Bernanke's FED Remarks and the Bulllion Market

Owle, I am not trying to hi-jack your thread here, but I did want to include some advice, or opinions from a day trader. I simply asked the question on weather this would be a good time to invest in physical silver. This is his response: Thoughts?

Hello,

I remember when I worked on Wall Street as a Stockbroker we would often help clients 'Hedge' their trades. If they were expecting a move higher in equities we would simply sell some Gold or Silver to hedge our longs. Since then which is over 10 years since, much has changed. Now, when you hear commodities the first thing mentioned is China, China and China.

FUNDAMENTALS:
Precious metals prices have exploded in the wake of credit defaults and loose monetary policy in the last few years in US and Europe. The growing concerns of credit defaults in China may have the same effect for precious metal demand, supporting prices going forward. Look for the next round of inflation data from China as a major factor in the silver market.

The fundamentals are there, but at the same time Silver is very over bought here. You may want to wait for the next leg down which may just come if the Stock Market begins to correct a bit.

CHART TIME
I personally am waiting to see if the DOW makes it above 13000 and stays at least for 3 days straight. If so I may look for a Silver long but as it appears now this looks more like a good short instead.

I am in no way recommending anything here, just mentioning what I am looking for.

 

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I guess it is not very in-depth, but what do you think of China's inflation practices affecting bullion prices?

 

Silver may be overbought when looking at the short term charts, but not long term. The term 'overbought' really just means it's above its moving average, and that is entirely dependent upon how many days are in the particular moving average used, whether the 200 DMA or whatever it may be. To say that it is overbought without quantifying the range is a vacuous statement. Also, whether it is overbought or underbought has nothing to do with fair value. It has everything to do with relationship to the previous price.

That being said, it does appear that silver is trading at the ceiling of it's current downward trendline from $49. I would not be surprised to see it dip back down below $30 again and hit the QE2 trendline. After that hold on to your hats.

 

you guys ever thought Bernanke just said what he wanted to say to drop the price of silver cause he was stopping by his local coin shop to load up? as well as buy in on his kitco account just waiting for silver to go back up to sell then "drop" the price to rebuy in?

if I had his job...I know I'd be A-OK with people hating me if I could get away with that... lol....

 

not to burst your bubble but it seems to me in most your threads your telling people to hold their hats or to watch out for the price of silver soon...yet...it's not really doing anything out of the $25-$40 range since it hit $48 last year then basically crashed...I get your reasoning and some of your arguments are somewhat valid...but I think a big problem for silver right now is lack of public support...the real unemployment rate is like 15-18% depending on what service you ask...if 1 out of 5 people don't have a job and close to 47 million people on food stamps...how can a commodity take off anywhere really? I mean there has to be ALOT of money in something to make it actually worth alot...and sure there are buyers but nothing out of proportion to what can be made or minted...
my 2 cents is until the general public recovers from the Obama economy of government control and other laws and legislation is overturned so people can get jobs....silver is going to have a hard time taking off anywhere except in a cylindrical bubble of $25-40 or maybe $25-$50..Also I think the most we can expect is overly minted bullion that will have zero numismatic value...Alot of people out there know the dollar is becoming inflated...but the problem is they don't even have jobs to make any dollars to put into silver to hold value anyways...

 

I see a flaw in this argument. You are basing the "value of silver" to the USD? What about the actual value of silver? Can you take a step back for a minute and really ponder what the value of silver is compared to the value of printed currency? I am not going to go out on a limb here and say that silver will take over as the new currency, but it does have to be mined does it not? It has purchasing power in that it actually has value? It can be used as both a commodity/industrial metal and a form of currency. What happens to the paper market when the euro goes?

From all angles silver has value. Currently it has value in that it is used in medical equiptment, your t.v., your computer, solar panels, not to mention it has the highest electro conductivity of all metals. It also is used in jewelry which is is becomming more popular with my generation than gold (atleast westernized).

So how about when the economy begins to slip? So the dow jones declines and silver begins to slide right? Bam.. hedge against inflation. Why? Because depending at how bad it gets we will have to have some other form of currency correct? I mean it isn't like we will resort to west virginia trade tokens, and people certainly won't go for another form of paper. Even at an open market there must be some form of exchange to universally connect guns for seed so on and so forth.

You mention that people are not buying or have not bought into silver yet, and it is not taking off. So if nobody has bought into it and it is currently hovering around 37-38 per oz wouldn't this make a good case for silver when it does take off?


In course of this rant I would just like to point out that the value of silver continues to climb in relation to the real value of the dollar weather we would like to admit it or not? Did you ever think that oil prices could be the result of the weakening dollar?

 

the silver isn't going up that much...it's been hanging around a range in price for the past year...imo I think silver hasn't taken off...that is if it's going to take off...also I would like to add something I was told when I was about 7 years old concerning baseball cards I had... the beckett price guide would say $2-3 value for a card and I was so EXCITED...then I was told by my mom..."it's only worth that if someone is willing to buy it" silver can be worth $140...but if no one buys it...is it really worth it?

 

If it crashes like the baseball card market than I guess we can trade our used tires in for ASE's.

 

well I'm not talking about the baseball card market really...just value isn't exactly determined by a magazine...it's whether you got a buyer at the high prices your trying to sell...

