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Author Topic: Why Silver Jumps Out to 30-year Highs  (Read 1764 times)
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tamo42
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« on: 2011 Feb 18, 08:47:28 am »



In case you haven't heard (and unless you keep your eye on the ball, you haven't), silver broke out to 30 year highs yesterday. Currently spot silver is trading right around 31.85 er ounce, the highest it has been since the famed Hunt brothers tried to corner the silver market back in 1980.

If you look for reasons why silver is making new highs, you'll see some nonsense about continuing unrest in the Middle East. I'm here to tell you that unrest in the Middle East is not the cause of this latest move.

The silver breakout is the result of a one-two punch to the silver shorts.

Punch one is from you and me, the masses. Silver has been in sustained backwardation for the last week or two. This is because there has been unprecedented demand for physical silver over paper silver. No longer are investors and traders content to use silver-equivalents like ETFs and futures that settle in dollars. They want their hands on the real deal. The background cause for all this is the money that is flooding into the markets thanks to central banks around the world, but especially the American Fed. This money flood is causing the prices of all commodities to go up. Corn is up, wheat is up, rice is up, cotton is up, gold is up, silver is up, etc. People around the world are starting to wake up to this and are realizing that they better get their hands on some real assets for a change. This is punch one from the masses.

Punch two is from some big trading firm out there. Someone has looked at the demand by the masses and decided to join the fray. The rumor is ex-JPM exec "Winter Benton." Whether it is this particular individual or not, someone has bought a large position right when silver was at its resistance point. This broke the resistance and allowed silver to go higher.

So the question now is, how high? Personally, I think we'll go to 34 before we see any significant retracement. Groovemachine seems to think $36.

One thing we know for sure is that as long as money keeps being pumped into the system, silver will trend higher. How you play that rise is up to you.
« Last Edit: 2011 Feb 19, 07:45:51 pm by tamo42 » Logged

Neal McSpadden
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« Reply #1 on: 2011 Feb 18, 10:14:45 am »

Thank you for the update. It is worth mentioning that silver has not even broken its "nominal" hunt brother high of $50. Silver's inflation-adjusted high is $120-$150 depending on which inflation numbers you look at! Max Keiser & Mike Maloney predict $500-$1000 silver!! Even by the most conservative predictions, silver has a lot of shiny days ahead!
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tamo42
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« Reply #2 on: 2011 Feb 18, 11:07:47 am »

Yes, things are looking up. Personally, I tend to discount the 1980 peak because the Hunts were such a singular entity. Two guys alone bought so much that the supply dried up. So I don't think that episode relates all that directly to today's action.

It's also worth noting that the silver shortages that have been announced all over are probably only temporary. We'll have to see if the mints can get blank planchets in stock or whether demand continues to outpace supply.
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Neal McSpadden
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« Reply #3 on: 2011 Feb 18, 12:25:58 pm »

"Whats to refute, its Inflation-Duh"

-Unknown-

"No silly rabbit...the Recession ended in 09"

-GhostRider808-

Cheers
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badon
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« Reply #4 on: 2011 Feb 19, 07:38:04 pm »

I don't discount the Hunt Brothers manipulated prices for silver. Silver is very likely to reach the $200 level sometime in the next 5 years. It could happen sooner. If precious metals begin filling the monetary role, silver could go much higher than that, due to industrial demand for it.

For the first time in history, there's a realistic possibility that silver could become more valuable than gold. If that happens, I suspect it will be many years from now, but the fact that the possibility exists at all is what is important, not whether it actually does it or not. It's a clue that silver is the #1 precious metal, although I do consider palladium to have potential to do even more, but it is more speculative than silver.
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tamo42
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« Reply #5 on: 2011 Feb 19, 07:44:09 pm »

When I say discount, I mean that the price it reached then has pretty much nothing to do with the price now.

I don't mean that it was unimportant.
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« Reply #6 on: 2011 Feb 19, 08:12:03 pm »

When I say "I don't discount", I mean that the price it reached then has pretty much everything to do with the price in the future.

I mean it is very important.

What happened then, will happen again, but it'll be more extreme now than it was then.
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If families are a problem for the system, then we must reject the system, not the families.
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« Reply #7 on: 2011 Feb 19, 08:20:38 pm »

To see 1:1 price ratio between gold and silver in the next 3 years is not out of the question. The supply of above ground investment grade (refined) silver is less than that of gold. All the "easy" silver mining output has possibly peaked, and large percentage of refined silver has been "consumed." China reduced its silver exports by 60%! So, the price argument might not even be relevant as we are dealing with new fundamentals.
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badon
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« Reply #8 on: 2011 Feb 19, 08:26:02 pm »

I'm just going to keep repeating this tongue twister: "What happened then, will happen again, but more now, than it was then."
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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.
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GhostRider808
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« Reply #9 on: 2011 Feb 19, 09:37:54 pm »

It could get ugly folks.  When I first started stacking silver/gold about a year ago I had no ideal how a fractional reserve banking system work nor cared much about what was going on economically and geo-politically around the world.  Now I see clearly the pending statistical economic crash to happen soon.  One just has to look at tunisia/egypt/lebanon/greece/italy/bolivia and the financial ticking time bomb (more powerful than 100 Hiroshima Nukes)--the good ol USA.  I firmly believe a rational person will be forced to conclude unless something fundamentally changes which I dont see on the Horizon--We are F#$*&(!!!  but one could also look at it like a cycle in life.  wherein chaos can come peace/huge profits.  Exciting time indeed.  
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