"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Tuesday, May 3, 2011

Silver becoming a proxy for the entire commodity complex

Note the following chart comparing the price action in Silver against the price action of the broad commodity complex as a whole as illustrated by the Continuous Commodity Index.

The parallel is remarkable. What appears to be happening is that silver is becoming a type of proxy for the complex as a whole and in particular, for risk trades.

When risk trades are in vogue, silver is rocketing higher alongside of the rest of the commodity complex. When traders are avoiding risk and jettisoning the risk trades in favor of bonds or cash, the entire commodity complex seems to be following the exact same path as silver, namely down.

As mentioned in my earlier post, until the risk trades come back on, the silver market is going to languish. I am not sure what pill the hedge funds will have to swallow to bring them back to another frame of mind but the fact is we need the money flows that only the hedge funds can provide to take it back up again.


  1. superimpose that chart Dan over a chart of POMO's/ QE and you have yourself a complete thesis! Its unbelievable. Excellent chart!

  2. I thought it was short covering driving it higher. Or is it a combination of funds going long and short covering?

  3. Yes, Dan, you are correct. Crude oil and oil stocks have been seriously underperforming and the bank stocks are getting some bids. Looks like some rotation occurring to me. And as usual, retail stocks and bonds have been untouched in all this carnage lately. Might have to wait it out for a few months before the uptrend resumes.

  4. thanks dan for all your posts and advice

  5. When the week is over with, and with all this downside volatility, if the gold and silver can come back even close to even, then the shorts going forward will be as dead as bin laden.


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