$40 Silver?

Tyler Durden's picture

Not quite. Give it a few hours: it just hit $39.70. Then we expect the Hunt High should be taken out shortly thereafter.

And not to be left out of the party, gold just hit another all time record as well. At this point, Bernanke is officially panicking.

And a quick update from FMX Connect who were spot on with their $1,550 gold prediction:

Is Gold Going to 1550? An Update from our Analysts (link)

Over the past 4 weeks we have said repeatedly that Gold has an excellent chance of a $75.00 to $150.00 rally from the area of 1410.  We picked $1550 as our home run scenario. It is time for an update.

First our initial chart and prediction from Feb 24th:

“FmxConnect uses several proprietary indicators to predict volatility trends. One indicator, the TrendVol actually gives directional signals as well.

Simply stated, if this week closes above 1416, there is a high likelihood of a 75 to 175 move higher in gold over the next 2 months. Although if the indicator hits, we'd expect the move to happen in a more compressed time. The signal does not usually waste time letting you know if it is right or wrong.

The indicator combines Bollinger bands, implied volatility, skewness, and historical volatility to determine speed and direction of a potential move. The actual calculations involve using these indicators to create and proprietary oscillators.

Volatility breathes (i.e. Bollinger bands) and FMX Connect believes that Gold volatility is getting ready to exhale in a big way.“


Next James Turk’s assessment:

James Turk’s recent call for a hyperbolic move is 100% consistent with our trend-vol breakout, hyperbolic moves are in our words, volatility exhaling. This observation means that the gold price is rising at an accelerating rate, so there is in my view only one logical conclusion that can be made from this chart.  Given that gold remains the world’s numéraire by which things are measured because it is money, the other so-called ‘money’ being measured in the above chart – namely, the US dollar – is losing purchasing power at an accelerating rate.  In other words, we are rapidly approaching the hyperinflation of the US dollar.  In fact, the below chart illustrates that it has already begun.  The dollar’s hyperinflation will worsen if gold keeps climbing within the hyperbola on the chart.

We can’t be sure of his hyperinflationary stance. But let’s say his track record is pretty good.


Here is where we are now:


The bands do not lie. As long as the lower band moves away from the direction of the market and we continue to settle near or above the upper band, there is little to stop this market form going hyperbolic. We believe volatility is just starting to exhale.

Technical Observations

Rallies from here should extend quickly, as in gaps higher. If they do not, be cautious. A close under 1440 reverses the breakout. Pullbacks to 1447 should be bought aggressively with 1440 as the stop out area. Odds of taking out yesterdays high are in the 70% area according to GRI’s report last night. Our next target level is 1477. Remember Goldman called for 1480 in the Dec contract. We’re sure there will be some selling in that area.

Options Plays

We are an options data firm, and based on our data and market intel, we are comfortable with the following comments.

We believe that, as there were no good buys in options for the last 3 months, that there may be no good sales as this market is headed for gap territory. We could be in a blow off pattern (initial-breakaway-exhaustion gaps), which is all the more reason to express directional bias with options. This may end in washout, so we prefer options.

Front months: there will be opportunities to buy as two-way business will be there. Long liquidation should make for dips in vol. if you intend to buy a May straddle, buy half now and half when it gets slammed form some random sell order.

If you are a call buyer in June, the 1500 and 1550 will give you tight markets and two-way business. There are huge longs in the June 1600, so while that option may seem appealing, it could get slammed if the long liquidates


  • We like the 1510/ 1530 call spread in May for a cheap shot (around 2.00)
  • The June 1500/ 1550 call spread at 9.00
  • The June 1550 call

Back months: unpredictable but we believe most fresh directional plays will be expressed in Dec 11 and Feb 12. Therefore, selling will have to be by dealers and marketmakers, which means entry will have a lot of Vig. But it may be justified given the added time value.

We like the 1900/ 2000 call spread here in the 3.50 area (the Z 2000s are a big short in the ring and consequently that call spread trades cheaply). 100 of these spreads gives you the equivalent of 3 futures exposure but you will benefit if volatility expands as well.

