Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What Does Silver's Weakness Mean For Precious Metals Investors?

Commodities / Gold and Silver 2010 Feb 27, 2010 - 05:53 AM GMT

By: Przemyslaw_Radomski

Commodities

Best Financial Markets Analysis ArticleThis week the World Gold Council released their 2009 Gold Demand Trends report and embedded in the statistics were a few tidbits we found interesting.

Overall investment in gold was 7% higher in 2009 than 2008. This is significant when you take into account that demand in the fourth quarter of 2008, during one of the worst financial meltdowns we have ever known, was so great that there were global shortages of physical metal. Nevertheless, in 2009, at a time when fears of a global financial disaster have abated somewhat, investors still bought more gold than in 2008. In other words, more gold was purchased at higher prices when the markets were less terrifying, than when the prices were lower and fear was at its zenith.


China was the only non-western country to record positive growth in net retail investment during 2009. ETF demand in 2009 was 85% higher than the previous year, while bar hoarding, largely from the non-western markets, experienced a significant decline.

The Gold council believes that regardless of whether the economic recovery gathers steam or stumbles, western investment demand will remain “well supported.” If the global economy falters, investors will flock to gold.  Conversely, if the recovery gathers momentum, inflation will come into play, and with it a rising gold prices.

So which will it be? Will the economic recovery gather momentum or will it stumble? We don’t need a peak at the 2010 Gold Council report, which will come out a year from today, to know that the trajectory for gold prices is up.

For one thing, western governments have not stopped the fiat currencies printing presses from working 24/7.

We've recently read something (http://www.lewrockwell.com/margolis/margolis179.html) that can elucidate the enormous, almost incomprehensible, size of the U.S. government debt. The numbers are so huge that it is difficult for most people to get a handle them.

If you had spend $1 million each day from the time of the establishment of the ancient city of Rome—about 2,700 years ago—until today, you would have accumulated about $1 trillion in debt.  But hold on. You would have to double that figure to get to the $2 trillion in foreign debt that must be repaid or refinanced each year by the U.S. government, a feat accomplished in only a few short years.

It doesn’t take a genius in economics to understand that when you print ever-increasing supply of fiat currency, it will inevitably lose its value. If so, where will people turn for safety? Gold and silver, and it is the latter that we would like to describe more deeply in the following part of this essay.

Let's begin with the long-term chart (charts courtesy of http://stockcharts.com.) 

Points made in the previous Premium Update regarding the long-term situation on the silver market are up-to-date also today.
 
(…) the RSI and Stochastic indicators suggest that the price of silver is likely to reverse soon, but these indicators are based on price alone - they don't take the volume factor into account." This is relevant also today, as the volume during the upswing that we've seen in the past few days, is not really impressive.

(...) it may seem strange that silver (the SLV ETF) is currently hovering around $15 instead of rallying strongly. However, taking a second look at the above chart reveals that this is the way that silver used to behave shortly after it had bottomed. We've marked these situations with red ellipses. Please note that if that pattern is to repeat itself once again, silver may move much higher soon.

This is the case also today, as the SLV ETF around $16 is not really much higher than it was when the latest bottom was formed and the volume during upswings is relatively low. Instead of rallying, silver is more or less trading sideways and moving insignificantly higher. Still this is a normal behavior for silver during the bottoming process, and it confirms that the last chance to get back on the long side of the market is not behind us.
The Stochastic indicator has formed a double bottom, which in the past signaled that the bottom is in. But let's not forget that it moved very briefly lower at the end of December 2009, when silver declined as well - back then it meant the final downswing before the $1+ rally.

Please note that the RSI indicator is slightly below the 50 level, just like it was the case in the past at the end of the consolidation / beginning of a rally.

In the previous Premium Update we wrote that at least a brief correction is likely.

Please take a look at the April 2009, July 2009, and November 2009 bottoms - once the bottom was put in around the date suggested by the red vertical line (as was the case recently), in silver corrected at least briefly before rallying significantly. Should that be the case also today, one might expect silver to move lower relatively soon.

Additionally, please take a look at the pace of growth of the price of silver since its early-February bottom. Should it be sustained it would move to the next strong resistance level very quickly and put in a temporary top much before the cyclical tendencies suggest.

Of course, it is possible that the resistance level marked with the blue declining line doesn't hold silver and it will move much higher without stopping at $17.5 - $18, however we don't find that outcome very likely. Instead, we see silver consolidating at least for a while, and reaching a temporary top within a month or so.

This is what we've seen this week. Silver corrected briefly and is currently once again over the $16 level. If silver does indeed rally from here (as we expect it to), the lower rising dashed line will become a short-term support level. Target prices for silver, gold, and PM stocks are included in the full version of this essay (we've set a record - it has 20 charts/tables each with detailed description) available to our Subscribers.

Summing up, silver appears to have formed a minor bottom and is ready to move higher rather sooner than later. Naturally, that is the case if the general stock market doesn't plunge and drag PMs with it. We are still waiting for the confirmation that PM stocks can rise on their own, instead of being lifted along with other stocks. Until that happens we must remain cautious. As always, we will keep our Subscribers updated.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, I urge you to sign up for my free e-mail list. Sign up today and you'll also get free, 7-day access to the Premium Sections on my website, including valuable tools and charts dedicated to serious PM Investors and Speculators. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
Sunshine Profits

    Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

    Sunshine Profits provides professional support for precious metals Investors and Traders.

    Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits’ Premium Service gain access to Charts, Tools and Key Principles sections. Click the following link to find out how many benefits this means to you. Naturally, you may browse the sample version and easily sing-up for a free trial to see if the Premium Service meets your expectations.

    All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

    By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Przemyslaw Radomski Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in