Sunday, August 29, 2010

Silver Poised To Explode

Since my post on Wednesday didn't jinx the price of silver, I'm going to keep riding the horse.  In fact, contrary to the expectations of many, silver has moved higher thru Thursday's option expiry and thru most of the "roll" period in the futures from September to December.  Not only is this price action exceedingly bullish, but I can not recall anytime during the last 9 years that silver has moved sharply higher like this during Comex options expiration/futures roll (that's not to say it hasn't happend, I just can't remember it if it has).  This price/volumn action further underscores the bullishness of the market.

Here's is an updated weekly chart of September Comex silver.  I can't recall ever seeing a chart formation in silver that looked this bullish.  Recall that when gold broke out of its massive head n shoulders formation, it ran from $1030 to $1250, or 21%, in a short period of time.  Here's the chart:

(click on chart to enlarge)

Silver, which typically lags gold until the end of a bull move, is getting ready to break out of its massive HnS formation. When silver makes a big move, like in 2005-2006 for instance, it outperforms gold by at least 2-to-1. If we apply that metric to silver on its HnS breakout, that would give it an initial target of $26.  I know several chart technicians who believe silver can make an initial run to $30.  I'll stick with my view for now and enjoy being wrong if that's the case.

I want to finish with a quote from James Turk's interview this week with Eric King on King News World:  "More people will be jumping on as we go higher but we're still in the very early stages of what is going to be a major bull market in silver over the next several years."

I can attest to this statement, as I was at a party this weekend and several people who poo-poo'd my economic and metals market analysis several years ago were grilling me about buying gold and silver.  Many of them laughed at me when I sold my house in 2004, but admitted they are now bummed they didn't do the same.  As I stated yesterday, the housing market is still far from a bottom and the precious metals bull still has a long way to run.

I regard Turk as knowing and understanding as much about the precious metals market as anyone out there. He explains clearly and succinctly exactly why the bull market in gold/silver, and specifically in silver, is still very young.  Here's the link and I would recommend paying close attention:  James Turk on silver

Of course, now that I've jinxed silver, if the bullion banks decide to raid the Comex this week in light pre-holiday trading, make sure you hold your breath and buy with both hands.  Silver is going much higher before the end of the year.


  1. Well, thank you so much for killing bulls again.


    I'm a bit confused when looking at Market Oracle. It is like one third of articles is about gold there. It never used to be. But what does it mean?

    Does it mean everyone expects gold going up therefore we will see some crash now? Or does it mean attention to metals becomes so hot so run up is inevitable? Perhaps it does mean both?

  2. Sti, who cares about Market Oracle. You know what % of the population looks at the vs. the % of the population globally this is still clueless or skeptical? .00001%

    This bull market aint' getting a long beard/grey hair until CNBC has been feverishly covering it every second of the day for at least 18 months, just like with the interenet/tech bubble.

    CNBC still shits and urinates on anyone who goes on their talks bullishly about the metals.

  3. I rather believe you are right. But be realistic, it is not only population. It is also about big players. You know there is great income/wealth distribution imbalance. Like 1 % of top equals to 90 % at bottom or something..

    I dunno but i suspect those rich are not dorks receiving knowledge from TV estrades.

  4. Thanks so much for your blog. I stumbled upon it a few months ago and now check it daily - the best PM blog out there in my opinion. This is my first timing commenting, but have a question... do you think JP Morgan will push the price down to around $18 again? I'm kicking myself for not buying earlier this month when silver was so much cheaper and now I am concerned I have missed my opportunity to get it "cheap". I am tempted to just pay today's price rather than wait. So, do you think it is currently a bit oversold based on the surge the past few weeks and a brief fallback is on the horizon?

  5. stib, I agree

    Anonymous - thanks so much for the feedback - I really appreciate it.

    I never say "never" with the corruption and manipulation that is allowed to fester in the gold/silver market. I would never rule out the possibility of 30%-40% correction, but since the last big correction came with silver at $19 in 2008, I think a lot of the weak hands have been washed out and have not jumped back in, for the most part.

    I also believe that the delivery demands in the physical market are starting to overwhelm the fractional paper system in bullion. If you are more worried about missing more upside, take 1/2 of what you want to invest and buy now and use the other 1/2 if the market pullsback/corrects. Seriously, where silver is going - i.e. easily $100/oz. - you won't care whether you paid $19 or $16 for your metal. Also, when silver starts moving like that, it may be difficult to find actuall sellers of physical in any kind of meaningful quantity.

  6. lets be real here, the general public will never be on board on this gold/silver run up
    1. because they have the wrong mentality of the metals is getting more expensive for the average joe, silver is definitely poor mans gold and that is the reason more avg joes get silver over gold simply because he can get more but that already is the wrong reasons.
    3.there just isn't enough supply of this stuff especially gold where its going to leave the markets completely but silver will still trade between the people.

    the way i see it is if silver outperforms gold by a high enough margin, i will just trade my silver for gold.
    i hope for a 30 to 1 ratio even a 45 to 1 and i think its possible for a very short period of time.

