Will a New Low for Silver Matter?
While the price of gold is holding up (sort of), silver has been slowly sliding back towards its closing low of 18.53 realized last June 27. As I write this, we are a mere 5% away from a new bargain basement price for the white metal.
The slide to new lows, however, is not occurring on particularly strong volume and is also occurring against a backdrop of silver volatility sitting at ten years lows (meaning that this is a dead market.) Some momentum indicators are as oversold as they ever have been--a pretty amazing thing when you realize how dead the market was at points in the 80s and 90s. As many of us have been saying for some time now, this kind of price action is reminiscent of prior, drawn-out, post parabolic crash patterns in poor man's gold like 1968-1971 or 1987-1991. The price, while dropping, is doing so in a way that indicates both buyer and seller exhaustion.
Obviously, for those who have made a decent-sized allocation to this space either as a hedge or as an investment, this kind of price action is demoralizing-- but bear market bottoms always are. I can tell you that the sentiment change is pretty amazing from prior years and it seems as though the only comments I get from the blogosphere are from traders convinced that a further market breakdown is likely. This kind of extreme sentiment is also indicative of a market making a bottom-- even as it is a drawn out one.
I also need to remind you once again that there are always a thousand reasons to buy at the top, and a thousand reasons to sell at the bottom. You have a clear choice between buying into a conventional stock market making all time high after all time high, or an asset like silver that is off over 60% from its highs. Markets, contrary to what many are saying, do not fall forever.
And beneath the surface, it bears repeating that last year was a record year-- repeat a record year-- for silver coin purchases. In spite of all the fun the bears are having with this metal at the moment, someone out there is not giving up on the need for a genuine tangible asset and crisis hedge.
The silver price looks set to make a new closing low soon, but beneath the surface a trend change may be in the offing.