We also like the Dec 1500/ 1600/ 1700 butterfly in the 1300 area. 100 of these give you a 5 futures equivalent exposure.

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TheGreatPonzi's picture

It's not gold and silver which worry Bernanke right now, but WTI crude, which is at the highest level since september 2008.

His worst nightmare is coming to reality. 

camaro68ss's picture

yeah my name is the bernake and you cant eat silver and gold..... but you can eat paper. keep on printing bitchez


Up up and away

Ray1968's picture

PHYS and PSLV are really pissing me off now!

Ray1968's picture

silver was up 1% and PSLV was down.....

But, looks like someone is putting the slam on the PMs right now anyway.

tmosley's picture

Follow on offering in one of his other products has investors spooked.  Good buying opportunity, as he has staked his reputation that he would never do it with PSLV again.

Ray1968's picture

With what information I have looks like the only thing lost on PSLV is the NAV premium.

I sold what I had left of SLV (been looking for an exit point) and bought PSLV.


Sudden Debt's picture

Yep, I still remember what that did to the industry in 2007.

It nearly bankrupted most companies and burned a hole in my pocket.



DoChenRollingBearing's picture

Sudden, I know you guys in Europe took a beating too in 2007 - 2008, but it was a REAL SHOCK when US gas prices went through $4.00 / gallon.  

Many of our working classes have to drive a long way each day.  And they had (and still have) serious debts and gas guzzlers.

Oh, and Owebama took a lot of cheap old cars off the market with Cash-for-Clunkers.

Gold and silver are two of the last places to hide.

iinthesky's picture

How about some Gold Pressed Latinum bitchez!?

Rodent Freikorps's picture

The First Rule of Acquisition:

  1. Once you have their money ... never give it back.
Problem Is's picture

Rules of Acquisition:

  1. Once you have their money ... never give it back.
  2. Once you have their money ... buy assets and commodities with it.
  3. Then devalue the money a la The 'Copter Bernank...
  4. And squeeze them some more...
Arthor Bearing's picture

Thank god for the titty-fuck metals report [that's what my mind says when I read your url]

Eternal Student's picture

Loved this quote:

"How desperate must global money managers be that they are running to the euro as a safe haven. The euro, for the love of pete!

What times we live in.


Hollow_Point's picture

He's not worried. He can turn this around in 15 minutes.

Roy Bush's picture

This is starting to get a little scary...

Math Man's picture

Very scary...  the bubble chasers are about to lose thier shirts again.

You get the logic right, but the price wrong. 

You bought tech stocks because the internet was going to change the world... it did, you just overpaid.

You bought real estate in Florida because the baby boomers were going to retire there...  they are, you just overpaid.

You are buying silver because the dollar is devaluing...  it is, but you're massively overpaying.

A 100%+ run in just over six months, meanwhile the dollar index is down less than 10%. 

You never learn.  You just chase one bubble after another.  That's the funny thing about bubbles... they exist because there is always some underlying logic behind the mania that makes sense.  It's the price that gets out of whack...  Silver is a perfect example of that right now.   Oh no!  The dollar is devaluing!  We better buy silver!  Never mind that is just doubled!  Never mind that only 50% of it is used industrially!  Never mind that it only costs 5 bucks to dig it out of the ground!  None of those things matter because the dollar is devaluing! It different this time!  It's not a bubble because the dollar is devauling!

But when you stop and look at the facts, you realize the dollar index has moved down less than 10% in the same time silver has more than doubled. 

You're setting yourselves up for a epic crash here...  don't be suprised when silver is back below $20 this summer.

Temporis's picture

Best quote EVER!!!

by Math Man
on Fri, 02/25/2011 - 17:34


Face it.  Silver is over.

It ran 70% in six months, but it only costs $5 bucks to dig it out the ground.

It'll be back below $20 soon enough.

Math Man's picture

And it will be back below $20 soon enough...  only a matter of time now.


