Imminent correction in Silver? I'm welcome any insight/knowledge/thought from all SLW traders ...
That’s why one long-time commodity bull, Eric Roseman, thinks a big correction in silver — and other commodities — is imminent.
“We’re long overdue for one,” he told me. “Something is going to derail this.”
---> “The summer is usually a very bad time to be invested in commodities and equities,” explained Roseman, who is based in Montreal and edits the Commodity Trend Alert newsletter.
“They’re all going to correct very sharply this summer,” he said, referring also to industrial metals such as copper, which he said faces an inventory glut because of stockpiling by China, its biggest buyer.
He thinks silver especially is in a classic mania.
Last fall, I wrote that gold was not in a bubble yet. Right now, it’s somewhat behind silver, but has probably entered the mania phase of the bubble chart too.
Remember, both metals have rallied for more than a decade: Gold hit lows of around $250 an ounce in 1999 and silver around $4 an ounce in 2001. So, gold is up sixfold from its lows, while silver has risen more than 12 times. And the current gold/silver price ratio of 30 to one is “at an extreme,” Roseman said.
===> (I wonder the same thing?) One more troubling sign: While prices of the metal have soared, “the larger silver-mining stocks are starting to go down in the last couple of weeks, which is very bad. It shows exhaustion in the market,” he said.
Roseman, incidentally, told me he started shorting some silver-mining stocks a couple of weeks ago.
But as a self-described “hard money guy,” he thinks silver will be a good buy again, after falling to as low as $30 an ounce in coming months. His ultimate target: around $125 an ounce
The long-term case for precious metals and most commodities is intact, he argues. With the Fed still not ready to raise rates soon, that will keep the so-called risk-on trade going. He also sees more inflation much sooner than Ben Bernanke does. And, of course, the U.S. dollar has continued to sink.
On the other hand, it’s hard to see the same real-world factors driving silver’s rise as we’ve seen with, say, oil and grains. Industrial demand for the metal has been steady, as has supply. One table-pounding silver bull I heard on CNBC the other day was touting silver’s use in solar energy panels. Oh, please.
Make no mistake: this is speculation pure and simple, and wild speculation at that. Some people may say they have “reasons” for buying now — inflation, the Fed, the dollar’s decline — but you can hedge against all of those without buying silver.
---> No, the only real reason anyone’s buying silver now is because they think the price is going up soon, and they don’t want to miss the boat. That’s the very definition of speculation, and it always ends very, very badly.
---> So, silver may keep rising for a few days or weeks but then it will come crashing down quicker than you can unwind a call option on SLV. I agree with Roseman that we will find better buying opportunities down the road, but for now you’d best get your helmet and flak jacket ready. Because in a mania like this, all that glitters is not silver.
Could any SLW traders here care to explain this statement ---> While prices of the metal have soared, “the larger silver-mining stocks are starting to go down in the last couple of weeks, which is very bad. It shows exhaustion in the market,” he said ???
I believe he has the reasoning wrong, I believe what you have is a simple pair trade where funds are net short miners and long pm etfs or futures contracts.
There is probably exhaustion by the bulls too as they have been buyers for pretty much 2 yrs without much profit taking.
I also believe there will be a Summer correction and it could be brutal, the problem is, many traders are looking for it, so it could be delayed.
It means that the rank & file are getting tired of having our own money used against us by our 'public servants'.
In an ordinary world, mining shares rise far faster than the metal that is mined.
If someone told us a year ago that the metal would rocket up while the miners went down, we would have confined them to a mental institute for rehabilitation.
Long way to go up, but it won't go in a straight line... THAT would make it a bubble; when it's in a mania and everyone's getting in regardless of price.
The fact that there is the potential, and likelihood, that we will see a pull back on the spot price of silver in the next couple months is fantastic news. There isn't really any support in the 40s for silver, so the smallest bit of bad news could bring us back to ~37 or even the 200dma (~30). I welcome it! I just bought an options spread with SLV out of the money calls and puts. The ideal case is a spike up before the drop, but I dont see that as likely as a failure to take out 50 again and seeing a sell off.
There is a lot of money currently on the sidelines waiting for a dip to get their buying opportunity...
The silver market is overheated and the more it goes up without a correction the harder it will fall when it does. Slow and steady wins the race!