Recently, silver moved from $45 and some change from the close of the New York market last Thursday to more than $50 a troy ounce in Asia on Monday, a move of 9.06%. After that, the bankers promptly beat down the price of silver the first chance they had in New York later that Monday and silver now stands a tad above $45 an ounce. So what does this enormous 10% up move that was countered by an enormous 10% down move mean?
Von J.S. Kim
J.S. Kim is the President and Chief Investment Strategist of SmartKnowledgeU, LLC (http://www.smartknowledgeu.com), an independent investment research and wealth consulting firm. His investment newsletter, the Crisis Investment Opportunities newsletter, has yielded positive return every year since its establishment in 2007, easily beating for example the US S&P500 in 2007, 08 and 09. He actively maintains a blog, The Underground Investor (http://www.theundergroundinvestor.com), and is the author of the book “Confessions of a Wall Street Insider.” Mr. Kim’s investment strategies don’t rely on fundamental or technical analysis as primary screens to select stocks but instead utilize the strength of corporate-government-banking relationships to predict share prize appreciation.
Recently, silver moved from $45 and some change from the close of the New York market last Thursday to more than $50 a troy ounce in Asia on Monday, a move of 9.06%. After that, the bankers promptly beat down the price of silver the first chance they had in New York later that Monday and silver now stands a tad above $45 an ounce. So what does this enormous 10% up move that was countered by an enormous 10% down move mean – a move undoubtedly fueled by official comments from the China Central Bank that it desire to offload some $2 trillion of its US dollar denominated reserves?
Well for one, it is not the blow-off silver top that marks the bursting of the silver bubble as so many talking heads on TV have been stating. The US Precious Metals Dealer Apmex doesn’t believe silver is a bubble either as they recently sent all their clients an email that stated:
“We will pay you $3.00 over the current spot price of Silver for your Silver American Eagles. ANY year, ANY quantity!”
Trust me, Apmex isn’t willing to pay you a 6.7% premium on your silver right now out of the kindness of their corporate heart. All the recent talk of silver bubbles is not only uneducated but also silly. If analysts can’t figure out that soaring silver prices are directly related to a loss of confidence in the US dollar and other global fiat currencies, a rejection of the global Ponzi banking system, and silver’s return again to its well deserved status as a monetary metal after years of being just an industrial metal, then they should cease performing any further analysis. Silver is not just soaring against the dollar but it is also soaring against the Euro and many other global fiat currencies. Silver’s recent big move also means that the recent articles comparing silver (and gold) investors’ fondness for precious metals to a misguided, religious-type fervor is also way-off base, and that analysts must be using the term religious-type fervor as a euphemism for logic, intelligence and reason.
While the recent run in silver from $18 and some change just last August to over $50 an ounce has been exciting, this huge run does not mean that silver will shoot higher to $60 and then to $100 in a few weeks either (unless the shorts at JPM get run over by this move and have to start furiously covering and the COMEX defaults – then anything can happen). Nothing goes up in a straight line just as nothing drops in a straight line. Silver will experience significant drops during future consolidation periods as the silver bull progresses as well.
Granted, some speculation and short covering are helping to drive the price of silver higher during this run. However, one never hears the other end of this argument – that speculators are merely enabling the price of silver to reach a price more reflective of the free-market fundamentals of supply and demand after having been suppressed for decades by the likes of JP Morgan and other puppet bullion banks that execute the wishes of the US Federal Reserve. Furthermore, very few people also discuss the safe assumption that China would not be releasing these official statements about dumping US dollar reserves, knowing that such a statement would drive gold and silver prices higher, if they had not already purchased a large amount of physical gold and physical silver for their reserves in recent months.
No one releases information that drives the prices of assets higher that they plan to purchase, just as no one (except Gordon Brown) announces information that drives the prices of assets down that they plan to sell. Thus, one can assume that China must have just concluded buying physical gold and physical silver, and lots of it, even if they have not announced this to the rest of the world. There is bound to be large sovereign buying backing this large move in silver that is fundamental and long-term. Such actions will counter and help smooth out the additional spike in silver prices that can be attributed solely to speculators and short covering.
While it is true that silver will pull back and consolidate after an enormous run higher (a mind-boggling 162% since the end of last August!) as it is doing right now, and while it is true that silver will likely experience some very volatile dips to the downside as well this year, the next significant dip in the price of silver will not mean that the silver bubble is bursting as the disinformation bots in the media will assuredly report when it happens. The next significant dip will likely present the last true buying opportunity in silver before it reaches triple digits. Let’s wait until silver reaches the mid-triple digit range before we start talking about a silver bubble.