The events of the last week that caused silver to come down about 30% in a week were NOT a fundamental change in the market. Demand for gold and silver is still sky high as the world around us is suffering through political, geo-political, economic, and social turmoil. Additionally, couple a slowdown in the business cycle with inflation due to irresponsible monetary policy and you have a perfect recipe for disaster! These are the fundamental reasons that have caused the bull market in gold and silver since 2001. Have any of these FUNDAMENTAL reasons changed? Are we all of the sudden turning the corner and entering a bear market in precious metals? Of course not! At some point down the road, this will happen but not until the disturbances above rectify themselves. In the meantime, we have had and will continue to have market corrections due to technical factors (i.e. an overbought or oversold market).
Silver has gone up so rapidly for so long that the CME and COMEX decided to change the margin requirements on silver futures contracts in order to curb speculation in the market. This caused a TECHNICAL correction in the price, and from the price of silver a week and a half ago at over $49 per ounce, we will have a tendency to approach what are called the “Fibonacci sequence” of numbers. The Fibonacci sequence will create resistance/support numbers. For example, the Fibonacci sequence for silver is $41.72, $39.83, $37.73, $33.75. So, when we came down from $49 and the price approached $41.72, that was resistance until the price went through it, then $39.83 became resistance and so forth.
With these technicals, $33.75 would be a 100% Fibonacci correction and those kinds of corrections very rarely happen. Chances are, this TECHNICAL correction is over or close to being over, and the FUNDAMENTAL strength pushing the silver prices higher will resume. It is not until the FUNDAMENTAL reasons change that we need to be concerned with the bull market being over. Since this is the case, I encourage all of you to gobble up as much precious metal as possible with this “gift” of lower prices. The world is falling apart, and the metals’ prices should continue to soar for years to come.
Prepare, protect, pray. These are exciting times.
