Monday, August 1, 2011

Where to for Silver?

As I suggested would happen in a post on Saturday the metals started to correct in price following the announcement of a deal relating to the US debt ceiling.

It's only early days yet, we are still to find out whether we get the multiweek correction that I am anticipating.

Although it's taken longer than I thought to play out I still think we may get a deflationary period which takes the markets and metals down (something I suggested we would get post QE2), which will ultimately lead the Fed to initiating QE3 to prop things up again. In my opinion this action will have the potential to trigger the start of a parabolic move higher in the metals (potentially leading to the peak of this bull market). In the meantime though...

After consolidating in a range following the collapse from $50, Silver is currently flirting with a fairly significant support line. If we see this breached to the downside (would probably want to see several days trading under US$39 for confirmation) it seems likely the price might head back down to test the low $30s and in my opinion if we see a period of deflation/asset price destruction then we may very well see a brief period under $30.

I still see Silver as an undervalued metal which will head higher. I still think the peak for this bull market is well over the $50 we saw in April. I still have significant exposure to this metal both through physical and related stocks. That said I also know that Silver is an extremely volatile metal at times and the corrections in price following the 2004, 2006 and 2008 spikes did not work their way through within a couple of months. Be mentally prepared for further downside in the price of Silver.


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  1. Hi Bullion Baron, great post!

    Just wondering around when you think this retreat back to low 30's or lower may happen?

    Both gold and silver have spiked recently due to global fears that we're heading into GFC2, will this fear in your opinion keep driving metals higher?



  2. Grant, I still think we will see lower Silver prices, but I could be wrong. I will provide an update to my thoughts on Silver tonight. Cheers, BB.