Buy Silver Bullion Coins

By Jeff Clark  
Tuesday, January 10, 2012
 
The silver bear market is over

Silver bottomed two weeks ago at $25.65 per ounce. It happened during the
typically quiet period between Christmas and New Year's. If you blinked, you
probably missed it. But it happened. The price of the shiny metal fell to more
than 33% below its 200-day moving average (DMA) – thereby tagging the bear  market target we set last April.

But over the past two weeks, silver has bounced back 10%.
That's a big move – especially for such a short time frame. But it has gone
largely unnoticed. No one cares. No one is paying attention. It's as though all
the folks who were wildly bullish on silver early in 2011 have gone
away.

That, of course, is how bear markets usually end… quietly.

It's not the same with bull markets. Bull markets flame out in a spectacular, parabolic move higher in a rush of popularity… with calls for  insanely higher prices. Those were the conditions in the silver market last April.

Back then, we warned that the silver price had run too far,  too fast. It was trading 50% above its 200-DMA – a level that had signaled a top  for silver in the past. We suggested caution and patience. And we speculated  that silver could drop anywhere from 30% to 50% below its 200-DMA before finally
hitting a bottom. That's exactly what happened two weeks ago.

Silver dropped down to long-term support at around $26 per  ounce. It's still trading about 30% below its 200-DMA (the blue line). As you  can tell from the chart, silver typically doesn't get much more oversold than this.  In fact… except for the decline during the mass-liquidation event in  late-2008, this is as oversold as silver has been in the past decade.

But no one cares. No one sees an opportunity here. Everyone
seems to think silver's best days are behind it.

I can't say for sure that silver won't drift a bit lower from
here. But just as I was confident the action last April was a sign of a top for
silver and a time to be cautious, I am equally confident the action over the
past two weeks is the sign of a bottom.
 
Now is the time to buy silver. A new bull market is  beginning.

Best regards and good trading,

 Jeff Clark

Further Reading:

Last April, Jeff said silver – which was flying high from a meteoric rise in
just three months – was due for a "nasty correction." He advised readers to hold  off buying. Over the following two months, the metal fell 20%. Read his
prediction here: The Curse of the Silver Trade.

If Jeff's right and silver resumes an uptrend, shares of one company could be
a double in waiting. "I don't expect to make 800% returns," Brett Eversole
writes. "But we could easily double our money over the next few years… even if  silver goes nowhere. Our gains will increase if silver pushes higher." If you
like silver over the long term, this is a stock you need to own…







 