 

I do love me some baseball cards, especially Ken Griffey Jr. who actually earned his records, but with silver there's really only one thing that matters which is the supply deficit. The trend is clear that one day there won't be enough silver to meet demand until the price rises enough to pry it out of investors' hands. This is a catch 22 and a vicious/virtuous circle (depending on your viewpoint) however as the people who are investing are doing so because they already understand the market and currency devaluation, and will not be easily swayed to sell for a currency that has an accelerating devaluation. As such the price will rise to bring metal on the market, but in doing so it will make people more reluctant to sell as it becomes more evident that currency is being devalued.

I haven't said to watch out for a price rise in silver soon. I have said to watch out for a couple of particular events. The big one being above ground available silver reaching a supply shortage, and the technical one being when the price touches down to the QE2 trendline which could be as low as $26. Only after that happens do I anticipate the big move up, and that is based on how this bull market has behaved in the past in that it establishes a trendline, breaks out from it, and then establishes a new steeper trend only after falling back to the original trendline it already broke away from. We have yet to fall back to the trendline we broke away from with the huge run last year. If the current trajectory remains intact it could be as late as September of this year before the downtrend from last May's high comes to a head with the longterm uptrend from QE2. That will force a decision out of the market to identify which trend was a failure. After that if it doesn't break to the upside then there will be a strong case that this bull run is over, but I can't see that happening with promises of further currency devaluation, the very small amount of silver above ground, and the inability of mining supply to meet demand.

Silver has also been the top performing asset so far in 2012 even after a $3 drop in one day. It has gained more this year in 2 months than gold did all of last year.

 

I've said many times that I still like PMs and think the long term bull market is intact. In the shorter term, I believe the situation is as I've described it, and anyone here who believes they have it figured out should be out there making huge amounts of money for themselves instead of trying to convince people in an internet forum that they understand it.

 

You would think that would be true for everything, but it's obviously not. There will be someone to pay that, or any amount for it. An example, look at gold. People pay $1800 an oz for a yellow metal and they don't think twice about it, yet if you ask 100 gold investors why the price of gold is 7 times higher now than it was 15 years ago, you'll get 100 different answers, none alike. So, they don't know why the price they're paying is high, nor do they care. They line up around the block to happily pay whatever the guy who holds it charges.
Guy

 

Of course, you could turn around and say that it's only worth what someone is willing to sell it for.
In the case of bonds, calculation of value is pretty straight forward. Stocks are a little more complex but can still be estimated. For PMs I tend to use cost of production as a measure of "value" because if someone won't pay that much, mining will stop in the long run. For baseball cards, they probably don't have intrinsic value although I don't plan on selling mine [1950s and 60's, many error cards and hall of famers] until the price is stupid high.

 

My "GUESS" is that you can't believe anything coming out of Washington these days. If they say there won't be a QE3, you can almost bet on it...or something like it. Assuming no abatement of liquidity into the market between now and November, I would stay exactly where I am...in stocks. As we approach November (or as gas goes over $4/gallon), I'm jumping out of stocks and looking for real estate deals.

The entire "recovery" hasn't been a recovery at all (imho)...we're simply flooding the market with money we don't have...our children's money. The idea is to borrow now and pay back with inflated dollars...let's see how long that strategy works. This rich/poor debate and the "Occupy" movement is nothing more than a "Progressive" smokescreen to justify buying votes via "tax cuts" for people that don't even pay Federal tax. :rolling:

One hundred years ago we were a society that valued Thrift, Industry, and Charity. Today we're a society that values Debt, Consumption, and Selfishness. This "change" has happened under the progressive guise of "compassion for the least fortunate among us" who have had a string of bad luck "through no fault of their own". The fact is that we've been turned into a Welfare society where no one takes responsibility for their own future.

"Oh...if I just had a BWM and a HD big screen...everything will turn out all right"...sound familiar, anyone? :kewl:

100 years ago we funded the Federal government through taxes that were "apportioned among the several States" ...tariffs, mostly. Today, we have an income tax and "free trade" agreements around the world. Is that smart? Is it smart to open our markets when we have a 23% embedded tax in our products but let foreign countries sell goods in this country tax free? Last year South Korea sold over 500,000 cars in America. You know how many US cars were sold in Korea? ...less than 1,000. ...but "NO!" the fault isn't our antiquated tax system...it's the big, bad corporations that are moving our jobs overseas.

Come On, people! Am I (and Dr. Paul) the last people on Earth with a brain? Repeal the 16th Amendment and adopt the Fair Tax!! :hail:
(before it's too late)

Oh...and did I mention, "buy stocks"? :thumb:

 

With the central banks flooding the world with money, that stance seems reasonable. However, the ECRI's indicators say we're going back into recession this year (Q2/Q3). And I don't remember the ECRI ever being wrong.

I'm still looking for good stocks and commodities, but being very vigilant about an exit.

 

Very prudent. :thumb:

Assuming there isn't a flare up in the Persian Gulf between now and the elections, I expect any and all steps will be taken to maintain the appearance of recovery.

 

If you're trying to get through the tiny door from derivatives into tangible assets during the stampede it will already be too late. You're not going to get advanced warning in such a scenario.

 

I'm already going into tangible assets. Why do you think I'm on a coin forum?

 

I might come off as a butthead for saying this but I hope we do go into another recession...for the USA's national security...it might just wake some people up to seeing propping up an economy is no real fix...also I would like it to happen right after I sell off all my silver so when the deflation of it hits...I can buy back my silver and still be sitting on a small pile of cash...I'm also about out of kraft mac 'n cheese boxes that I paid 4 for $1 back then...and I remember about 3 weeks before that they were $0.79 each...wonder how much they are now...

 

Mmmmm....Kraft Mac & Cheese! ..."The Cheesiest™"