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« An Interview with David Morgan of The Morgan Report | Main | Pan American Silver Corporation: 21 million ozs this year! »
Tuesday
Apr072009

Silver prices heading into choppy waters

silver chart 08 apr 09.JPG
Chart courtesy of StockCharts.com


The short term outlook for silver prices looks quit hazy at the moment as the world wrestles with a dramatic slowdown in economic activity, job loses, financial turmoil, bank and other bailouts et al. On top of these very difficult times we have to deal with more and more government intervention as the civil servants expand their powers over the private sector, a sector that they themselves have little knowledge and almost no experience.

As economic activity contracts the demand for silver contracts as fifty percent or so of all silver mined is absorbed by industrial uses, however, as silver is largely a by-product of mining base metals and some of those operations have closed, then the supply of silver is also contracting. So, we have supply and demand in a contraction mode for now, against a back drop of economic contraction and an ever looming shadow of political intervention. As we scan the landscape for indicators and pointers we find that we have a massive diversification of opinions proffered by eminent analysts and researchers. There is the deflationary camp who are convinced that they are correct and the inflationary camp who are convinced they are equally correct even though they hold views which are completely opposed to each other. Some are predicting that the banking sector will go to the wall and others are predicting a return to the glory days of bank shares at fifty dollars a pop. If we try to keep an open mind and read as widely as we possibly we can detect that the full slate of possibilities exists out there, even though they are based on pretty much the same the data. It all boils down to matter of interpretation.

At the risk of sounding extraordinarily dull our take on it is that we will see a contained volatility, silver will be bouncing around but within a confined range and moving sideways rather than moving up or down. This period will last from now until the end of August where we expect silver to be at or around the $12/oz level. By the end of the summer we should know that GM for instance has entered into bankruptcy and the some of the banks have been nationalized or not, the DOW may have finally sold off and established a bottom etc. The removal of these uncertainties will clarify the picture for all of us and hopefully the future will be a tad easier to forecast.

The short term choppiness may present us with the opportunity for the occasional 'hit and run' trade which we will publish as when they become apparent. However we do intend to maintain our core position regardless of the volatility as we view silver and gold for that matter, as cheap at todays prices and believe that the best is yet to come.

So hold on to your hard hats and your precious metals producers and be prepared to hit choppy waters so that you wont be shaken out of your positions prematurely.

Trading decisions belong entirely to you as your circumstances are different from ours and we trade to suit our investment criteria and cash position.

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Reader Comments (4)

The biggest problem is still the massive short positions by outfits such as JP Morgan. Silver will move sideways just as long as they can continue shorting and preventing delivery on their paper contracts. I wouldn't want to bet on that scenario going on forever.

April 8, 2009 | Unregistered CommenterJEV

While I understand there are many "experts" on silver out there, I'm afraid this article, as contrived as it is, is extremely lacking in true vision and certainly not written by one. I've been an investor/dealer in silver and gold for many years and there is nothing new in this op-ed piece. As a matter of fact, I know some freshman, new to the biz types, that have a better understanding of the "markets" than this article. As mentioned above by Jez, who obviously has a handle on reality, comments like the GM situation have absolutely no bearing on the prices of the real, physical metals. When you have banksters controlling the entire system of finance, overt control over Wall St., in which they have a vested interest, then you're starting to see what is really happening out there. I'm with Jez, in that it won't/can't last forever or for that matter, much longer, I might add. Since there is no author noted above that I can see, I'll just mention that in order to look professional, reputable and appear at least educated, this author should take the time to try and be grammatically correct, even if he/she is way off the mark and doing a wonderful job as a mainstream media shill, keith

April 8, 2009 | Unregistered CommenterKeith

Whos Jez?

April 8, 2009 | Unregistered CommenterSilver Prices

Yes Keith, most would agree that effort toward being grammatically correct is desirable but in my opinion really not all that critical if there is a lapse here and there. I do hope you noticed in your commentary that in your reference to the comment above you referred to his name as JEZ when it was JEV. Now there is a lapse that is a head scratcher when the correct information is just above where you are typing in you comment. People who live in glass houses....

April 10, 2009 | Unregistered CommenterRon LaCourciere

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