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Thoughts on Silver (4/2/11)

The Silver market has enough fundamental and technical ammunition to absolutely explode in price within the next 1 to 3 years (and I’m being VERY conservative). The ancients referred to Silver as the “tears of the moon”—pretty cool analogy there…and in my mind Silver may well just shoot to the moon not too many days from now. There’s tightness in the physical market all the way around, as evidenced by the record level of backwardation, and the industrial demand for Silver shows no signs of slowing down. The Royal Canadian Mint has actually put a restriction on the amount of Silver they will issue, and if anyone would be in tune with the supply fundamentals of Silver, it would be a company whose main product is silver bullion. As a matter of fact, what I failed to mention earlier is that not only has industrial demand for Silver picked up due to all of the electronic gizmos that now require Silver, but also investment demand for bullion-related instruments has gone absolutely bananas. There’s a general “feeling in the air” (backed up by an absolutely craptastic Dollar Index chart) that the U.S. Dollar is in some grave trouble, and there more than likely will be some straw to come along that will break the camel’s back for good. For this reason, people are flocking to true safe-haven assets such as Gold and Silver. Truth be told, Silver IS money…it doesn’t just have a monetary value, it IS money. In several cultures throughout ancient history, Silver was used as a form of currency, and in more than one language, the word for “money” is actually the same word for “Silver”.

I’m saying all this to say, watch the Silver chart closely. I lean more towards technical analysis most of the time, because I believe that at the end of the day, price action is all that matters, and it will pretty much tell you everything you need to know. In light of this, just take a look at a longer-term Silver chart, such as a 10-year Monthly Nearest chart or something similar, and you’ll see an insane flat-top triangle formation in Silver, and as of this writing (April 2011) Silver is hitting highs that it hasn’t seen since the days of the Hunt brothers. What does all this spell, in plain English? Simply this…being a Silver bull is a pretty smart idea right now, and probably will remain a smart idea for a relatively long time to come. My personal prediction is that Silver will clear $50.00 an ounce in the not-so-distant future. Only time will tell, though.

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