Thursday, July 11, 2013

Chart of the Week - Silver Corrections

Silver bars vault oldSilver is well known for being the more volatile of the two most popular precious metals.  The chart below shows the four most important corrections for the white metal since the bull market for silver began in 2003.

The current 64% swoon for silver is the longest in time (by far) and deepest percentage wise (by a little) correction, measured from peak to trough basis monthly close data. 

The area shaded in green represents former important, long-period resistance (from 2007 to 2010).  Technical theory suggests that former long-period resistance becomes important implied support.  The price of silver recently tested that implied support, so far successfully.  (Chart below.)

20130711 Silver

At Got Gold Report we believe that when silver traded under USD $20 it entered a zone where we can begin to add physical silver metal for the first time since 2009.  For longer-term thinking investors, adding actual silver metal in measured incremental “bites” over time is an attractive game plan.  That’s as long as one can buy silver without paying injuriously high premiums and without any leverage or using borrowed money to do so. 

Silver 90 coins junkOur most favored silver product is 90% silver pre-1965 U.S. dimes, quarters and half dollars in bags of $1,000 face value, but only if one can buy it without a high premium.  Currently premiums for so-called “junk silver” are prohibitive in our view.  However, a quick look at some of the well known internet based vendors suggests that small bars (10 to 100-ounce) and rounds are available at more reasonable premiums. (Generic .999 rounds, not U.S. eagles which do have very high premiums currently which renders them uninteresting to us.)

As an alternative, the Sprott Physical Silver Trust (PSLV) is currently trading at or near par (1.2% premium as of July 11) and as long as the closed end fund stays at a low premium or trades at a discount it is a good silver proxy in our opinion.  Of course everyone can make up their own mind about such things and should.

Over time we expect the gold/silver ratio to decline from its present 64 ounces of silver to one ounce of gold to its historic ratio of between 15 and 20 ounces, making the current situation very interesting.  But that is a subject for another Chart of the Week, another time. 


The Original
Vulture Speculator

Trading gold, silver and mining shares since 1980 with a focus on taking advantage of volatility extremes, Gene Arensberg analyses the markets through a basket of technical and fundamental indicators and shares his findings from time to time here at Got Gold Report. Mr. Arensberg has been quoted in the Wall Street Journal, Dow Jones MarketWatch, USA Today and dozens of other news organizations.

"I've been a huge fan of Gene and his amazing work for years..."

Brien Lundin, CEO, Jefferson Financial, Host of the annual New Orleans Investment Conference and Publisher of Gold Newsletter

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