I previously wrote that we needed to spend some time getting to ‘the moon’, but within weeks we’ve now approached a major psychological level at $30/oz. With all the euphoria we’ve been seeing the last two weeks, we had a significant reminder today that silver remains extremely volatile and can still exhibit some rather dramatic u-turns. If you’ve historically been a net buyer like me, you need to see these actions for what they are… emotion-creating events. Emotion is what makes you think you need to buy or sell more – right now – or you’ll miss the train forever. Emotion is exactly what the guys at JP Morgan and HSBC are literally banking on. We’ve all been guilty of it, but remembering why you bought silver in the first place should help you stay grounded.

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It’s popular in the media to talk about bubbles, especially the perceived ‘gold bubble‘. It’s one of those buzzwords people use – people that may not necessarily understand – to categorically dismiss something that’s rising. “Just a bubble”, they’ll say. No doubt we’ve had them, the ‘irrational exuberance’ Buffet loved to talk about, but those who think silver is bubbling couldn’t be further from the truth. After the end of last week and what appeared to be much-needed pullback in the market a little bit, you might start to hear the “I told you so” people thinking they have this one down to a science. Time will tell how much silver ultimately gives back, but I think there’s a strong argument that we should see sustained prices.
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It is popular opinion that Kitco’s frontman Jon Nadler has a poor understanding of the precious metal markets, but I decided it would be prudent to see if the complete lack of respect for this man from the enthusiast community was justified given his forecasting performance over the last few years. The results were fairly conclusive. Even when given a timeline of just a few months, Nadler is woefully off the mark across the board, and often doesn’t show up in the right zip code when asked about longer-term expectations. Unfortunately, most of his predictions are on gold, but we found some great quotes on why he doesn’t appear to like silver and his general attitude towards the metal. Don’t take my word on it, however, take Jon’s:
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Unless you have missed – and i mean, really missed – the last few weeks of action in the silver market, it’s hard not to get excited about the prospects of silver reaching new heights towards the end of 2010. After all, all the indicators are there. You’ve got the economy in the tanks (who said that metals can’t move in a recession?), countries devaluing their own currency, and the never ending black hole of US government spending. Throw in the fact that big brother gold is at all time highs, and you’ve got a bunch of reasons to remain optimistic about silver over the short term. The problem, though, may be an interesting one for once-suffering silver longs: do you really want silver to race to the moon so quickly? The more I think about $25/$30 silver over the next couple months, the more I’m concerned about the health of the market. Here’s why:
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