Not For the Faint of Heart

Years of research consolidated for you
Not for the Faint of Heart
Tuesday May 3rd, 2011

The Gold Volatility Index/GLD the gold etf:

The yellow line shows gold on a steady, systematic progression as the outlook for world currencies of all kinds becomes more known.

I don’t have or know a volatility index for silver but I’m sure one will be developed soon but that would make the gvz look tame.

Shown below is the SLV silver ETF and in blue the trend for the SIL silver miners index. The SIL peaked when silver was around $37 and has declined to levels which reflect much lower silver prices.

Just after arriving home last evening and just prior to viewing these charts, the doorbell rang and a pleasant courier handed me a package from Mr. Market. In it was my fanny which appeared to have been run over by a riding lawn-mower and then chopped with a machete.

The chart above shows what happened to my portfolio of silver stocks- some down north of 10% on the day. . I bought them much, much lower but, nonetheless, drawdowns are unnerving. I read a lot of people who write newsletters and commentaries who never have this happen-or at least admit to it-but this may likely be the nature of the precious metals market for stocks and physical itself-presenting opportunities in both directions.

Silver blew through the 40s to within 18 cents of 50 so this is to be expected. The key will be where the support levels develop which appears to be in the $42s. If it holds in that range, I am expecting a big rally in silver stocks but as my favorite commentator is known to say “We’ll just have to wait and see”. You can’t win if you don’t play..of course, you can lose if you do. At the same time, if you don’t play inflation guarantees that you do lose.

For those with no or small physical positions, silver just went on sale with a 15% drop so beginning here with a starter holding could make sense.



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