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« Eurozone ministers agree 30bn euros for Spanish banks | Main | MOUNTAIN OF SILVER? MINING FIRM SAYS IT'S HIT NEXT GREAT MOTHERLODE OF BOLIVIA »
Thursday
Jul052012

The Next Time Silver Crosses $30.00 Will Be The Last Time

It has been an interesting week on the economic stimulus front with what looks like a co-ordinated effort by the major powers to ignite their respective economies.

The European Central Bank (ECB) made the headlines with a widely anticipated cut to its key interest rate of a quarter of a percentage point to a record low 0.75 per cent in an attempt to ease Europe's financial crisis and boost its stagnating economy. This move by the ECB will make it cheaper for people and the business community to borrow and ultimately spend this cheap cash.

Next up to the plate was The Bank of England (BoE) chipping in with STG50 billion or US$77.62 as part of its Quantitative Easing stimulus package to boost Britain's recession-torn economy. The BoE also decided to keep its main interest rate at a record low of 0.50 per cent after a two-day monetary policy meeting.

Then we have The People’s Bank of China who decided to cut its benchmark lending rate by 31 basis points to 6.0 per cent.

Now we wait patiently for the next shoe to drop, which belongs to the United States. This Friday another set of Non Farm Payroll (NFP) will be announced with the hope that they are somewhere north of 120,000 jobs. However, should this figure come in at sub 120,000 then the heat is back on the Fed to take action. If this figure is as low as 60,000, then Chairman Ben Bernanke will be required to move and move quickly. Our own opinion is that it will be a low number and therefore some form of QE3 will make an appearance albeit in drag if necessary. Any indication that QE3 is on the cards will ignite gold prices with a subsequent knock on effect lifting silver prices as the demand for both of these precious metals gains traction.

All of the above represents a policy of cheaper money and more money, which is inflationary through the continuing debasement of our spending power. The lack of confidence in fiat currencies still exists despite the short term rally in the US dollar.

You may recall the last time we updated the silver chart we said: “that silver could go as low $26.00, so acquire gently.” That level is holding for now as the chart shows and the longer this sideways action continues, the bigger the move will be when it comes. Also note that the RSI has dipped below the '30' level and that silver prices did rise, but not in a convincing fashion, the 'tease' for silver bugs continues. However, rather like a bouncing ball the oscillations are getting smaller with every bounce. The trading range is narrowing and in the near term silver prices will break out of this range and move almost violently to new ground. As we see it the odds are skewed towards an increase in silver prices rather then a fall and once they do catch fire it will be dramatic. The regulators may well move to limit the rate of change that occurs, however, once through the $30.00/oz level the ensuing pullbacks, real or manipulated will not bring the price back to this level again.


To conclude we politely suggest that you accumulate as and when you can and that you do not sell any of your physical silver bars or coins, you might be just offering someone else a real bargain. As for the stocks we remain skeptical about their ability to perform, its not happening for them at the moment and we need to see some signs of investor interest in the producers before we decide to increase our exposure to them. At the same time we are not selling any of our silver producers as we purchased them early in this bull market and they owe us nothing.

Now for those of you who are adrenalin junkies you may want to consider allocating some of your funds to a few well thought out options trades. As we see it options are the only vehicle offering leverage to the underlying movement of silver prices. You will need to be highly selective, totally focused and disciplined. Once you have made a purchase the clock is working against you and Theta is your enemy as the time premium erodes with each passing day. Options do not fit a 'buy and hold' strategy its a buy, wait until your target has been achieved and sell regardless of how much further you think that they may have to run.

So if we have stimulated your interest drop by and see us some time.

We hope that you all had a very good Thanks Giving break, however, its behind us now so get your game face on, the second half promises to be explosive, one way or another. 

Regarding www.skoptionstrading.com. We recently closed a trade involving the S&P which generated a profit of 25.61% and was opened just 8 days ago, the charts and stats have now been updated.

Our trading success rate is 91.00%

91 profitable trades out of 100.

Our model portfolio is up 455.14% since inception

An annualized return of 81.15%

Our annual performance figures are as follows:

2009 We made a profit of 23.89%

2010 We made a profit of 158.66%

2011 We made a profit of 40.95%

In 2011 we outperformed:

S&P by 42%

HUI by 53%

Gold by 31%

Silver by 41%

The 2011 Annual Report by be accessed via this link.

Also many thanks to those of you who have already joined us and for the very kind words that you sent us regarding the service so far, we hope that we can continue to put a smile on your faces.

If you are new to investment in the precious metals sector then you may wish to subscribe of our FREE newsletters regarding gold stockssilver stocks and uranium stocks, just click on the links and enter your email address.

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Reader Comments (2)

Hello Bob-
Thank you for the thoughtful and insightful article on silver
reported in today's Kitco commentaries. While I agree with
almost everything that you wrote, I would like to point out
one thing that you may have overlooked.

You wrote: "Now for those of you who are adrenalin junkies you may
want to consider allocating some of your funds to a few well thought out
options trades. As we see it options are the only vehicle offering leverage
to the underlying movement of silver prices"

Bob, another, and less risky method of leveraging the price of silver
is with ETFs. The two that come to mind are AGQ, which moves
at double the price of silver, and USLV, which moves at triple the
price of silver. The advantage of these ETFs over options on the
price of silver is, of course, that there is no time value to them as
there is with options. Do you have an opinion on these silver
price ETFs?

Thanks for your article on silver, and please keep them coming.
We need to educate the other 99% as to its many uses and value
as a protector of wealth.

July 6, 2012 | Unregistered CommenterDL

Good Day Dwight,

We agree with you in that you can avoid the erosion of Theta that comes with an options contract, however, there are times when an option can move 5-10 times more than silver, in percentage terms. We are continually looking for new opportunities in order to get a better bang for our buck and we do appreciate the point that you are making, but for now we are comfortable with options and as our trading record shows they have been kind to us.

Go Silver Go.

All the best,

Bob K

July 6, 2012 | Registered CommenterSilver Prices

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