There is so much noise occurring in the financial markets that one must step back and look at the fundamentals. First let’s look at the historical performance of both metals:
Gold % Gain/Loss
Silver % Gain/Loss
It is clear the silver has greater volatility attached to it, especially with an 81.9% move in 2010. At this writing, I expect to see a drop similar to 2008. Those that have the ability to manipulate the price will attempt to remove anyone who is “long” silver in a leveraged position. This situation determines how strong your conviction. This is why I have not been an advocate of leverage. Even though I don’t own a lot of silver compared to many, none of it is leveraged thus the downward swings in price don’t phase me. If anything, it allows me to buy a few extra coins for the future.
I expect gold to move between 1,500 and 2,100 for 2012 unless the Iran conflict heats up or the European crisis reveals worse financial losses than previously reported. If that happens, $3,500 is in sight. I expect the volatility of silver to continue as it always has and see 24 to 50 as the potential range. The paper market does not reflect the physical market for there are notable delays in shipments of silver purchases. The physical demand is not reflected in the current price, a classic sign of manipulation of the paper market.
Those with government and financial backing and are primary dealers in the gold and silver market are clearly “painting” sell signals in these markets from a technical perspective. Traders who rely heavily on technical indicators will be removed from their long positions as their computers flash sell signals. As usual, manipulation occurs just prior to critical review dates such as the year end.
I will continue to scrape up cash to buy silver ounces and gold & silver stocks. I believe that this is a late Christmas present. I will not leverage up to buy however. I will only buy stocks with strong cash positions and substantial reserves in the ground. I will pay close attention to those stocks paying dividends, an indicator of excess cash.
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