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keys
Penny Collector Member
383 Posts |
 Posted - 01/18/2009 : 13:38:51
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An article from a silver investor.
You may agree or disagree with this article, but you shouldn't dismiss it without verifying the facts yourselves.
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Silver in Crisis
By Adam Hamilton
Nov 21 2008 2:27PM
Excerpts-
...Like so many things in these crazy markets, today’s horrific silver environment would’ve seemed impossible not too many months ago. So this week I decided to take a look at silver in crisis and see what insights we could glean.
To start, we need some perspective. Despite what it may feel like, silver has not been singled out. From early March to late October, silver fell 56.7%. Most of these losses snowballed since mid-July, a span over which this white metal lost an unbelievable 53.0%. This is terrible, no doubt. But realize over this same period crude oil, the king of commodities, plunged 63.3%! Heck, even the geometrically-averaged (hence very slow to move) Continuous Commodity Index is down 43.0% since early July.
Silver’s losses are not happening in a vacuum. They have been driven by exogenous forces far beyond the usual small and insular silver market. The financial panic has driven a wholesale deleveraging of all assets, including commodities. It is crucial to keep this in mind. Considering silver technically in isolation, ignoring these unprecedented times, will certainly lead one to draw the wrong conclusions on its troubles.
And silver is unique among commodities even in the best of times. Its small market size, phenomenal historical price spikes, and fanatical following have forged it into one of the most volatile and speculative commodities on the planet. While its secular bull is indeed fundamentally-driven, inflows and outflows of speculative capital have driven violent swings all around this core uptrend. Silver has never been for the faint of heart, it takes no prisoners.
Because of this heavy speculative component driving silver’s wild gyrations, speculator sentiment is disproportionately critical to silver’s near-term fortunes. If silver speculators are greedy and excited, silver can rocket higher like it did in early 2008. But if silver speculators are fearful and scared, silver can plummet like it did in recent months.
Speculators’ mood swings drive silver’s short-term price swings.
As I’ve traded silver and silver stocks over the years, it has become clear that one factor dominates silver-speculator sentiment much more than all other factors combined.
It is gold’s performance.
Gold is the king of precious metals, its behavior governs sentiment for the entire PM complex. When gold is strong, silver traders get bold and buy aggressively. But boy, when gold is weak silver traders run for the hills.
In light of this truth, and considering how universal this financial panic’s impact has been, we can’t consider silver’s behavior in isolation from gold’s. Gold sets the PM tone, and silver amplifies it. If you are the least bit skeptical of this, I encourage you to study market history to investigate it on your own. I wrote an essay last year, Silver Lagging Gold, that illustrates this strong tendency with 7 charts spanning nearly 4 decades.
Today’s silver crisis needs to be pondered in light of gold. It won’t and can’t make sense in isolation given all the unprecedented financial-market extremes we’ve witnessed in the last couple months.
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The entire article explains in greater detail the relationship between gold and silver, gold and silver speculators and the reasons for the price swings that occurred in the past year.
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I change with the times-
but like silver coins found in your change
I stay the same.
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The United States of America started out as the new Republic of Rome.
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Gold, the key to silver's price?
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