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
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How Low Can Silver Go?

Commodities / Gold and Silver 2011 May 05, 2011 - 01:22 AM GMT

By: Jason_Hamlin

Commodities

Best Financial Markets Analysis ArticleSilver has posted an incredible first four months of the year, appreciating by over 60%! But we all know the adage that nothing goes up forever and silver proved it true by finally hitting a wall and correcting by 15% in just three days. The metal continued declining this morning and just tested the psychologically important $40 level.


This correction has been blamed on the COMEX margin increases, reclassification of delivery-eligible silver, bank manipulation, Bin Laden’s death and a whole host of other factors. These certainly seemed to play some part, but I think the simpler explanation is good old-fashioned profit taking. Silver finally matched its all-time high and was nearing $50 after a parabolic-like move, so plenty of investors that bought in around $20 or less likely decided it was a good time to take some profits off the table.

The big question now becomes “How Low Can Silver Go?” The fundamental situation… supply shortages, surging investment demand and central bank buying, sustained record low interest rates, out-of-control spending, record deficits, debts and the U.S. dollar falling off a cliff, all seem to suggest that the correction will be short-lived. None of these situations have materially improved in the past week and I don’t see any of them miraculously turning the corner anytime soon. The FED might slowly raise rates later this year, but they would have to rise to above the true inflation rate to have any serious impact on gold and silver. Neither political party seems serious about addressing the budget crisis or reducing our bloated military budget. They continue to bicker about cutting a few million here or there from NPR or Planned Parenthood for ideological reasons. Whether they cut $30 Billion or $38 Billion, it is still just a fraction of our annual budget deficit of $1.5 Trillion.

Despite the strong fundamentals, the technical chart shows plenty of room for more downside. Furthermore, the last bounce was not nearly as robust or convincing as previous ones. Silver fell through its 20-day moving average on Tuesday and the drop below $40 will test just how many weak hands are holding silver this time around. If enough buyers emerge, $40 could hold, but any panic selling is likely to force the price down to support at the 50-day moving average of $38.67. I find it likely that this support will hold, but further down we see support at the $36 level, which was a zone of previous resistance and consolidation. Below that is the 100-day moving average of $34, which has not been breached since the Summer of 2010. I believe the likelihood of silver falling below this level and testing its 200-day moving average of $28 is less than 5%.

It is worth pointing out that both the RSI and MACD have yet to reach oversold territory, despite the 15% dip. They are likely to begin flashing oversold on a dip below the 50-day moving average of $38.67, which I believe is the lowest silver will go during this correction.

Remember that as difficult as it can be to stomach in the short term, these corrections are normal and healthy parts of any bull market. The medium and long-term picture is still intact and I remain convinced that we will see $1800 gold and $60+ silver by year end. We are nowhere near a top or end of this bull market as some analysts and reporters are shouting.

The inflation-adjusted highs are still a significant distance away and the fundamental conditions that created the spike in 1980 are much worse today. Depending on which inflation statistics you want to use, gold still needs to climb to somewhere between $2,400 and $5,000 and silver needs to hit a minimum of $140 and could climb as high as $500 by some estimates. This short term correction will once again prove to be the same thing every other correction has been in the past ten years — a buying opportunity.

Mining stocks have been significantly under-performing the metals thus far in 2011. However, I believe they will play catch up during the back half of the year. If you would like to see which stocks I am holding in the Gold Stock Bull portfolio, get the monthly newsletter and receive email alerts whenever I am buying the dip or taking profits off the table, sign up for the Premium Membership at just $35/month.

By Jason Hamlin

http://www.goldstockbull.com/

Jason Hamlin is the founder of Gold Stock Bull and publishes a monthly contrarian newsletter that contains in-depth research into the markets with a focus on finding undervalued gold and silver mining companies. The Premium Membership includes the newsletter, real-time access to the model portfolio and email trade alerts whenever Jason is buying or selling. You can try it for just $35/month by clicking here.

Copyright © 2011 Gold Stock Bull - All Rights Reserved

All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The information on this site has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any information on this site without obtaining specific advice from their financial advisor. Past performance is no guarantee of future results.


© 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