"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, December 30, 2011

Silver ends DOWN on the Year

First of all I would like to publicly thank one  of my readers, "Silverwood", for noting that I erroneously reported in an earlier post that silver had ended the year 2010 at the $28.00 level. I mistakenly used the LOW for the month of December 2010 instead of the closing price which on the front month futures contract was $30.93.

Based on that price, Silver is ending DOWN on the year 2011.

Note on the following chart that it has retraced 50% or half of the entire rally made from the lows in 2008 which marked the bottom during the eruption of the credit crisis and the inception of the Federal Reserve's Quantitative Easing program. That rally took it all the way to $50 before it then promptly collapsed.

Bulls would have preferred to see it close the year ABOVE that 50% Fibonacci retracement level near $29.30 but alas, it could not do so after staging a decent bounce off of this week's low near $26.

A period of base-building in a sideways trend would benefit this market as many players are simply too worn out from its wild swings up and down to mess with it right now. Silver is a seductive lover which promises all manner of satisfaction only to then break your heart with its fickleness. If it can settle down some and grind sideways ABOVE $26 for some time, then we should start seeing some confidence towards it on the part of more investors outside of the dedicated silver bulls.

If you note on the chart the line marked "SUPPORT"  in dark red. That line comes in near $26.30 and extends down towards $26.15. THREE times over the last year it has held price and attracted sufficient buying to take the price higher. IT MUST HOLD in order to prevent a drop all the way down towards $22 - $21. If the bulls can take price back above that 50% retracement level near $29.30 and preferably put a handle of "3" in front of the price once again, then I think silver will be okay and attract some new buying as well as minor short covering.

In order to get a sustained uptrend going however, it is going to have to convincingly clear $35.50. If risk trades come back into vogue early next year, then this should be a relatively easy matter for the bulls to accomplish. If however risk aversion is still the order of the day, then this market is going to struggle.


  1. Thanks Dan for the great year of guidance!

    This morning I was reflecting on the last few years of growth of the gold and silver prices and mining stocks.
    Even though this last year kind of sucked, how can we complain with great returns for the last few years. I think we have to keep a bit of a longer term perspective.
    There are no guarantees that every year will be great.
    I've ended the year down but that compares with being way up over the past few years!

    Maybe this year will be better? But if not, we wait as all the reasons for being fully invested in these sectors are all still in place.

    On top of all of this, I feel like I keep learning more.
    During this pull back I've been adding quite a bit to my physical metal positions.

    It's a little unnerving at times but I feel like I have to stick with the bigger plan.
    Thanks, John

  2. The buyers were out today, which was very encouraging. The action was palpable in the upswing to 1580/28.40. The only discouraging thing I saw was that there was zero attempt to hold 28 on the way back down, but by then Elvis had left the building, Euro dropped 50 pips, and the general markets were selling off, yet gold still positive for the day, with silver flat.

    Looks like a small portion of that fresh ECB cash is being deployed in the European stock markets. PM's/Commodities are setup well to outperform over the next few days, assuming we get a little help from our friends who have been shorting the dollar. My take is that they want to see it at 1.3 to 1.31 to keep the party rolling, and I'm hoping they want to push the general markets higher out of the gate.

    Maybe we'll get a gift from the S&P and they will only downgrade France one notch instead of two. That's my only real concern for next week.

  3. Just maybe one may want to check out this lady's blog:


  4. Seen Barnhardt. She is a feisty one. I like her mostly because she has "integrity" and "character". She is also smart as a whip. But, alas, I fear she will be eaten alive eventually by the big maulers. I have written her and told her she is appreciated. Sold all mining stocks again today. Waiting for the 1620 crossing. Took the 8% gains in certain mining stock funds. I don't trust this market yet. Thanks Dan. If we cross 1620 with conviction, and ...dollar crosses downward trends, I will buy more with idle cash. Good luck all.


Note: Only a member of this blog may post a comment.