So my two cents is that we've seen the bottom and we're coasting along. A month ago I called "Brett's Bottom" (tribute to Mark Haines!) Today's strength and the willingness of the masses and institutions to stack during the last few months would support this theory. Massive swings and transactions are usually a sign of the market changing directions. Or is this just a dead cat bounce?
I guess I just don't know. Without strength in Asia buying I cannot see it moving strongly up. We might be near a bottom but I simply see sideways trading unless something positive starts happening in Asia. Western markets are simply not much of a factor for PM anymore. My worry for prices, (not for me since I would just continue to buy), would be the large mines coming online that were started when prices were high. Rio's large copper/gold mine in Mongolia is one, but there are many others. What was invested before is sunk, and even at lower prices they need to bring this production online. So, short of positive Asian news, and given new production and continued low oil, I am not sure we have seen the bottom yet. Interestingly, a bump in industrial metals might make pm go lower. If copper can recover, silver would take a pretty big hit.
It's too early to tell if this is real or false. The market reacted wildly to a newly released report from the government. Not a first time event. Gasoline continues to drop. It's down $.13 cents in the last 2 weeks in my area of PA. Some dealers are saying they have a 3 month backlog in orders for silver. Demand seems to have out lived supply. Have we seen the bottom in silver? Will silver continue to go up for the 4th day? Will it form a new higher low? Who knows? I think a number of factors are causing this buying frenzy but I also think it's too early to tell if this is the real recovery or not. After all, it's only been dropping for 4 years. Give it time.
But it hasn't. The current drop is from the 18ish level down to around 15. You have to measure drops in stages. Each stage has additional buying pressure at it. When you drop from one stage to the next there is always basis adjustment short term unless this new buying dries up, then basis returns to normal. I guess we have discovered around 15 has a large investment pool at it. My prediction, (very low risk for me but makes me look smart), is if prices continue sideways spot premiums will decline. Let people get bored of 15 silver, new ASEs and other silver will flood the market, and dealers will have no choice but to lower premiums. Its only happened every other time in PM history, so I think I am pretty safe in my "prediction".
I understand what you're saying but I was looking at drops in stages, just on a large scale. The last time silver was in the $40's was 4 years ago, before that it was the 1980's. 4 years is a stage when compared to the last 9 4 year stages.
I look at it more in 4-5 dollar chunks. Moving from high 18's to 15 was a stage IMHO. Before that is was around 22-23. Humans with numbers are funny creatures. We assuming importance to certain numbers, that is why we behave erratically in investing. We have major and minor psychological barriers with numbers, which is why we have different levels of interest at different price points. I would imagine if silver got below 10 or gold below 1000 there would be a huge spike in interest from US purchasers. Want to get a headache? The same action occurs with all currencies. Local purchasing will spike when it hits certain psychological points in yuan, or baht, or euro, or rupees, or any other currency. Wonder why pm moves every day? This is just one factor, but can be a major one.
This is very true and a very good observation. Because at some point we all believe the price is now "fair" and adjusted for cost in/cost out. That price point is different for everyone, but the lower it goes - the more people believe it is in the "buy" column and therefore do buy - which increases demand. The other piece of the puzzle is the unexpected drops tend to scare people and then they lose interest. This is where we are now, and what makes the "silver $8 an ounce" and "Gold 800" crowd so vocal. Every time we see a new drop - there's a new predicted low that is lower than the last one. The last statement I'll make is entirely speculative - but I do believe there is more coercion in the markets these days and a lot more people playing trading games to control the cost. I left my tinfoil hat at home today, so I'm publicly announcing my conspiracy theory. It's happened many times in many markets - and I'm a firm believer that it is happening now. I believe the market is being negatively leveraged so someone can corner it - and as soon as the bubble bursts in stocks - the metals will magically shine. I'm just trying to stay one step ahead of the Hunt Brothers this time around.
Maybe it has to do with stocks, but this is such a small market I don't think we will see the true bottom until the last of the doomsdayers and those who believe the dollar will soon implode sell. Then we will be positioned for another slow run. Don't be one of those who walk away because the price slowly declined. Hang in there and buy while it's cheap.
I'm ready for prices to go up. I'm content with what I've got, and I'd like to convert some of it to land.
Precious metals are up 20-30% on the year in emerging market currencies. This is because their currencies are being substantially weakened, because their stock markets are crashing, because they were artificially inflated with cheap money (vicious cycle reaching fruition). China is devaluing too, and there are negative interest rates in the EU so the USD is strong just by standing pat while everyone else weakens. I do not think the bottom will not be in unless any of the following conditions become true: 1. The US dollar begins to weaken 2. Metal exchanges experience a failure to deliver 3. Market leverage is removed entirely There is a pretty good case that #1 has happened since the Dow touched down to 16,001 and change last week. The psychological 16,000 mark was protected at all costs. Ever since then everything has been going up; stocks, metals, oil, and the USD is strengthening at the same time. One plausible explanation for this is stealth QE providing the market with its fix, and if that is the case, by not advertising that this is occurring (thus not further undermining Fed credibility since they have delusions of a rate hike which has the inverse effect of money printing which QE requires) the world still has enough faith that the dollar is better than the rest of the pigs at the party. Still, the cause of all this deflation was inflationary policy leading markets away from equilibrium. Any attempts to stave it off by more money printing will only make the deflationary pressure grow in the future. At some point there will be a decision point between hyperinflation and default, and in that case you will need to have secured your metal position already or else you will either be left with currency that has no value (USG default) or a currency that is depreciating so rapidly that price discovery becomes problematic. Make no mistake, where other fiat currencies go the USD will follow. As the global reserve currency it will receive plenty of safe haven demand until people finally choose to forsake IOUs for real money.
And just for the sake of casting my lot, I do not think we have seen the bottom in the paper price. I do think we have seen the bottom in the physical price however, which makes buying much easier in spite of spot price fluctuations since it always costs about the same.
