My Dear Extended Family,
My daughter was hospitalized yesterday. She is fine now, but it was dicey last evening.
This note is being written in the hospital to tell you to please relax.
Margins will continue to rise on the COMEX until it reaches the cash price of silver. This works for the shorts as their hammer on the silver market reduced the equity of low cost positions. The efficacy is short term and made no difference whatsoever in 1980 as the silver market made its highs. What broke silver in 1980 was a unilateral change (novation) of the silver contract which went to "sellers only." Under contract law that is simply not permitted. They got away with a violation in 1980, but the corporate changes in structure at the COMEX that have occurred since 1980 makes the COMEX less able to pull that trick off successfully in 2011.
Silver is simply being silver. Silver did help gold therefore the 25% drop in value has to pressure the gold price.
The USDX is simply having a weak rally off a totally oversold on every internal indicator short side trade. The dollar has no future. The supply wishing to diversify is simply too big to allow any rally to have legs.
I have told you silver is a game. That being said, it it is a great game. Certainly as the silver price approached the 1980 high, you might have considered selling 1/3.
The high trade on silver was $54 in 1980. Silver’s round numbers are at $50 and $100. Both will function as such in trading.
Silver is not money. It is simply too bulky to be freely and universally fungible. After this short play, which had to follow the spike intermediary top, silver will rise as fast as it did again.
The Hedgies are having their way with the gold shares, but logically this is coming to an end. When you can buy companies whose resources are three times the company’s present capitalization, the share is getting unreasonably cheap.
The ratio of GDX versus GDXJ is starting to favor the juniors which is a major heads up event.
What you have witnessed is not at all shocking. If you traded 1968 to 1980 you would know this is just silver being silver.
Relax. Put a french curve on silver and you will see the bottom change in trend event.