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Traders Workshop

Silver Crash 2011 Probably Not Over

Commodities / Gold and Silver 2011 May 15, 2011 - 09:38 PM GMT

By: Nadeem_Walayat

Commodities

It looks like most silver bugs got swept away by the bullish hysteria that is associated with parabolic moves, with outlandish forecasts emerging just as silver was peaking at $49, forget $75, $100 was just a matter of weeks away when the resulting reality was that of a 33% price crash to below $34.


My quick take as someone who is watching from the side lines is that the silver price ran way ahead of itself when compared against the Gold price (See Inflation Mega-Trend Ebook analysis on the Gold / Silver Ratio), in fact it STILL remains expensive when compared against Gold, so on a fundamental basis I can't see a sustainable run up in the silver price on the horizon. If anything we could see Silver after a short-term bounce to $40 from technically oversold levels trade to below $30 and lower still if the Gold price also significantly weakens.

So Silver bugs, despite the 33% crash, Silver is still not cheap relative to gold, keep your eye on the gold price, and don't get married to your positions as Silver has always been one of the most volatile markets to trade, and given the relatively mild reaction in the Gold price which suggests that is where precious metals investors should be focused.

Source and Comments: http://www.marketoracle.co.uk/Article28151.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2011 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of three ebook's - The Inflation Mega-Trend; The Interest Rate Mega-Trend and The Stocks Stealth Bull Market Update 2011 that can be downloaded for Free.

Stocks Stealth Bull Market Ebook DownloadThe Interest Rate Mega-Trend Ebook DownloadThe Inflation Mega-Trend Ebook Download

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

eric
16 May 11, 01:47
oil/dow jones

Thanks for all your updates. If you have a moment, where do you think the markets are headed short term based on:

oil prices

- do you view this correction as consolidation (net bullish) or is it entering "weak oil price" territory which you suggested is bearish for the stock market

usd strengthening

- just a temporary correction, or is this the start of the anticipated usd bounce into mid-September?

technical/timing/etc...

- are we looking at a dow correction down to 12,400 or will the markets be dragged down to 12,000 as people seek safe-havens.


sc
16 May 11, 07:18
bubble

Reminds me of the question someone asked you the other week about whther pm,s were in a bubble and you said ,sure but we can't know when it's going to pop.

How true !

What we can do though is watch the increasing coverage markets give to asset groups and when they become as outrageous as this one has been we really do know if we are still in at all it needs to be lighter and lighter positioning because bubbles have one consistent feature..when you need it the liquidity to exit disappears along with whatever we have left on the table in position.

People really can fool themselves though. Even after this went pop I read people saying buy that dip because the "herd hasn't bought yet" ! Seemongly oblivious to the fact when margins get hiked that alone usually signifies the herd has been in place chasing price.Exchanges are not fools in this respect and yet even now we can find people who think this is a trend that as hardly started.

Appears to me a trend due to stagnate at best.


David Baran
16 May 11, 09:22
Silver . . .

Historically silver is 16 to 1 vs gold. Right now silver is almost 45 to 1. The

short positions on gold were recently required to raise their positions from 15%

to 85% in a matter of 9 days. The SEC made 5 raises on margin within 9 days.

Either you are not aware of these facts or you do not understand the situation. Perhaps we should sell all our gold and silver and buy US Treasuries!


David
17 May 11, 03:02
really?

All these analysts who say that silver was a bubble that should pop resemble and advocate of a murderer who says:

NO my client did not kill his victim. The 5 bullets that he shot in victim does not mean anything. The victim anyway should

die sometime in future, so it is a natural event of dying and the killer is innocent. Let's free him.

Does any technical analysis, Fibbonaci, MACD, Mumbo-Jumbonacci predicts 5 times increase in margin (an extraordinary event,

since it was used last time by gold-suppressing cartel to break the Hunt brothers in 1980 and still it is not enough this

time) amplified by typical attack on PM in controlled press? What if it did not work and they raised margin 10 times to

break the silver?

Would it be still natural phenomenon? How many times do you need to see the cause? 20? 50?


Nadeem_Walayat
17 May 11, 19:57
The Price is King

There is ALWAYS a reason WHY AFTER the event.

But no broker will ever let anyone trade on the basis of hindsight, and the ONLY way you stay ahead the Price Action is by focusing ON the PRICE ACTION in which respect TA (mumbo jumbo) is all one has!

The CAUSE DOES NOT MATTER its the EFFECT that matters, which is there in black and white on the price chart.

It's why I knew the stock market was going to crash in 1987 (before the event) without knowing any reasons for why it should crash (which everyone knew of AFTER the event) ! - http://www.marketoracle.co.uk/Article2499.html

I can tell you, you will find silver much easier to trade if you ONLY listen to the price chart.


colin syme
09 Jun 11, 05:18
Bring it on

l am a small time nobody and welcome any drop in the price as an opportunity to buy even more of the stuff.

Why? interest rates on savings is non existent and as l believe that Fiat money is on a hiding to nowhere my trust is only in gold and silver which l hoard and buy as l go along.

As l have no intention of ever selling my loot and brain-wash my kids who will inherit my collection to do the same,- keep the price as low as possible please.-my children might benefit one day when the price of silver is based on the Yuan, as will be oil and the Dollar a piece of paper loaded with debt, nothing more.


Gerard
02 Jan 12, 11:10
Silver is KIng

what i can't believe in all these doomsayers is that Silver as a commodity is so undervalued its near laughable. You acn't even mine it for the price that the are giving it away it's a byproduct of other mining materials. So all you freaks that keep smashing silver ask yourself this question "What happens when Silver runs out?" Yes as we know stocks of this material which is used in every common piece of equipment that is known to man ids deminishing at a phenominal rate. So the second question you need to ask is why is Silver at such a low price simple ask the big banks that have shorts on it. So after this one thing should be plain to see Silver isn't going to falter if anything the price will go higher. You shouldn't be buying a precious metal to extract huge gains over a short space of time you should be buying because the Euro and the Us Dollar are collapsing and this will be your safety net.


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