Silver is the fast horse because it is a favourite retail investment asset. In the recent bubble jubilant investors found out the hard way that the price on the screen is not the price at the store when you come to sell. The system was overloaded by the boom and bubble and it choked.
The silver supply chain was not interested in buying Silver that might collapse tomorrow and as the system couldn’t consumer the sellers supply, it pulled down the shutters on sellers or offered a price very much below what the price the markets was suggesting it should be sold for. A liquidity trapped snapped closed.
(Never buy anything a financial system aggressively wants to sell you. It’s a red flag. If they don’t want it, why should you?)
Liquidity is key in fast markets and when it goes away, so does the price, whatever the ticker says it is.
I always say, have your exit already established when you play the market game of boom, bubble and bust. Liquidity is a hidden variable. It nowhere to be seen those equations of valuation. Private Debt, Private Equity, Venture Capital, they all depend on it not being a valuation variable. However it’s a hidden variables that make you rich or hurt you and commodities and many other assets are strewn with them.
So now after months of disillusionment and falling prices, those precious metal denizens still engaged would like to know where the bottom is of the Gold and Silver market.
While the FOMO crowd are gone bemoaning their bad luck, the die hards are licking their wounds and wondering where the bottom is and where does it go from there.
So as I called the initial precious metal breakout here and called to top as well and left the party with a smile I think I’ve earned a stab at calling the bottom. Forgive me if I’m wrong as this is the toughest of punditry task.
So, lets kick off with the retail favourite, Silver.
Trade what you see, if the relevant maxim. What do you see? Its going down. No?
I reach for my Crayola. So where could the bottom be?
So what do you see?
The end is near.
I also see $50 Silver, perhapseven $40.
So lets look at Silver and Gold together.
You can think of it as Gold priced in Silver and once again, the end is near.
When prices falling into that box I will consider starting to stack again.
So what will it do when it gets there?
This is my guess.
It is extremely unlikely to whip around and go straight up. It will go sideways as usual and bore the pants off everyone, for years.
Yet once it bottoms, it will be time to consider stacking again for the next silver boom. It will go vertical again for sure, its not ‘if’ its ‘when’ but the when is anyone’s guess.
So lets keep it simple, buy at the bottom and sell at the top. This is the way. ‘Dollar cost averaging’ is your best weapon for this and Ill be wielding it once Silver and Gold settle down to a boring transit across time.
They will come good but we have all the time in the world.