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« Silver Wheaton Corporation Call Options Update 18 March 2010 | Main | Minco Silver Corporation Up 33% in a Week »
Tuesday
Mar162010

USD is Struggling to Rally

usd and silver chart 17 March 2010.JPG

Taking a quick look at the above chart we can see that USD is struggling to stay above the '80' level and now appears to be running out steam. Note that the golden crossover created by the upward movement of the 50dma across the 200dma, which it normally positive, has failed to have a positive effect on the USD.

The situation with the dollar becomes more precarious as each day goes by and should foreign governments around the globe lose their appetite for the purchase of US treasuries then the dollar could fall dramatically to about half of where it is now. In our view it should be trading a lot lower than it is at the moment and an orderly decline would do less damage to all concerned than a sudden fall from favour, hitting the programmed 'sell' buttons along the way.

We can also glean that silver is now heading north in an inverse reaction to the USD as it trades around the $17.45 mark, up from a recent low of $15.00/oz. The volatility continues as silver clearly demonstrates by putting on 16% in a little over five weeks. Its also good to see the Gold Bugs Index, the HUI, which includes Coeur D Alene Mines Corp and Hecla Mining, has moved up albeit more slowly than we would like to see. Again we are looking for the stocks to play catch up and catapult ahead of the precious metals to make the risk element of investing in mining stocks more tolerable. Should this not happen in earnest then we will need to re-visit our strategy and give the alternatives a good shake. If you have discovered a good alternative way to play this bull, then do let us know.


Have a good one.

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Reader Comments (8)

Hi. I own some ENDEAVOUR SILVER C COM NPV (EDR.TO) stocks and I don't undestand why is going down when silver is going up. Is there anything wrong with this stock?
Thanks in advance

March 17, 2010 | Unregistered CommenterNicolas Marcaida

oohh, no, you underestimate the power of the dollar. the dollar is going to 115 on the index (long term), its rally didn't conclude yet the first wave up. when it is going to hit 85/86 we can talk about overbought. right now it is in a horizontal trading range, this is a continuation pattern, not reversal. it is testing this golden cross. Dollar shows typical uptrend right now, strong and fast moves up, and slow retracements. A lot of stuff (like stocks, oil, commodity currencies) are holding against the dollar rally creating divergence. Once the euro breaks below 1.35 for good, all the dollar denominated assets will correct this divergence and its going to be damn quick. In a week or two you can see the dow dropping 1500 points and silver 4 bucks. Nobody can do anything against global deflation trend, not the government, not the investors, it's like small boats in the sea at the storm, completely powerless against it.

March 17, 2010 | Unregistered CommenterDi

Fascinating analysis...and certainly a plausible scenario. Who am I to disagree? I notice that your timing is pretty specific.

"In a week or two." Okay, we have it pegged then.

Maybe you'd be willing to favor us then with an answer to the question I posed to you in the thread to the McEwen article.

To repeat:

I’m confused Di. (Comment #6) You said the following on Feb 17:

“take profits guys, because i am short silver again today after being forced to take profits at 15.80 . not sure if it can go higher than 16.30, maybe, but certainly not above 16.50 … next week it is going to be a bear party again, and i hope in march we are going to kiss & goodbye to above 1000 gold prices

Comment by Di — February 17, 2010 @ 1:15 pm

Am I missing something? Silver’s been trading well over $16.50 for weeks. You said it was CERTAIN that couldn’t happen and that prices were set to tumble. I think we all deserve an explanation.

Just curious. Have you covered that short position? If not, at what higher price would you cover? Now that silver has reached its recent high of $17.65, how much higher can it not possibly go?

***

Thanks.

March 17, 2010 | Unregistered Commenterfallingman

Whoah! Major bearish divergence on the silver price rise compared to both the RSI and the MACD! That price rise is on thin ice. Tighten up your stops and be ready to go short any time.

March 17, 2010 | Unregistered CommenterTW

Silver is on the move. It is in the over bought arena. So, the shorts will be in soon to take it down. Gold went up strong today, but was pushed down. Gold will consolidate between where it is now and $1150.00 OZ., mark. I feel this consolidation period will go on for the next week before a pull back happens. Then you will see the metals depressed for a good period.

March 17, 2010 | Unregistered CommenterJerrold Minyard

Jerrold,

We assume that you mean $1115 and not $1150?

March 17, 2010 | Unregistered CommenterSilver Prices

Di,

The fallingman is still seeking an answer.

March 17, 2010 | Unregistered CommenterSilver Prices

Yes, that is exactly what I mean. As I am writing this the spot price for gold is $1125.10 OZ,. I think the low for today on the futures price was around 1109.?? for gold. The metals trend will give in to seasonality. Meaning the price will drop.

March 17, 2010 | Unregistered CommenterJerrold Minyard

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