    $20 is the silver resistance, it just never seems to surpass that.
    most people who bought maples or eagles in the last 3-4 years have bought them in that range give or take.
    in 2008 when silver was $8, no one was able to get maples/eagles and if you did you were still paying $16+
    the 1000oz bars were a different story though.

  7. Hey Mike. Agree for the most part but I think we'll see a much lower gold/silver ration than 30. As you point out, it's the poor man's effect that will drive the gsr back to at least where it was that the peak in 1980, which was 17.

    I also agree that majority of the hoi polloi will be caught with their heads up their ass on this. But even if you go from 1-2% of the population buying metals to just 10%, because of the relatively small size, it force the price much higher than anyone in this country understands. And then add to that the fact the Indian and Chinese hoi polloi are starting to buy a lot of silver.

    Once we push thru that $19.80 - $20 level, it's "look out above" time.

  8. i certainly hope so Dave. dont get me wrong i dont hate silver but it just seems to be always in the same place. i would love silver to start to outperform gold especially by years end.

  9. the trick to beating your jinx is to buy 1 SLV put or something. just buy 1 little odd lot and you'll be ok. :)


  11. Dave--your post reminded me to buy some silver today-thanks. This has been an interesting ride the past several years and I guess we all anticipate a double edged sword ride the next several years.

    But one interesting facet is the study of human nature. This evening I was at a wedding and seated at a table of retired educators--all early retirees receiving full final pay in a state where the fund is not bankrupt-but vastly underfunded.

    The interesting thing is that these folks admitted I have been dead on right on what has happened (thanks to folks like yourself, Midas, Jesse, JS--and the rest you know) but when I say the state retirement fund will reneg on their future payments they scream at me and deny they will be put at risk.

    This has been a massive "disconnect" which is easy to extent to the vast numbers of our population. The question is why do these folks not see it or not "get it"?

    Just blows my mind. You can lead a horse to water, but.........

    BTW--the educators? I had always thought one of the strengths in a good education is the ability to see thru and question things--I guess that's not taught anymore.

  12. "BTW--the educators? I had always thought one of the strengths in a good education is the ability to see thru and question things--I guess that's not taught anymore."

    Some possibilities are too devastating to ponder.

    Just ask them if less people are working/contributing and the pension fund is flat or down on its investments, what will happen then? No new money, then what? Does it sound like a ponzi?

  13. Rothbard, the private and public pension situation in this country is so catastrophic that it makes my explode thinking about what the solution would be. It's going to be either print or collapse.

  14. I am fully on board with what Adrian Douglas said about the PM action last week.

    "So I am documenting here and now that this market just made a phase change and the ramifications are going to be seen very shortly."

    Also, where do you think the price of Silver will be headed when Sprott goes out and tries to buy 200 million dollars worth.

    Joe M.

  15. Since I've been looking for $23 silver this year, I sure hope you're right! I also can't recall the last time silver surged during an options expiry and I've been watching this market closely since 2003. I agree we should see the gold:silver ratio drop here.

  16. Hi Jennifer. James Turk and John Embry think $30 silver may happen this year. I don't see it, but you never know.

    The SEC just delayed the new Sprott physical silver ETF from Oct to mid-November and it is suspected that the motive is to prevent further stress on the tight physical market.

    Let's get silver thru that right shoulder and then we debate from which point the correction will start LOL

  17. Mike above made a good point, which I've also found to be true. When silver gets slammed by the Faumex for awhile, it's very hard to find. Now that it's floating in the sub-$20 range, it's there. This past weekend, a guy who sells at flea markets had gotten a good deal, as he put it, and although he was well-aware of the over-$19 close on Friday, he sold me a roll of mixed-date Eagles for $20. I would have bought more, but couldn't (I'm poor). But I notice that buying a little silver regularly has harmless drug-like effects, bringing a sense of calm and peace. Plus, knowing that the Gov't and Oligarchy hate people who put their faith in real money also gives one pleasure.

    Just a random musing. Thanks again for your blog. As someone on this thread mentioned, this is an indispensable PM site.

    All the best,
    Clark in Old Hickory

  18. Hey Clark. I remember you. Hope you are doing well! Thanks for your comment and your feedback. I love it: "Faumex." Haven't heard than one before but I think "Fauxmex" might be a better spelling.

    I agree, whenever the market agitates me and I buy some physical gold or silver, it has a calming effect.

  19. Thanks, Dave! You're right, "Fauxmex" it should be. I just thought of it, but doubtless I'm not the first.