As I was watchin todays 1-2-smackdown in the precious metals markets, I noticed something that has happened increasingly often – silver refuses to budge. I would say that this is very bullish for silver, because if it lies flat when gold drops, we can all imagine what it will do if gold rises. Additionally, if historical trends are to be a guide, it is very peculiar that gold hasn’t managed to have a proper correction, despite multiple moves down. Basically its just zig-zagging.
Gold/Silver ratio - wanna guess where JPMorgan prop-trading stopped?
I think the dollar is the key. If the dollar breaks again, we’re going to have a magnificent rally in the precious metals. And the dollar breaks if they do another “paper-over”-solution for Europe. And according to many, they probably will, even if I don’t think this constant putting out of fires will last. The second option, of course, is that they break up the euro during Q1 2011, which seems unlikely but cannot be ruled out. In that scenario, expect one final rush to the dollar and treasury bonds, and then the cataclysmic collapse.
Bernanke has flipped the switch, and made sure it is properly on this time. Unless we see one or more large banking collapses, there is no stemming the tide of new hot money. A municipal bond market collapse might do it as well, but the thing is that the current trend remains “bail out everything that moves”. When that changes, I can accept a “deflationary collapse”-scenario, but not until then. All the signs point to a continous policy of print/bail/print/bail. And that means that sooner or later, the dollar is going to have that breath-taking, horrendous fall that we have all been waiting for. Maybe not tomorrow. Maybe not next month. But the markets are pretty clearly signalling that its decision-making time again – shall we pummel the euro or dollar? Who goes down first?
And if China tightens up, sooner or later the peg must be adjusted, and send another load of unrecycled billions towards the US shores. For now, my best bet is being long silver, because worst case scenario seems to be sluggish, best case scenario parabolic. Like I mentioned yesterday, I will start a bi-weekly investment column/post/thing after new-years, and I will try to stay with one topic at the time. For now, you will have to survive my ranting.
Oh, and if you don’t own any silver coins, now is probably a good time to get a few. If the price drops, you may get a few more. If the price goes up, you could also get a few more. You see where I’m going? Just buy a few silver coins every now and then, and be sure to thank me if necessary in the future. It will be the cheapest disaster-insurance of your life. Over’n'out.
I also like silver (surprise, surprise) and have quite a lot. If you can afford it, it makes sense to buy the standard large size bars (1.000 oz, about 30 kg). These you can get at very close to listed spot price, i.e no premium.
I am a long term bull and see much higer silver prices over time. But as a trader, I do not like the price action in the past month, Silver feels a lot like it has had a blow out top and now is struggeling. I think that we will se levels close to 20 again within the next 3 months.
Any comments on where to buy silver? I googled a little bit but I’m not sure I found anything that looked better then anything else, really.
Excitable : In Sweden, I go for Liberty Silver, always. I’ve talked a bit with the owner over email, and he was also featured in an article at Mises.se. That’s enough of an argument to convince me. And last I checked, he also recommended Rothbard’s “what has the government done to our money”
A word of caution though – while I am fairly sure that silver is set to explode, I hope you remember that things do not always turn out as expected. I try to cost-average by buying every other month, even if I sometimes feel like taking all my savings and just pouring them in. Another hobby of mine is to use Tradera/Ebay to pick up old “junk silver”-coins – you can get them pretty much at spot price, and thus avoid the VAT
As I am sure that you know, there are quite a lot of stories around that it is difficult to get delivery of metal. Regarding the large swiss banks, I can from personal experience say that there have been absolutely no problems to get bars during the past few years. Gold coins have been sold our for brief periods but that was during 2008 and now you get them within 3 days.
For some reason, most of the silver bars seems to come from Russia. Maybe they are selling old stockpiles?
Silver out of Russia eh? That was indeed very interesting. I must check to see if they produce a lot of silver there – or if it is indeed old stockpiles. I know they have a fair bit of mining going on in Russia, but I’m not sure about silver ….
Regarding metal delivery, I would assume that Swiss banks are the most safe place to store, unless you dig a hole in your yard and store it yourself. The rumours are of course only rumours, but do these Swiss banks offer both allocated and unallocated accounts? I am aware that there is a fair amount of cheerleading in the goldbug press, at the same time these guys seem to be right more often than not. And since I am generally very suspicious of any state and state-influenced activity, it would surprise me more if there HADN’T been regular operations of gold swaps performed by some banks during the last 20 years. I guess time will tell. The fact that gold and silver is hitting backwardation territory again seems to indicate that something weird is on the horizon.
” but do these Swiss banks offer both allocated and unallocated accounts?”
Well the normal alternatives are:
1. metal account with the bank. This is basically a trading account and you can not take delivery. I think that this my be the reason for some of the rumors, i.e people do not understand the nature of their own accounts.
2. Physical metal. This you can buy over the phone if you have an account or at the bank desk with cash. When you have the metal you can choose to rent a deposit box with the bank or take the metal with you someplace else.
There are also a number of companies that only offer deposit boxes. These are NOT banks and some people prefer to use them.
In general, you can buy and sell bars, like 1 kilo gold, very close to the spotprice. So, in general, I see very little reason not to go for physical, at least if you live in Switzerland. And people do. There is a massive amount of privately held gold here. To me, that is a very good thing, since it means that a return to metal backed money would be relatively easy. Also, the central bank has by far the largest goldreserves in relation to outstanding notes if you compare to other counties.
Ok thanks.