Just look at the collapsing backwardation.

lynnybee's picture

i'd love for silver to go to $20 again !   i'll buy more / am holding it for the day comes when the U.S. $$$ is not accepted in this country .    but, will i be able to find any silver if it hits $20 ?    something tells me that my coin guy will be out of his eagle bullion rounds.  

malikai's picture

Ditto that. And I'd use the money from my puts to back the fuckin truck up.

Math Man's picture

Backwardation to the Dec 2015 contract has dropped to 46c....  a decline of 60% from the peak.

akak's picture

Don't you have some unicorns to go herd?

RockyRacoon's picture

Hey.  The Aden Sisters say, "Buy".

That's good enough for me.

Why you should buy gold and silver now.

Hephasteus's picture

I don't know what makes him stupid but it sure works.

A Nanny Moose's picture

Promise? BTFD Bitch...no "ez" needed here.

Creed's picture

"First let’s examine First Majestic's overall business strategy. First Majestic has three operating silver mines, all located in Mexico. They are fairly low cost production mines and the company averages about $7.10 in production cost per ounce."


These are actual silver mines, not another operation with a silver byproduct. Apparently $7 bucks an oz to produce it is on the low end.

Better inflation adjust your $5 buck figure.

Triggernometry's picture

I remember this quote, thanks for keeping it fresh. I can still remember the coming out my nose from laughing so hard when I first read it.

A Texan's picture

It may only cost $5 to get the stuff out of the ground, but everything yanked out of the ground gets used up, plus several tens of millions or more ounces of what's in the worldwide stockpile of silver - each year.


Also, it isn't quite so simple to say that it costs $5 to mine the stuff.  That is the marginal cost once a mine is established - but there are precious few mines purely dedicated to silver alone.  Most silver is a by-product of copper, gold, lead or zinc mining - so if there is relatively little demand for them, the silver doesn't get mined, because the whole operation is closed down (albeit temporarily).  The point being that the supply-demand function isn't as straightforward as one would normally suspect.  Further, silver tends to be found closer to the surface, meaning:  1) most of the easy finds have been made (similar to oil); and 2) even at prices significantly higher than $5 it isn't so easy to find silver.  Note also that with an extraction price significantly higher for any deep mines that MIGHT have sufficient silver, the market price will have to be higher than that price by a substantial margin, and stay there for enough time to be viewed as permanent - otherwise the mine doesn't get started.  These things have long lead times and substantial up-front costs, so we're not going to see a substantial drop in price for anything more than purely speculative reasons (and, at that, such a drop will be temporary - enough people and institutions are aware of the long-term supply shortfall in silver that they'll buy at those lower prices, putting a floor under the price).  This is because the market isn't going to get flooded with new supplies any time soon, if ever (again, the easy stuff has been found and the known stockpiles are a mere shadow of their former selves).  We're not going to see $20 again unless markets collapse worldwide and people/institutions owning silver have to sell to meet margin calls or out of sheer panic.


Dude, you're just wrong long term.  Anything can happen short term, but the long term fundamentals on silver say that it should be a lot higher than it is now.  Of course, if you think its going to $20, I'll take all that you can sell me at $25 right now.  Deal?

JonNadler's picture

Priceless quote Temporis, $5 to dig out of the ground!



How long before Methman goes the way of JonnyBravo

DoChenRollingBearing's picture

How long indeed.

Good to have you back in the ring JonNadler.  You still looking for better shills?  Blythe must be all over you now...

preston's picture

Perfect timing ATM as I have an ample amount of cash and I do want more silver. I think I will trade some of my palladium store for some 1 oz bars today.

redpill's picture

The dollar index is only down 10% because it is a comparison to other paper currencies that are also being devalued.

You can't seriously be that stupid.

Math Man's picture

Oh that's right.  I totally forgot.  It's not relavent what you can buy in other countries with your dollars, only how much silver you can buy and bury in your back yard.



KennyG09's picture

Somebody is butt hurt that he doesn't have silver. Please enlighten everyone on what the true value of silver is. Also, what country has ever survived on a unbacked paper currency? 

Math Man's picture

All of them.


And which one has ever survived on a gold/silver standard?

