Silver Ready To Breakout - Technicals And Fundamentals Suggest $50/oz In Early Autumn

From GoldCore

Silver Ready to Breakout - Technicals and Fundamentals Suggest $50/oz in Early Autumn

Gold and silver have fallen after yesterday’s gains due to the very poor consumer confidence data and Federal Reserve murmurings of further monetary easing. Gold is trading at USD 1,792.50, EUR 1,245.10 , GBP 1,098.30, CHF 1,471.50 and JPY 137,624 per ounce. While silver is trading at USD 41.21, EUR 28.53 , GBP 25.31, CHF 33.33 and JPY 3,155 per ounce.

Gold’s London AM fix this morning was USD 1,826.00, EUR 1,264.19, GBP 1,121.14 per ounce. Gold fix was higher than yesterday’s AM Fix which was USD 1,791.00, EUR 1243.49, GBP 1097.56 per ounce.

Gold remains less than 5% from its record nominal high of $1,913.50 per ounce while silver remains nearly 20% below its record nominal high just below $50/oz.

Gold has stolen the limelight from silver in recent weeks with gold reaching a series of new record nominal highs.

But silver has been quietly consolidating after the sharp falls seen at the end of April and in early May when many claimed the silver ‘bubble’ had burst.

Media coverage of silver remains nearly nonexistent which is bullish from a contrarian perspective.

Technically silver is looking better by the day and is now trading not far above its 50 and 100 day moving averages (see chart above).

Today the 50 day moving average is trading at $38.70/oz and the 100 day moving average is trading at $38.74/oz. The 50 DMA is rising after recent price gains and looks set to cross the 100 DMA in the coming days. This will be a bullish technical signal.

Silver’s sell off was very sharp but volatility and a correction was expected and warned of once silver reached the nominal inflation adjusted high of $50 per ounce.

Value buyers continue to accumulate silver bullion. Jim Rogers, one of the most prescient investors of recent times and who arguably has a better track record than Soros in recent years, remains bullish on gold and particularly silver.

A tiny minority of retail investors has begun to look at silver, but it remains largely the preserve of the smart money, a very small amount of people in the US and Europe concerns about currency devaluation and store of value buyers in Asia.

There are many factors that strongly suggest that silver remains a prudent buy and diversification today.

But there are three key metrics which strongly suggest that silver remains far from a bubble if not undervalued.

 
The first is silver’s real price today adjusted for the inflation of the last 31 years. Silver’s real high in 1980 was $130 per ounce – more than double the price today (see chart above).

The second is the gold silver ratio which has averaged 15 to 1 throughout history due to geology and the fact that there are 15 parts of silver to every 1 part of gold in the earth’s crust.

Gold Silver Ratio – 40 Year (Quarterly)

Silver, unlike gold, is an industrial metal and a very significant amount of all the silver that has even been mined has been consumed, like oil, since the dawn of the industrial revolution in the 19th century.

Most analysts with a long term view believe that the ratio is likely to revert to the mean of 15 to 1 in the coming years.

The third metric is comparing silver’s current bull market to that of the 1970’s.

Silver has risen by a factor of 10 in the last 9 years – from near $4 in 2001 to over $41 today.

In its bull market from 1971 to 1980, silver rose by over 3,199% or by a factor of more than 32 in just 9 years culminating in the blow off top in 1979.

 
Today, the physical supply of silver bullion is much less than in the 1970’s. Also there is the ‘Asian factor’ and 3 billion people with growing incomes, many of whom see silver as a store of value against currency depreciation.

Demand for silver in Asia has been increasing and in China alone silver demand is increasing from a near zero base. The demand was not present in the 1970’s.

Were silver to replicate the performance of the 1970’s it would have to rise 32 times or to $130/oz (32 X $4.05).

Interestingly, $130/oz is also silver’s real high from 1980.

Our long held belief that silver could reach the real high, inflation adjusted, of $130/oz remains. However price forecasts should always be taken with a pinch of salt and silver’s value is as financial insurance and a store of wealth that cannot be debased.

