"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


Friday, October 19, 2012

Silver Fails at 32.50 Support, Attempting to Hold at $32

You can see on the weekly chart that silver failed (once again) to extend through stubbornly strong overhead resistance near $35. Having done so, it is now setting back as speculative longs are getting flushed out. Additionally, fresh shorting is occurring.

The metal looks like it wants to drift lower yet unless it can pop back over $32.50 before the weekly trading ends. If it does not, odds favor a move down towards the 50 week moving average near the $31 level. That would put it back near the middle of the very broad trading range that it has been stuck in for more than  year now and effectively leave it in limbo for a while.

Clearly the market lacks the necessary impetus to drive it higher through the stiff selling originating at the $35 level. The question is at what level it will find enough solid buying to set a floor.


  1. Dan,

    Personally I find silver too volatile for its charts to be of much use. Just me personally. I have better luck watching gold and the dollar index. The 200 DMA and the 75 week moving average (on gold) are currently almost at exactly the same level in the low $1660s. The dollar action tells me today's bounce off the 50 DMA (in gold) will not be THE low.

    I doubt gold makes it that low, and I'd be stunned if this correction takes us below it.

    Big, big buying opportunity coming up late next week, I think.


  2. Thanks for the great call on the impending selloff in gold and silver. As expected, the S & P 500 was on the brink of breaking out to new highs and the bonds were under pressure, so it is no accident that stocks once again are sacrificed by TPTB in order to get millions of investors to flee back under the "Iron Apron" safety of U.S. Dollars and U.S. Treasuries, and might as well throw in California and New York muni-bonds as they have a relentless big also.

    And a little bit of jawboning should be sufficient to crash oil, gold, and gasoline down as the Fed is constantly vigilant about managing "inflation expectations".

    And don't count out the engineered selloff today as a method for Romney to tell Obama about the stock market crash under his watch when the debates resume on Monday.

    Of course, after the obligatory stock correction, slumping gasoline prices, bond yields back down to 1.6%, etc. Bernanke will utter an "all clear" signal and stocks will once again rise to new higher highs and gold will be dragged up kicking and screaming.

  3. Thank you Dan.

    Anyone think the action in the mining shares today is a little strange?

  4. Do I see a cup-and-handle chart forming on gold?

  5. Hey Dan, could you comment on the impact of the maintenence margin requirements ? My question is : are the silver margin requirements now the same as they were when silver was at $50 last April? The weak upside action might be due to the high margin requirements, if the margins are the same.

    1. Eli,

      the silver margin requirements on the CME have actually been lowered a bit since last April.

  6. The selloff today was in all asset classes, with lots of hedge fund favorites such as CMG, AAPL, GOOG getting mauled the last few days. The most heavily margined positions would be in futures of all kinds.

    Note that it took 40k contracts for gold to sell off less than $19, and it took 30 minutes to do so. Huge volume down or up moves with relatively little traction usually means solid buying into the lows and vice versa. Think about just late last year how much 40k contracts would nuke the gold market.

    Also, mining shares of all kinds made nice bounces today off support. The shares usually precede a similar move the next day in the metals. Yesterday they got crushed versus the metals themselves. Today they were almost the only sector positive or strong on the day. Options expirations shenanigans or real strength? We'll see Monday.

  7. Bradley - we are discussing this very point that you raised here on the KWN Metals Wrap. It is indeed very interesting and noteworthy. I agree with you 100% - this next week's early action in the mining shares will be key.

    1. Dan,

      Even more impressive is the performance of some of these silver names. SLW, CDE come to mind. You would think that silver's annihilation in the last few days would have priced in more of a decline in the silver stocks.

      A best case scenario for miners would be good miner action vs. a flattening or declining overall stock market. That would definitely mean sector rotation, and would get noticed even more by the mainstream media/investors.

  8. Eli - Bradley's comments on the lower margins are accurate. The margins are lower now than they were back at $50 silver.

    The problem with silver right now is a technical one - it failed to get through the $35 - $35.50 level which is very formidable so now it is retreating lower seeking to uncover more substantial buying on the physical side of things. This probe lower to see where the support is will show us at what price silver is attractive to the larger buyers out there.

  9. Thanks Brad and Dan for answering my question. I listen to the metals wrap every week, and I agree or should I say agreed that there was no catalyst to drive gold prices higher after QE 3 became known and gold failed to cross $1800, silver $35. What I use as a guide is the oil price, although I really cannot connect the dots between gold, oil, and stocks other than they all tend to go higher as the dollar gets weaker. My thesis has been since April of 2012 that oil would average around $90, and it has to do with politics as well, as Saudi Arabia wants Obama to be re-elected, because they see the Middle East more stable, thus they will oversupply oil to bring the price lower. When oil was around $93 at the start of this week starting 9/14, risk assets were more likely to go down as there's a $90 magnet in the oil price. This in addition to Dr. Faber stating corporate profits will disappoint and Dan's comments on the gold market being stale made it a more likely possibility (which happened) that risk assets would get crushed which happened.

  10. That was not a technical level at 35... that was the cartel
    throwing infinite amounts of their dirty shorts taking full
    unfair advantage of their obscenely concentrated and dominant
    position in the market. They only have to scatter a few of
    the boldest pigeons to spook the whole flock...they have
    no defection dilemma to worry about like us..
    No position limits gives them both motive and means to
    Pillage on scale unseen in history. Enough is enough.

    1. Totally agree-

      For every action, there is an equal and opposite reaction.

      When unlimited selling is not met by unlimited buying, price is going only one way: down.

      The buy side of the precious metals market is the only legitimate participant.

      General Motors is not allowed to sell cars (and collect the sales revenue) on cars it has no intention of ever manufacturing.

      fraud is fraud.

  11. And a little bit of jawboning should be sufficient to crash oil, gold, and gasoline down as the Fed is constantly vigilant about managing "inflation expectations".
    Harry Potter


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