Friday, November 5, 2010

Silver Strides Shrilly

Silver Strides Shrilly
November 5, 2010
By:  Marco G.

The markets have certainly responded well to the FOMC statement on Wednesday November 3rd afternoon.  As reported by Seeking Alpha's Jason Kelly - Markets Climb to 2-Year High:

"Wednesday's long-awaited QE2 announcement sent the stock market to a two-year high yesterday. The Dow soared 2% to 11,435 and the S&P 500 jumped 1.9% to 1221. The price of gold for December delivery rose to a high of $1,384.80 per ounce as the U.S. Dollar Index slipped 0.6% to $75.84. In after-hours trading, gold rallied to $1,393.40, its highest price ever. Analysts say the Fed gave the "green light" to buy gold and that "gold and non-dollar investments should benefit.""

Silver Affections

 Though the mainstream focuses upon Gold, the author has determined previously that the Silver metal seems to have more opportunities than others at the present time.  Turning to examine the chart of the SLV silver fund, displayed following,  (the author is using this as a proxy for the actual silver prices) we see the chart story: 

True to form, Silver prices popped in the opening hour (circled in yellow on the chart above) on Thursday November 4th, 2010.

Silver Activities Overseas

The pop of Silver during the opening hour on November 4th, 2010, indicates that there has been activity overseas, that is driving the prices up.
In the precious metals investing internet vapours, there is much speculation in the precious metals blogs about large Asian players buying into the precious metals.  This adds further to the raucous behaviour of the precious metals prices.

Irfan Chaudhry, another Seeking Alpha contributor, recently presented good research about Central Banks buying back into Gold:
·         Central banks will keep diversifying their reserve holdings into gold without trying to convey any price information to the market.
·         US dollar part of reserves has seen most of diversification as dollar reserves have declined more than euros and other currency reserves. Expectation of further weakness of dollars may exacerbate this trend (a positive feedback)
·         China, Middle Eastern countries, Russia and India will stay as most aggressive diversifiers of their reserves into gold.
These reported Central Bank actions would explain some of the price supports for the precious metals overseas.
Searching further, the author finds that a new Silver trading service has just launched in China, on September 7th, 2010:

"As related, ICBC silver trading for personal account is similar to that of trading gold. Two types of silver trading categories: account silver (ounce) against USD and account silver (gram) against RMB. Once individual customers open precious metal trading account in ICBC, they can trade precious metals during business hours through the counter at the designated outlets, or through electronic banking right at home to trade 24 hours a day non-stop from 7:00 am every Monday to 4:00 am Saturday (except National and public holidays), and place order from the shortest validity of 24 hours to 120 hours longest. ICBC prices on account silver are quoted in real-time and go along with the international market price, highly transparent. No delivery of physical metals after the transaction, eliminating the steps of warehousing, transportation or authentication. The new trading service is very convenient for retail investors."

Who is the Industrial and Construction Bank of China (ICBC)? 
 The Wall Street Journal…
Well much surprise, the largest bank in the world has just opened up a convenient way for the investors in the largest country in the World to buy Silver. 

Impact on World Silver Markets

Source:, November 5, 2010, 11:10 EST.

Investing in The Silver Market

As described previously, the author has a preference for Junior Silver Stocks.

Disclosure: The author is long junior mining equities.
Important Disclaimer
The information and opinions contained within this document reflect the personal views of the author and should be viewed as food for thought and amusement only. The author may from time to time have a position in any of the securities mentioned. There are no guarantees of the accuracy, reliability or completeness of the information contained herein. Independent due diligence and discussions with one’s own investment and business advisor is strongly recommended. These writings are not to be construed as an offer or solicitation with respect to the purchase or sale of any security or as an endorsement of any product or service. We do not request or receive compensation in any form in order to feature companies in this publication. It is prohibited to copy or redistribute this document to any type of third party without the express permission of the author. This document may be quoted, in context, provided proper credit is given.


  1. Thank you for your insights Marco. I was wondering about that gap up on Thursday. Do these type of gaps typically fill? Wondering to go in at market price Monday or put in a limit order at the bottom of that gap. Thanks.

  2. Hi,

    As in the article, this is not a gap in the usual sense. There was much price action on Silver overseas, that was driving this up.

    The theory about gaps is that, the stock has moved too quickly, and that the owners tend, to want to take profits.

    My take on this is that presently, this is a real bull market. The major moves that come are unknown and unpredictable, and most important will probably happen on only less than 10% of the trading days.

    Therefore, if one is out of the market, one may end up chasing the market or get left out.

    This is not by any means, a sideways trading makret; this is a full blown bull in precious metals. Also, it is supported by the broader markets moving up together. This is the best of all worlds here.

    To reap the rewards, an investor has to be in.
    Thats all.

    Marco G.