It’s clear that silver has had some large and scary sell-offs over the years but the “silver” lining to that fact is the realization that its current volatility is perfectly normal. As such, the appropriate question to ask isn’t “How far does silver fall?” but “When do I get to start buying again?” [Let me explain.] Words: 593
So says Jeff Clark (www.caseyresearch.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com, has reformatted and edited […] below for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.) Clark goes on to say:
My “corrections” chart below shows all major pullbacks in silver since our bull market began in 2001. The data measure any clearly visible drop in price greater than 10%, regardless of time length…
The average of all corrections is 19%. Applied to our high of $48.70 on April 28, silver would fall to $39.44 if it matched an average drop. The current pullback [ has been above] average and… quicker than most but corrections don’t happen in a vacuum.
It’s generally true that the larger the rise, the bigger the subsequent pullback – and silver [peaked up] an incredible 58% from year-end 2010… This is important to note because based on my research, this was the biggest surge in the silver price in the current bull market. Thus, it seems reasonable to expect that the metal might fall more than the average.
You’ll notice [above where] a couple [of] corrections in silver were about a third. If we dropped 33.3% this time we would hit $32.48. If it matched the giant 53.9% sell-off from July 15th to October 24th, 2008 we’d get to $22.45, though I wouldn’t hold my breath for that. [You might be interested in reading Dr. Nu Yu’s technical analysis here in which he projects silver falling as low as $33 based on his “Bump and Run” chart pattern.]
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The value in this, of course, is that it gives us some idea of where we might start buying again. I personally would love to see $32 silver because that would represent a healthy sell-off and appear to have limited downside from there. Only if you believe inflation “loses” would you hesitate to buy at that level.
Regardless of when you start nibbling again, it’s important to remember that the fundamentals driving this market haven’t changed one iota. The two big “Ds” – debts and deficits – are among the largest in history and cannot be repaid in sound currency. The U.S. dollar and other fiat currencies are getting inflated into oblivion – the full ramifications of which have yet to play out. In my opinion, viewing silver as a monetary replacement in our current environment is very prudent. [Goldrunner could not agree more as he puts forth in an article here in which, according to his fractal analysis of the trend in silver it should reach $52 t0 $56 before the end of June!]
The appropriate question to ask isn’t “How far does silver fall?” but “When do I get to start buying again?”
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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