Today, as I write this short article, silver has moved from $45 and some change from the close of the New York market on Thursday to $49.35 a troy ounce in Asia, a move of 9.06%. If the price of silver remains anywhere near this level for the next four hours until the COMEX opens, this will mark one of the largest, if not the largest, move higher in silver in years from market close in New York to the next market open (remember the COMEX was closed last Friday for Good Friday). So what does this enormous move mean, undoubtedly fueled by official comments from the China Central Bank that it desires to offload some $2 trillion of U.S. dollar denominated reserves?
Well for one, it proves that all the recent talk of silver bubbles is not only uneducated but also silly. If analysts can’t figure out that soaring silver prices are directly related to a loss of confidence in the U.S. dollar and other global fiat currencies, a rejection of the global Ponzi banking system, and silver’s return again to its well deserved status as a monetary metal after years of being just an industrial metal, then they should cease performing any further analysis. Silver is not just soaring against the dollar but it is also soaring against the Euro and many other global fiat currencies. Silver’s recent big move also means that the recent articles comparing silver (and gold) investors’ fondness for precious metals to a misguided, religious-type fervor is also way-off base, and that analysts must be using the term religious-type fervor as a euphemism for logic, intelligence and reason. While exciting, this huge market-close to market-open move in New York in the silver price also does not mean that silver will shoot higher to $60 and then to $100 in a few weeks either [unless the shorts at JP Morgan (JPM) get run over by this move and have to start furiously covering and the COMEX defaults – then anything can happen]. Nothing goes up in a straight line just as nothing drops in a straight line. Silver will experience significant drops during future consolidation periods as the silver bull progresses as well.
While it is true that some speculation and short covering are helping to drive the price of silver higher during this run, one never hears the other end of this argument – that speculators are merely enabling the price of silver to reach a price more reflective of the free-market fundamentals of supply and demand after having been suppressed for decades by the likes of JP Morgan and other puppet bullion banks that execute the wishes of the U.S. Federal Reserve. Furthermore, very few people also discuss the safe assumption that China would not be releasing these official statements about dumping U.S. dollar reserves, knowing that such a statement would drive gold and silver prices higher, if they had not already purchased a large amount of physical gold and physical silver for their reserves in recent months. No one releases information that drives the prices of assets higher that they plan to purchase, just as no one (except Gordon Brown) announces information that drives the prices of assets down that they plan to sell. Thus, one can assume that China must have just concluded buying physical gold and physical silver, and lots of it, even if they have not announced this to the rest of the world. There is bound to be large sovereign buying backing this large move in silver that is fundamental and long-term. Such actions will counter and help smooth out the additional spike in silver prices that can be attributed solely to speculators and short covering.
While it is true that silver will pull back and consolidate after an enormous run higher (a mind-boggling 162% since the end of last August!) at some point probably in the not-so-distant future, and while it is true that silver will likely experience some very volatile dips to the downside as well this year, the next significant dip in the price of silver will not mean that the silver bubble is bursting as the disinformation bots in the media will assuredly report when it happens. In fact, I expect the silver bears to proclaim this recent huge move as a “blow-off” top that marks the inevitable bursting of the silver bubble. I would be disappointed if they didn’t. My take? I will use any significant dips in silver price in the future to convert more of my savings into physical silver. Let’s wait until silver reaches the mid-triple digit range before we start talking about a silver bubble.
JS Kim
Managing Director
SmartKnowledgeU Pte. Limited
http://www.smartknowledgeu.com.
About J. S. Kim
Since the launch of the SmartKnowledgeU Crisis Investment Opportunities newsletter on June 15, 2007, as of December 31, 2010 it has returned a cumulative +176.14%, outperforming the S&P 500, the FTSE 100 and the ASX 200 each by nearly 200% during the same investment period. In 2010, his Platinum Membership that tracks junior mining stocks returned the following yields on favored SmartKnowledgeU junior mining picks: +457.14%, +346.22%, +189.42%, +221.50%, +119.23%, +65.05%, +70.51%, +72.06%, +154.34%, +84.07%, +73.78%, +97.07%, +97.90%. +88.68%, +80.08%, +77.78%, +68.72%, +45.16% , +8.97%, -11.70%, and -23.52%.
After earning an undergraduate degree from the University of Pennsylvania and two master degrees (a Master in Public Policy and a Master in Business Administration) from the University of Texas at Austin, J.S. Kim started working within the Private Wealth Management division of one of the largest financial institutions in America. In 2005, dissatisfied with the ethics of the commercial investment industry, JS left the corporate world behind to launch his own company, SmartKnowledgeU™ (http://smartknowledgeu.com/), a fiercely independent investment research & wealth consultancy firm based upon his innovative, proprietary wealth creation strategies, where he serves as President & Chief Investment Strategist.
Mr. Kim’s great accuracy in calling the procession of this global financial crisis for 3 years running on his investment blog, his subscription services, and a series of YouTube videos has led to a high level of interest in his future predictions, with many of his articles reprinted online by Reuters, the New York Times, USA Today, the Wall Street Journal, the Financial Times & the International Business Times. He actively maintains a blog, The Underground Investor (http://www.theundergroundinvestor.com/), where he strives to bring the retail investor timely global investment news that rarely receives mainstream coverage – the “real” news behind the headlines.
*yield is for a tax-deferred account