Oh wait... that's right.  It has never happened.  The gold standard always goes away.



Sancho Ponzi's picture

We may reach a point where the JP Morgue intentionally blows up equities in order to save their asses by tanking silver.

malikai's picture

I pray for this every single day.

tmosley's picture

Ok, tell me where I can talk to the Great Khan, or Louis XXXIV?

Who needs a "standard"?  Money is still money.  Gold has always been valuable, and will always be valuable.

But then, you are too stupid to understand this, or even to know up from down, so I don't know why anyone should bother.

nachtliche's picture

All unbacked paper currency has gone to 0. Unless you consider the actual paper worth something. Gold and silver has ALWAYS retained value. Gold and silver has, and always will, have strong, solid purchasing power. It's sad that you don't understand this. If you have followed your own investment insights up to now regarding silver, you must have lost a shitload. If not, you are a pansy for not putting your money where your mouth is. 

Math Man's picture

Bullshit.  Last I checked, pretty much every country on the world was operating just fine on unbacked paper currencey.

It's the gold standard that has failed every time it has been used... not the fiat.  There are  hundreds of fiat currencies in the world that have not failed.


whthewrld's picture

Awesome! I love this guy!

tmosley's picture

lol, define "just fine".  Most are failing at this point.  They are in debt up to their eyeballs, or are swimming in bubbles.  Hell, Belgium doesn't even have a government any more!

But hey, you say everything is fine.  We BELIEVE you.  After all, you were right about $34 being the top for silver.

Math Man's picture

Most are failing at this point?  What the fuck are you talking about... Last I checked, paper money was still legal tender in all of the World's 200+ countries.  And, since the '08 financial crisis, how many fiat currencies have failed?  (I'll give you a hint - it starts with Z)

Tmosley, you really need to stop making shit up.  I know it is scary to be 95% long physical silver, but you really need to stop lying to justify your position.



akak's picture

The history of fiat money is coexistent with the theft of the average consumer's purchasing power via the stealth tax of so-called "inflation" (which is just a smokescreen word for currency depreciation), and much more importantly, the theft of the average person's savings via the same process, not to mention the resultant profound economic distortions and waste inherent in the process.

Nice to see you standing up for sociopathic monetary corruption, however.

tmosley's picture

Countries are going bankrupt left and right--major economies like Japan and the US have debt levels that are unprecedented in world history--yet you think everything is fine and dandy.  

Here's a tip:  when a government accumulates too much debt, it will default on its obligations.  When the same government is bought and paid for by the banks, they don't "default", they "print", rapidly rendering the currency worthless.

But it "can't happen here", just like "silver can never rise above $34".


Math Man's picture

But have they gone under?  NO.

You're all just speculating...  with some great underlying logic.  High debt, devaluing currencies mean you should buy PMs.

Makes sense.

Problem is you've had a 100+% run with only a less than 10% dollar devaluation.  You're over paying, just like the fools who bought internet stocks because the internet was going to change the world.  There was nothing wrong with the logic, only a problem with the price.  Same here w/ silver.   Bubbles are always the same... a good reason to buy, but everybody piles in until the price is completely disassociated from reality.   And then the sheep get slaughtered.   Do yourself a favor and buy some puts as a hedge... you could even buy more silver with the proceeds after it collapses.

Silver Pullet's picture

Do yourself a favor and buy some puts as a hedge... you could even buy more silver with the proceeds after it collapses

That's reasonable advice if it ever showed some downward momentum. To do so now would be pretty foolish IMO.

Out of curiousity, do you go on other sites and try to talk down, say, NFLX, which has risen 10x in the time that silver has risen 4x?

How do you get paid to do this? By the comment or day or a flat rate if Turd takes down his site?

akak's picture

But have they gone under?  NO.

In fact, HUNDREDS of fiat currencies have "gone under" in the last century.  You obviously have not been paying attention --- or, more likely, such incontrovertible but inconvenient facts get in the way of your campaign of disinformational trolling on behalf of the corrupt power elite, and must be ignored.