There are a number of mixed opinions out there at the moment which in our opinion represents a healthy state of affairs. When we are all ‘over the top bullish’ it gives us the jitters, same goes for when the situation becomes overly bearish. Right now the bears are flexing their muscles following a correction in silver prices and the predictions for much lower silver prices sally forth.

Taking a quick look at the chart for silver we can see that the correction appears to be over, however, we will wait and watch for now as the steam has been taken out of the technical indicators, which were at the top of their respective ranges, but, they can still go lower and chug along at the low levels for now. We expect more consolidation in the short term but there are experts in this field who suggest that a strong summer rally could be on the cards, notably James Turk, over on King World News as this snippet suggests:

The sharp rally that occurred today off of those support zones suggests to me that the correction is over. In other words we are going to see silver back above $40 and gold above $1,550 within the next couple of weeks. Everything is all set for new record high prices in both metals this summer, which is going to surprise a lot of people.

As individual investors we need to prepare for surprises if we are to take advantage of the next move in silver prices, whether we are leaning towards the bulls or the bears. Our own assessment of the situation is that the traditional summer doldrums in the precious metals sector will prevail until around mid August. This will allow enough time for the investment community to ascertain whether or not there will be a QE3 or not, this we expect will be determined by how the stock market performs. Should it continue to falter as it has done in recent weeks then helicopter Ben will hit the stimulus pedal as per usual. He may be tempted to not to add any further stimulus if the market appears to be managing without his help, but given his track record we doubt that he will be able to avoid the temptation of interfering where and when he thinks fit.

There also the small matter of the election race which has now started and although there is a long way to go, an incumbent president will be looking for an improvement in unemployment figures to help him get across the line in first place.

Either way it is too late for the dollar and it is now just a question of timing as to when both silver and gold make their move. We must stay vigilant and be prepared to use our ‘opportunity cash’ maybe a tad quicker than first thought. For now, we still intend to wait until mid August before committing major amounts of our capital to the silver bull, but when the time is right we will hit it hard, with purchases of the physical metal, the associated producers and a tranche of options plays.

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Bob Kirtley Archive

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