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NEWS
(Gallup) -- Americans Choose Gold as the Best Long-Term Investment
http://www.gallup.com/poll/149195/americans-choose-gold-best-long-term-investment.aspx

(Reuters) -- Gold edges down; eyes on Fed cues on stimulus
http://www.reuters.com/article/2011/08/31/us-markets-precious-idUSTRE7781Q420110831

(Bloomberg) -- Gold May Drop as Rally on Federal Reserve Minutes Prompts Investor Selling
http://www.bloomberg.com/news/2011-08-30/gold-may-climb-as-fed-minutes-weak-consumer-confidence-boost-haven-demand.html

(CNBC) -- Italian Town Mints Own Money to Fight Austerity
http://www.cnbc.com/id/44322945/

COMMENTARY
(Forbes) -- U.S. Elites Begin To Confront The Paper Dollar
http://www.forbes.com/sites/ralphbenko/2011/08/29/u-s-elites-begin-to-confront-the-paper-dollar/

(Money Morning) -- Why Gold Will Replace U.S. Treasuries as the World's Last Risk-Free Investment
http://moneymorning.com/2011/08/30/why-gold-will-replace-u-s-treasuries-as-worlds-last-risk-free-investment/

(GoldSeek) -- Can we Trust Government Statistics on the Economy?
http://news.goldseek.com/GoldSeek/1314734058.php

(King World News) -- Stephen Leeb - Gold Skying Because of Bernanke Desperation
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/8/30_Stephen_Leeb_-_Gold_Skying_Because_of_Bernanke_Desperation.html

(Speculative-Investor) -- Steve Saville - Gold: The Big Picture
http://www.gold-eagle.com/editorials_08/saville032409.html

China punters sway gold market
http://www.thestandard.com.hk/news_detail.asp?pp_cat=30&art_id=114736&sid=33564191&con_type=1

Gold’s Just Going to Run on Ahead and Price in QE3 for You
http://blogs.wsj.com/marketbeat/2011/08/30/golds-just-going-to-run-on-ahead-and-price-in-qe3-for-you/

Comments

[Temporalist]

What happened did you go to Troll rehabilitation?  They say that people can be reconditioned...maybe you are proof?

[Paul67]

We all need to stop thinking in terms of fiat dollars but in terms of what that Silver will buy at the point in time it hits say $500/oz.  At the peak price all it will really buy is increasingly worthless paper.  You have to have a ready use for that worthless paper already set up ‘before’ the collapse or you’ll just be forced to ride the price wave up and then down.

Another key is being self-sufficient on the basics during the currency collapse freeing you up to pay off fiat loans you have on real assets, like your home, with Silver or Gold.  Simply being forced to cash out an oz of Silver to buy loaf of bread won’t get you anywhere.  Get the basics covered first and ‘then’ buy Silver and Gold.

So in order to really take advantage of this coming wealth transfer cycle you first need a fixed rate fiat loan on something of real value in order to leverage this rise in precious metals.  Remember a key part of the currency collapse is that all new agreements and transactions will also get progressively shutdown.  If you think getting a home loan is tough now it will be impossible during the collapse.

As such very few will be willing to exchange a house for worthless paper or even an unconventional purchase using Silver 'priced' at its worthless paper value.  On the other hand their will be tons of worthless paper trying to buy stuff of value, ie Silver, Houses, Bread etc.  The difference is subtle but very important.  Silver and Gold in the end ‘is’ really only good vehicle to get lots of worthless paper.  It will also enjoy a premium due to its importance as an emergency medium of exchange but don’t over estimate this component of its value as it will be fleeting as well.  The key question is that after you receive $500/oz what can/do you buy with this worthless paper?

Some may exchange real for real (ie House for Silver but only at a real equivalent value).  The smart ones will know that after the dust settles and a new currency is issued there is no reason that precious metals won’t revert back to a price in the new currency based on equilibrium between the cost of production and supply/demand.  As such exchanging real for real you’ll need just as many oz as now roughly to buy a house at the peak or the bottom.

So in sum in order to take advantage of $500/oz Silver you need to have in place ready and waiting a fixed fiat loan on a real asset in order to utilized that $500/oz quickly.  Without a receiving end for the transaction already in place, Silver at $500/oz won’t buy you anymore stuff of real value than it did at $15/oz.

The other key is timing, as I suspect that us "evil PM speculators/hoarders" will be legally prevented from selling precious metals and/or paying off fiat loans at some point in the collapse, so don’t get greedy or you’ll be forced to ride the price wave or break the new law, take your pick.

At which point you’ll have to wait a couple decades more until the industrial consumption of Silver gradually makes it closer and closer to the scarcity of Gold with a price to match.  A good reason, after owning your house via selling into the coming peak price, to then to start re-accumulating Silver once again at the lower price in the new currency.

[KinorSensase]

Dunno about selling PM's to pay off fiat loans.  I guess if I had a home I'd think more along those lines, but my debt consists of student loans and stupid credit cards I got in college cause they were giving away free pizza and t-shirts (the bread and circus of college students).  I've already got the "assets" which that debt paid for.

