

Some disconnected thots:

I agree, silver coins are very divisible. Most silver buyers START with the silver coins and after a while, do not like them as much as .999 bars and stop buying junk coins. You seem to have reversed that order. Oh sure, I will buy junk if I can get it a tad under market, and I have done so on odd lots. >>I am always ready to blow a few hundred bucks on silver, any old time.<<

I don’t fear the large bars, though I am not buying any more. My favorite form is a 10 oz bar. I only have 2 x 100 oz bars. If I were buying > 1000 oz, today, I would elect 100 oz bars for at least 600 oz.

A bag of junk silver, @ 55 lbs and the size of bowling ball, is not my model of “portability”.

I respect what you are thinking of doing. If your existing stash is in one kilo (32+ oz) bars, then I’d be more encouraging. If your current stash is mainly in one ounce rounds, eg; already smallish quanta, then I would (if I was concerned about divisibility) just go buy 2-3-4 rolls of junk instead of taking what would likely be a $1 per oz hit on whatever you traded in. Don’t forget that because you were smart or fortunate enough to have bot Ag when it was much cheaper, this gives you price protection. I have bought silver at every price between $5 and $35 (very little anywhere over $30) This, the dollar cost averaging” notion, I take it you are familiar with.

You know, I assume, that ANY TIME you TOUCH these metals, there are these inevitable “frictions” that suck away value...either penalty in, or premium out, or freight in, or wire transfer cost, or...whatever. The world will find some way of charging you money when you either buy or sell this crap. <<THAT is the most important lesson I can impart.

All this is just my opinion, nobody can predict the future.

[ExSoldier]

Ah my stash is just in KILO sized rounds. If you've read our Travis McGee's latest novel, Castigo Cay, you'd see where such a stash makes eminent sense in the event of monetary meltdown. If gas is $60 a gallon blackmarket and you have a roll of 90% silver coins (quarters) valued today at $240 then you have a ready and divisible supply of emergency cash. You won't be able to use greenbacks due to Gresham's Law. They'll be worthless. With greenbacks the price would be $600 a gallon.

[Attention Surplus Disorder]

Understood. But I think if you carefully re-read your own post you’re relying upon 3 suppositions/theories/prognostications.

Based on a novel? Really?

In between “now” and “then” the dollar will possibly, even probably, decline in buying power but I think the idea that it goes to “zero” is extreme. Plus, from your composite scenario, you are eliminating the case of severe deflation, where your green cash dollars may buy distressed assets much, much cheaper than they can today.

In short, I reject the extremist argument that the dollar goes “to zero”. I also think it is wrong to eliminate the deflation argument from your table of possibilities.

If gas goes to $60, astounding numbers of people will not be able to justifiably drive to work.

I don’t think this stuff is predictable, to the extent that we are fish in water, we cannot objectively analyze water. But it’s all a lengthy thought exercise, all of which depends upon (what I find to be a faulty supposition) that we can predict the future, when I am far more sure that we cannot. You posed a simple question about transforming form that makes sense to ponder, but one can’t really perform that decision in the midst of a giant, scary, amorphous philosophical discussion. Whatever these metals do, they do not because we think about them. They themselves have no thinking power, yet for those who foresaw the future and made some moves based upon the fundamentals some years ago, the non-thinking metals were just as smart as we were. The bottom line is that you either like dollars or metals and when you “sell” (eg; transact) dollars or buy or sell metals, you are expressing a preference. And that preference can change over time and to various degrees. Unlike many PM fans, I have sold lots of silver. And bought it back. I am doing neither now, but I am itching to buy some gold.

If you’re concerned about what you originally posted about, you should be able to trade a kilo of silver for about 4 rolls of dimes and I would just do that and be done with thinking about it.

[ExSoldier]

Based on a novel? Really?

Not just any novel, our very own freeper Travis McGee. His stuff is I think, very realistic and if I might say so not immodestly, I was in the acknowledgements section of his first trilogy. The circumstances are I think very applicable and could become real. Look, think of the monetary meltdown that Argentina suffered through some years ago.

[Attention Surplus Disorder]

Yeahbut—Argentina’s debt was denominated in USDs (or, gold). This is the difference between ALL the examples of hyperinflation commonly cited (Weimar Germany, Hungary, Yugoslavia) and it is a GIANT difference. That’s why I say, that as fish in water, the idea that we can objectively analyze all this is objectively more preposterous than the very realization that we are indeed fish in water. If that makes sense.