Friday, 12 October 2012

Who is talking silver down?

From its 2012 bottom level to the $35 attained intraday, silver has rallied over 32%. This is almost the double of the mere 17% gold rallied from its $1537.5 bottom (LME fix) to an intraday close to $1800. Yet in a different perspective, gold is currently quoting at less than 10% below its all time high, while silver needs another 30% rally before coming close to its April 2011 peak level.

But again, in this kind of game, it's not long term trends that count and even less fundamentals. For short term gain, only short term moves are of any importance. On two consecutive occasions, Daniela Cambone of Kitco News, hints at rumors on an imminent correction for silver.

Last spot: Daniela Cambone interviewing Peter Hug (You'd like to swap surnames too?)

First spot: Daniela Cambone interviewing chart technician Jim Wyckoff.

On both occasions the analysts deny any major correction is "in the charts". A 4 to 5% correction for gold won't bring us back below $1712 - $1730. Such correction is likely to translate into a 6 to 8% correction for silver which than translates into $32.2 to $32.9/oz. Jim Wyckoff sees a first support at $33.36.
A geopolitical event may bring back the safe haven demand for gold, in which case the $1800 resistence will promptly be taken out, propelling gold to a new all time high.

Peter Hug sees silver continue outperforming gold to the upside. "If you believe in $2200 gold, silver attaining $50 is equally likely. Do your math: the upside potential for silver is still huge, also at the current price level." And further: "A deflationary collapse, driving the investment crowd back to the dollar can drive precious metals down on a temporary basis. Yet with the current FED policy, in such case precious metals would recover rapidly."

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