Jim Willie CM
www.marketoracle.co.uk
A love affair with silver is so natural. The fundamentals are astoundingly positive and bullish in price prospects. My basic argument has been repeated many times. Industry has countless uses for silver, significant demand. But industry has only miniscule isolated uses for gold, in trivial demand. So silver wins on the Demand side of the equation. Central banks own a huge amount of gold. They frequently sell it, even through their slippery surrogate the Intl Monetary Fund. Central banks own zero silver. So silver wins on the Supply side of the equation.
My motto is that gold fights the major political and financial war, but silver will ride in on a shiny white horse and take much larger spoils. That effect has already begun. Since the significant game changing FOMC meeting on September 21st, where the telegraph message delivered to the world financial markets was made by megaphone, the impact has been clear and stark. Compared to closing prices on September 21st versus October 29th, just five weeks, the silver price had risen from $20.64 to $24.56, up 19.0%. During the same timespan, the gold price had risen from $1274.30 to $1357.60, up 6.5%. My claim, a loose forecast often repeated, has been that the silver breakout gains would be at least double and possible triple the gold gains. We have seen exactly that in recent weeks.
An extremely fuzzy factor is the CFTC attention. The Commodity Futures Trading Commission is supposedly investigating the Big Four Banks for gigantic concentrated short positions in the silver market, for naked shorting of silver, and for collusion with other banks. Commissioner Bart Chilton has made a lot of noise, but has done next to nothing. Some find encouragement, an absurd notion in my view. Let me know when court injunctions are slapped at JPMorgan. Several class action lawsuits against JPMorgan have begun, also encouraging, but unclear on substance. They crop up every couple weeks, the latest citing a RICO aspect. Let me know when the full force of the USGovt regulatory bodies order JPMorgan, Goldman Sachs, Citigroup, and Bank of America to liquidate even 10-20% of their short positions. Unless and until such action occurs, the CFTC chirping is just that, noise from the menagerie of obedient pets who work on short leashes at the behest of bankers. Mail room clerks do not give orders or make demands to the executive suites, not now, not ever. The regulatory chiefs are mere squires to the bankers, and will follow orders, not give them. By the way, the Big Four positions are naked short positions in all likelihood. They are immune from posting collateral, as required by the metals exchanges. So they routinely sell a stack of silver whenever the price moves have been made, like in the wee hours this Wednesday and very early at the New York open. Good Morning New York resulted in almost a full $1.00 drop in the silver price, undoubtedly another naked short raid before the QE decision by the US Federal Reserve and its statement. The full impact of the ambush decline was reversed by afternoon. Right before important events deemed negative nasty to the USDollar, the Big Four go wild with naked shorts, called ambushes. The evidence, the trails, the fingerprints are easily seen except by blind men, official gold industry wonks, and USGovt regulators.
SUPPLY & DEMAND BASICS
Silver total demand was essentially flat in 2009 versus 2008, as the world adjusted to a mammoth meltdown late in 2008. During the extraordinary disruptions, disturbances, and sudden insolvencies, JPMorgan liquidated much of the inherited (commandeered) precious metals accounts from Bear Stearns and Lehman Brothers. In the case of Bear Stearns, a solid argument can be made that they were targeted for kill due to their long gold account. In the case of Lehman, they were targeted fro kill in order to consolidate the power structure in the twin monoliths at JPMorgan and Goldman Sachs. On silver demand, the bulk of the 11.9% decline in the 2009 fabrication demand was primarily driven by the global financial crises. The reduced drop in industrial requirements was the lowest level since 2003. Total fabrication demand totaled 729.8 million oz and industrial demand was 352.2 million oz in consumption. Much of the decline in factory demand was attributed to the car industry.
Implied net silver investment increased by a staggering 184% to 136.9 million oz last year, reaching its highest level in 20 years. Overall jewelry demand fell slightly by 1.1% in 2009 to 156.6 million oz, a testament to the historical norm. It falls with a bull market, not to contradict it, but to confirm it!! That is the opposite message, contrary to what the official gold industry propaganda preaches. In fact, India and China posted increases in jewelry demand last year, outside the global trend. Silverware demand rose by a decent 4.6% to 59.5 million oz, largely due to a surge in Indian fabrication. Their middle class grows impressively.

As for supply, the silver mine production rose by 4.0% to 709.6 million oz in 2009. Gains came both from primary silver mines and output from mining by-product. The strongest growth came from Latin America, where silver output increased by a hefty 8%, the biggest gains logged in Argentina and Bolivia. Again Peru was the world leader in silver production in 2009, followed by Mexico, China, Australia, and Bolivia. All of these countries saw increases last year except for Australia, where output was dragged down from the lead/zinc sector, with the by-product impact. Some mines are devoted solely to silver targets, called primary silver projects. Global primary silver output saw a 7% increase in 2009, accounting for 30% of total mine production last year. The cash operating costs for primary silver mines remained relatively stable, rising by less than 1% to $5.23/oz in 2009. The big story is the huge decline in net silver supply from above ground inventory stocks, which were reduced by 86% to 20.2 million oz in 2009. The drawdown was driven mostly by the surge in net investment, higher de-hedging (the active reduction in forward sale contracts), lower government sales (like official mints), and a drop in scrap supply. The scrap supply came down by 6% from 2008, enough to register a 13-year low of 165.7 million oz. It was the third consecutive year of losses in the scrap category. Government stocks of silver, the feeder in official coin mint programs, fell by an estimated 13.7 million oz last year, to reach their lowest levels in more than a decade. Data was supplied by the Silver Institute (SEE LINK).