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Author Topic: Silver Prediction - The Road Ahead (Jan 06, 2011)  (Read 1132 times)
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tamo42
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« on: 2011 Jan 07, 12:51:11 am »



A lot of people are starting to ask: what is the deal with silver and gold?  They're dropping!

Well, I have shocking (SHOCKING!) news for you guys, even in a bull market there are ebbs and flows.

Perhaps it is easiest to understand if you mentally put yourself in the place of a couple different people.  First, you have the wise market observer who sees that the value of silver has nowhere to go but up.  So he buys silver at various times.... $7, $10, $15, $18, and most recently $20.  He doesn't just sit on it though, he needs to realize his profits.  So he sells some periodically.  Not hiw whole position mind you, but enough to realize some gains.  

This provides selling pressure on the market.

Then there are the very short term traders who look at the run up in silver and think, "That's too high."  They short the market, whether it be through simple shorts on ETFs, puts, futures, options on futures, etc.  

This provides selling pressure.

At this stage in the game, there are really only 2 sets of buyers.  There are those few out there who are beginning to wake up to the macroeconomic picture.  Then there are those who see the price of silver rising in a straight line and are induced into panic buying.  Neither one of these provide much in the way of buying pressure, at least compared to the previously mentioned sellers.

So what happens when selling pressure outweighs buying pressure?  Prices fall.  That's what's going on with silver now.  In the graph below I have highlighted a few support levels.  I wouldn't be surprised if we see a retracement to the breakout levels after the announcement of QE2.  I would be surprised if we retrace all the way to the initial breakout from the $18 region.


  

But here is the question you need to ask yourself: what is the long term picture?  In the long term, fundamentals win out over technicals.  The technicals say that the dollar is bouncing off support, so silver will fall a bit further.  So what do the fundamentals say?

I'm so glad you asked...

The fundamentals say that silver is used as an industrial metal, for jewelry, and as a monetary metal.  The fundamentals also say that silver production is usually a secondary mining product from other base metal mines.  The fundamentals comment still further in saying that the proven reserves of silver are in the shortest supply of all the major metals.  All of these indications are bullish.

So what do you do when you know something has a long term uptrend, but a temporary retracement?  You use those lower prices to buy!  

This upcoming decline in prices is an excellent opportunity to get in to positions or add to positions in argentum (the Latin name, which I find so much more poetic).  Keep in mind, I am talking about positioning for the long haul as a preservation of your wealth.

Happy trading!


* 2011 01 06 - Silver.jpg (41.69 KB, 900x399 - viewed 380 times.)
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Neal McSpadden
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« Reply #1 on: 2011 Jan 09, 02:18:17 am »

Excellent analysis tamo42. I think it could drop as low as $20, but it won't go below $18 unless it's being manipulated or WAY oversold. Silver has a reputation for surprising people because it's an easily manipulated thin market. Market makers know how to push people around who are on their territory without physical metal, but with the recent scrutiny of lax regulatory oversight and rampant corruption, I think it's less likely we'll see a shocking surprise to the downside so long as there are superbulls with money who see the big picture, and will buy up the shortsighted sell positions.

To me, $22 looks like a more realistic bottom for a big drop, with maybe a temporary overshoot down to $20 or even $18...remember the old days when a $0.50 move was a big deal? Smiley
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« Reply #2 on: 2011 Jan 09, 08:33:56 am »

I would love to see $20 silver again Smiley
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« Reply #3 on: 2011 Jan 09, 01:39:23 pm »

If 2011 is a repeat of 2008, maybe you will. In 2008, prices dropped from around $21 all the way down to about $17 very quickly. I don't remember the extremes of the range exactly, but it's possible that we get a big drop, then a prolonged weak decline until after the middle of the year. I don't think that will happen, demand is too high for the prolonged decline part of that.
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If families are a problem for the system, then we must reject the system, not the families.
Founder of the Coin Compendium (forum, blogs, calendar, images, donate, contribute).
LBC makes you rich, with a free ebay gift certificate awarded every month!
The Coin Compendium and the china-mint.info forum, censure, disclosure.
Do not PM questions. Answers should be publicly available.
Backup is not enough. Protect your data with MultiPar.
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About me: User:Badon - MediaWiki.org
Badon effect: type 1 to 8, type 9.
I type faster on a TypeMatrix.
Use my work. Give credit.
Coin, medal, whatever!
Coin storage advice.
FreeArc is amazing.
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