I'm happy to say fuck-off to my debt, pay cash for my PM's, bury the shit and wait for price discovery to kick in for real once a transition to barter economies begins.  Of course, should this take longer than I expect, I'll get a real job, play the "proper citizen" role and pay on my student loans (minimum), all the while funneling extra cash into silver and other key resources.  Personally, I'm long floss.  I hate it when I run out of floss.

Regardless of how silver and markets play out, I think people are fucked if they don't have land, seeds and the guns to defend them.  Oh yeah, and social capital, probably the most important of all.

Also, I've encouraged a fellow student that's now into silver to max out his loans and buy the shit out of some physical.  He mentioned that it's probably fraud, to which I respond: "Of course, that's why it works."  Rigged-market capitalism has been a wonderful role model.

[1000yrdstare]

I agree it is a store of wealth but what happens when or if the .GOV decides to ban the use or make it illegal to own? I can't see 5% of the population (who I assume do owe pms) will be able to take up arms and protest. I have heard on this wonderful site that most people will go to blackmarket, but will the value stay the same? That has always kept me shy of loading up on PMS as opposed to loading up on bare essentials, does anyome have any ideas on this?, thanks!

[Temporalist]

You assume wrong it is not 5%.  And if silver is "banned" then only manufacturers will be able to get a hold of it?  How is that going to work out when Ag is critical to so many new and developing technologies and industries.  Without silver, no solar panels.  Biocides, antibacterials, mirrors, electronics.  Do you actually believe that only certain countries like China will keep silver legal?  That would be insantiy.  The gov will not confiscate it because that would be admitting they've been wrong and they NEVER do that.

[goodrich4bk]

If you look at those two charts, notice that the 3,000% "top" didn't last more than a few weeks.  The actual, sustainable top was at about 1,000% appreciation, exactly where we are today.  Also, the 3,000% appreciation was caused by the Hunt brothers' failed cornering effort.

I am not yet a seller because I understand the hyperinflationary argument, i.e., a currency collapse caused by political events leading to a Fed monetization of all bad bank debt.  But the "emergency" powers excercised to accomplish that will most certainly extend to confiscatory taxes on PM holdings, the eliminiation of margin purchases for PMs and, in an extreme case, a ban on PM sales.  The "black market" price for PMs in that case may be much lower, at least in terms of what you will be able to purchase with whatever currency you get for your silver at that time.

For preserving my purchasing power through "normal" inflation, I'm keeping my PMs.  But for TEOTWAWKI, I prefer an investment in lead.

[1000yrdstare]

Thanks Goodrich....got plenty of lead and high speed delivery devices for said metal as well.

[Lazane]

If you own SLV shares and you are not one of the elite Authorized Participants, you may end up someday holding a bag of shells.

Don't enable the elite banking interests any further!, take physical deliver of all your metals before the JACKSTER cometh a knocking at your door.

Alternative to SLV is - CEF, SVRZF they provide investors and alternative to the SLV ponzi scheme, if your fiat is mind trapped in a self directed IRA brokerage account.

PS Central Fund Prospectus amounts to about 12 pages in length, an old rule of thumb we used to gauge a new underwriting IPO, way back before Glass Steagall was repealed by the Lion King, in the good old days when the banksters did not own brokerages, (thin to win)
If I counted beyond 20 or so pages in a prospectus the deal was in serious jeopardy down the road because the lawyers working for the deal makers jiggered the deal in some way that would screw the bond holders.
SLV offering memorandum was an encyclopedia sized document over 100 pages of legal mumbo jumbo, look out below, run from the JACKSTER run!

[IQ 145]

I have no idea what the price of silver is going to do this fall; I don't understand the "science" of "predicting breakouts"; if the price gets beat down enough on any one day, I may buy a contract. Right now, the price charts are saying "Meh"; to me. maybe I'm just not listening right.

[Conax]

I bought some silver in 07, as a way to dig out of short term debts.

If I weren't such a greedy bastard, I could dump it today and pay those bills off. Now I watch and wait, and add to the stack, steely-eyed in the face of madam Master's efforts to trip me up.

While holding it, I grew to enjoy the stacking itself. Morgans, kooks, wolves, all sorts of nice coinage now reside in a cool dark hidey-hole, off the market. I like having an asset that doesn't rust away out in the driveway. An asset that doesn't need a new roof. An asset beyond property taxation.

Yes, I like my silver.

bitchez!

[NESSE]

Hei Guys,

As I write this, Silver is $43/oz my question is Is it still good to buy at this rate. Many Thanks

NESSE

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