I've received a few questions regarding the previous post, so I thought I should revise and extend my remarks. This mainly has to do with my short-term expectations.
Let's lead off with the charts so that you can see what I'm seeing:
Though I continue to hear of robust, consistent demand for physical, it is clear that, at present, the paper manipulators are driving price. Yesterday, I laid out the historical case for driving price back to the levels seen before the announcement of QE∞ and we are almost there. In gold, this would amount to a drop toward $1720 and, in silver, a drop to at least $32.50. However, if gold does drop another $20 from here, silver will likely see something sub-32, something like $31.50.
The technical picture adds fuel to this idea. The same HFTs, algos and commercials that are driving the paper price lower would love to hasten the decline by piercing the 50-day moving averages and they'll likely have a go at it. As of this moment, I show the 50-day MA in gold to be near $1718 and the 50-day in silver to be $32.42.
So, in summary, though I laid out yesterday the case for why I'm extraordinarily bullish, there is still room for a little extra weakness before the bottom is in. The purpose of this post is to ensure that no one is caught by surprise IF it happens.
Lastly, a few emailers were wondering why I bought a Mar13 $40 silver call yesterday. Three reasons:
- To make fiat that I can convert to metal.
- To demonstrate for everyone the courage of my convictions, essentially putting my money where my keyboard is.
- Most importantly...I could be wrong about this entire post and the notion of one, further dip. If I'm right about where price is headed by late February, whether I bought yesterday, today or next week is of little consequence. Additionally, I had about $5M in cash so I spent half yesterday and I'll be looking to spend the other half if/when the final dip develops. My next purchase will likely be a gold call, either a Dec12 or a Feb13.
That's all for now. More later if warranted.
3:55 pm EDT UPDATE:
Just a couple of things I've noticed this afternoon.
First, check out these 1-minute charts. The drops were not steep but, anytime you see selling on the Globex, it usually foreshadows Bad Guy intent. Last Friday into Sunday and Monday, for example. Again, this isn't much and we've already recovered some but you have to watch these things.
Now, take a good, long look at these daily charts of silver and gold. Note the rather obvious correlation to each other.
Also note the rather obvious correlation to the chart below....until the Sep 13 QE∞ announcement. Since then, the euro has zigged while the metals have zagged...again until today when the euro sold off and took the metals with it. (Not shown on the euro chart as it is only updated thru yesterday.)
So, what the heck is going on here? With the near 100% correlation from mid-July to mid-September, I would have thought that the trend would continue but it didn't. Should the euro be about 1.28 (1.307 as I type) OR should the metals be about $1780 and $35? One would expect this situation to fix itself but how? And when?