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Wednesday, July 18th, 2018 - Buy Gold - Bringing you trusted gold news and gold investing information since 2006

Is Silver Bottoming?

Last year was a very good year. The author was able to increase his portfolio value by double digits (nearing triple digits) during 2010 by concentrating on the smaller mining stocks. The spectacular performance in the fall of the precious metals and miners accounted for almost all of the gains.

Looking forward to 2011, the author is searching for possible investment suspects. Runing over the charts this morning, something particular stuck out – the Silver price is exhibiting signs of bottoming, as displayed in the following chart:

(Click charts to enlarge)

The orange rectangle at the left side highlights the time frame at the start of Silver’s great ascent last summer on or about August 26, 2010. The first circle on the right of the chart highlights that the Relative Strength (RSI) is now below the 50 level, having been unwound since December 2010. The second circle highlights the white candlestick, which engulfs the previous day’s red candle; this signals a turning point in sentiment. Also, the price candlesticks bounced off the 50 day Exponential Moving Average (EMA), the red line, again indicating a reversal of sentiment. Note that during the rise of the Silver price, the candles did not even come close to breaching the 20EMA, such was the strength of the price move. Finally, the bottom circle on the right shows that the Moving Average Convergence Divergence (MACD) histogram is showing a lower divergence, again indicating a more closely aligned market opinion.

As the above Stockcharts is one day behind in the data displayed; the author switched to look at the SLV ETF (as proxy for Silver price). The chart of the SLV is below:

As indicated by the first chart, the first circle on this chart is displaying a long black candle for the day so far, as the pricing is jockeying further upwards. The second bottom circle on the right highlights the fact that the Stochastic Oscillator (STO), a price speed or momentum indicator, is turning upwards. This is further data to support the idea that the Silver price has bottomed and may now be turning upwards.

This is all fine to see the market sentiment on the charts, but what else is happening in the Silver space that may support the sentiment findings?

Thanks to reader DT, who alerted this author to some contango happenings in the Silver Futures pits as posted on Zero Hedge:

Last time we saw a contango move this significant was in 1997 before Warren Buffet took delivery. While more information is needed, and this could be a fake out we think the spread’s move is important. It happened during Asian hours and the Asian market has shown strong physical demand.

Another compatriot SR has alerted the author to this commentary “Bullion shorts in over their heads says our man in London” by Rick Ackerman:

This is just a bluff poker hand and by the time we get through NFP they are going to be called. Embedded shorts are going to have to cover or suffer a royal religious experience. All we are seeing is the same old washing cycle active so that the bullion banks can cover. However the lines cross very close to here so any benefit gained by flushing out the visible stops will be lost as new real strong hands pick their pockets. We buyers sat back largely yesterday looking for better prices and any spike down will, be short lived and cause a feeding frenzy.

Finally I submit my own anecdote in that a few weeks ago, through a third party, an Asian lady was inquiring as to whether it was a good idea for her to purchase $100,000 RMB in Silver certificates. Apparently, her boss had already purchased $1,000,000 RMB in certificates and was crowing about the percentage gains already. It seems that the Asians have an affinity for Silver, and that Silver certificates are now very easy to purchase.

Is a short squeeze for Silver in the works?

Disclosure: I am long GGCRF.PK and long junior mining stocks not listed.

Disclaimer: The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.

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