Sunday, February 20, 2011

Silver on the move 'The perfect storm'

Looks like Silver is going to continue it's powerful bullish uptrend, here is an updated screen shot of TD Ameritrade's Think or Swim's platform on Monday morning at 7:30am PST showing the Silver futures. It's a 1 hour bar chart going back to January 24th. The low on January 28th was at $26.30.

Silver hit 33.75 and it looks like this move to the upside should continue.  The major shorts in the market are getting squeezed and they will be taking a huge monetary hit on their bottom line.  I'm sure there are more shorts coming into the market as some will see Silver at a 30 year high and believe that it will pull back or even start a long downwards trend. (I've heard some people on CNBC state that the bull market in PM's are over......they obviously do not understand the monetary system)
We still have a LONG ways to go to the upside as Silver is still undervalued compared to Gold.  The ratio is dropping and is now around 42, compared to 70 last year at this time.  That is a drop of 28!

Feb 21st 3:15pm price update: $34.27 an ounce and climbing on my Thinkorswim trading platform.  This is with the Comex market CLOSED for the Presidents Day holiday. It's going to be an interesting Tuesday...

With Gold on the rise and the Gold/Silver ratio dropping, Silver will have another great year to the upside.

Combine all of the drivers below:

Physical shortage
Futures market 'Backwardation'
Investment demand
China demand (Government diversifying out of the dollar + citizen demand)
Industrial demand
Short Squeeze
Monetary debasement
Civil unrest in the middle east (It will be worldwide in a few years)

As you may already know, even the U.S. Mint cannot produce enough of the uncirculated Silver Eagles as they sold all of their 2011 production in January. (The U.S. Silver Eagle coin must also be minted with Silver that was mined in the United States) Here is the message on their website for the Silver Eagle:

The miners should start gathering momentum to the upside as well with profit margins increasing as the spot price appreciates. Most if not all of the mid tier or junior Silver miners have had a good run over the last 2 weeks for those swing traders.

As long as the stock market stays 'healthy', the Gold and Silver miners should be one of the best areas to invest. People that only purchase physical Gold or Silver have missed out on some huge gains and may be missing out on some of the largest returns in this bull market. The risk level is much higher when you invest in any individual stock, but the returns are also higher for those that do the research.

As seen in a previous post, I picked up AGQ a few weeks ago when it looked like the market had bottomed and was starting to rebound.  AGQ is a double long Silver, so if the spot price were to rise 1.5% in one day, AGQ will rise 3%.  If Silver is headed higher going forward, this may be the right investment to own. On the downside, it will also drop double the amount of the spot price so leverage is a double edge sword.

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