Gideon writes:
"Doc,
Been following your site for a while...I truly enjoy it.
I know all about the fundamentals of silver etc etc.
I basically invested 90% of my life savings in physical silver at about $30 dollars. Was thrilled to watch it go to $49 and it's been very disheartening watching it tank to below $35 now. It seems we've entered the summer doldrums, and to be honest, I don't feel too good about how low we might go. Are you still confident about your $70 prediction by fall of this year? "
Great question Gideon, I'm sure its one that is echoed among many that are newer to silver. Many are likely even more disheartened about silver currently than you are- imagine how those who entered near the recent top and put 90% of their life savings into silver at $48 then watched it fall to $32 must feel currently!
As you've said, you know about the long-term fundamentals of silver- keep your focus on these, and try to detach yourself emotionally from silver's wild price gyrations. The fundamentals for silver have not changed since the take-down from near $50 to $32. If anything, they've improved! Physical silver supplies have been drained from the COMEX. The Morgue and HSBS have piled on 10 million additional ounces in silver short positions. COMEX registered silver supplies are now near 28 million ounces. The US fiscal situation is continuing to deteriorate.
We've been long physical silver since 2001, and this is the 3rd of 4th severe correction we've experienced in that time. We've seen the game played out long enough that instead of invoking a knee-jerk panic liquidation of our positions, we welcome silver's severe corrections with open arms! Our fiat is temporarily able to be exchanged into more ounces of silver! (Note, this is why we strictly recommend physical silver, options can burn you out of your silver holdings, which is the whole purpose to the cartel's games-if you stay with physical, their games work against them)
The last severe correction was in the fall of 2008, which saw silver fall to nearly $8. So fast forward only 2.5 years later, and silver is STILL up 4-fold from the 2008 lows, EVEN AFTER A MASSIVE 36% correction from recent highs near $50! I believe we'll look back at the low $30's in another 2-3 years with the same perspective.
As to more immediate price action and whether silver will still reach our call of $70 in 2011, we still think $70 is very obtainable for 2011. This likely depends however on the actions of Congress' vote on raising the debt ceiling another $2+ Trillion, and especially with how the Fed handles the continuation of QE. There remains the very real possibility that the Fed publicly allows QE to end at the end of June, and the economy subsequently immediately rolls over. Compound a publicly announced "end to QE" and the Q2 earnings release which will show the huge economic drop-off from the Japan disaster, and we could see a panic rout in the market, in which silver very possibly could get caught up in during the initial stages. We say initial stages, because this could very quickly morph into a dollar crisis, at which point physical gold and silver will go vertical and become literally unobtainable for fiat dollars.
If the Fed reverses course and publicly announces QE3 to prevent this market collapse, silver can reach $70 this year without any problems whatsoever. The moves both up and down will continue to get bigger the farther along we go into this bull market/ dollar collapse.
I don't have any inside connections to the Fed, so as far as the short term, we're like everyone else, speculating on The Bernank's game-plan.
But again, long term, silver's fundamentals are better than ever. We personally bought into silver's correction at $43, $36, and $32.50. If silver falls more this summer, we will be buyers again. We try not to look back and regret trades we made in the past. All you can do is RESPOND to current price action.
Stay patient, the trend is your friend. Continue to accumulate during corrections and consolidations, and hang on for the ride when silver makes its rocket-moves up!
