Wednesday, August 25, 2010

I Know, I Know - Everytime I Make Bullish Call On Silver...

it gets hit hard by the illegal manipulative activities of JP Morgan and HSBC.  BUT, here I go again.  I will preface this by saying that silver has an extraordinary reversal off of its 200 dma over the past 2 trading sessions - $17.75 to $19, or nearly 10% - so a consolidating pullback here would not surprise me.  Having said that, if you look at the chart below, silver appears poised to make a big move, with seasonal factors now blowing some wind into the sails of the poor man's gold.  I slightly modified this chart, which was posted in tonight's Midas at courtesy of  "Richard from the Scarborough Bullion Desk:"

(click on chart to enlarge)

This is a weekly chart of silver, and the relative positioning of the standard momentum indicators are tremendously bullish.  Also, as Richard pointed out, the bollinger bands have become quite narrow, indicative of a tightly "coiled" trading behavior which often makes a big break up or down.  As you can see, the last two "coils" made huge moves to the upside.  And finally, there's that massive inverse head n shoulders formation, with the "right shoulder" oscillating just below a potential breakout to the upside.  I know several long-time participants in the silver market think we could see the low $20's before the end of the year.  I also know one chart technician who believes this silver chart is pointing toward $30 sometime in the next 6-9 months. 

Personally, I'm not putting any price objectives on silver here.  I think if silver can get over the $19.60 area and hold, the sky is the limit.  Certainly new highs in the low-mid $20's would be my expectation.

And then there's the physical problem.  I know that Sprott is going to float its silver trust sometime in mid-late October.  I mentioned to a colleague that they may find it difficult to find $200 million worth of silver (the proposed offering size, roughly).  He said that they are aware of that issue...

More evidence piles up:  Let's not forget the old gold/silver ratio.  In Roman times, the gold/silver exchange ratio was fixed at 8.  After The Fall, the ratio floated in mostly the teens.  Since the world has been on a steady fiat currency diet, the ration has spend most of its time somewhere between and 50 and 80, although in 1980 it fell back to 17.  Currently the ratio is approximately 64.  I expect that eventually we will see some regression to a long term mean ratio, but it will hit the teens again before the metals bull is over.  Here's an article from Bloomberg:   LINK Zombie U.S. investors are clueless, but as you can see, the real precious metals players globally understand the gig.


  1. It is certainly exciting action, be interesting to see just how it all shakes out. There was an excellent interview on KWN with Ben Davies regarding the "potential" for precious metals. He outlines a compelling case for the precious metals.


  2. Hey Ben!

    Funny who Ben Davies all of a sudden is getting all this attention, but he's only regurgitating what we've been saying for years! LOL

  3. Two thoughts.

    "I Know, I Know - Everytime I Make Bullish Call On gets hit hard by the illegal manipulative activities of JP Morgan and HSBC"

    Charts CAN be helpful, but I find that TPTB use them to sucker people in, to buy right before a plunge, and to sell, right before an upsurge (often making goldbugs look the fool, when they go by charts alone. How many times have we heard,"This is it!" Only to wasn't!)

    I find charting marginally useful these days, all they are useful for is painting the tape. Better to buy the dips and sell the rips, which goes against our emotions.

    Also re BEn Davies. I appreciate King World News and their interviews, but the last time gold surged they had jIM rickards on several times getting people all excited about the rising price, then poof! A 'big' downdraft.

    By all accounts JR seems like AN establishment guy, given all his credentials, so why is he so bullish on gold....and where did he disappear to when gold was plunging?

    Now As you say Ben Davies appears out of nowhere, pumping gold on the airwaves non-stop, and the goldbugs are only too happy to oblige WITH AIRTIME.

    I don't disagree with what he says, but I FIND the TIMIng curious.

    Have TPTB switched tactics? Instead of having these unknown wankers appear out of nowhere slamming gold as it drops, now we have these new faces pumping gold...only to see it drop $100.

    I am suspicious by nature, as you can see, but some food for thought.

  4. Rothbard, I agree on Rickards. He was for sure originally part of the inside elitist crowd and I'm not sure where he's coming from now. His message is not anything we don't already know and I don't what his motives are. He has been on record explaining why he thinks gold can easily go to $7k, with $15k justified if the US still has 8000 tonnes (which it doesn't) and needs to reval gold to back Treasuries.

    Ben Davies is a capitalist like the rest of us. I think he may be the 2010 version of Soros - remember Soros took on Germany and Britain and broke their overvalued currencies.

    I can see Davies using his fund to do the same thing with the metals.

    I agree on the usefulness of charts for short term trading but longer term than inverse HnS is going to explode to the high 20's low 30's....

  5. It doesn't matter if you jinxed it or not. All price slams from here on out will be bought. Same with gold.