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Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Friday, April 22, 2016

Silver -- The Crash Dummy Abides

The silver price is venturing off its second major crash in the past 35 or so years. Silver Monthly
Price bottoms of $5. oz. were not uncommon historically, but over the past decade, silver price
lows have lifted, as the cost of mining the stuff has ascended steadily, with breakeven probably
somewhere near $14 oz.

Silver fundamentals are akin to gold, but silver is also more sensitive to commercial and industrial
demand. The silver weekly chart compares its price to that of industrial metals in the top panel of
the foregoing. Silver Weekly

There has been a blowout in the commodities sector since the spring of 2011 as large supply /
demand imbalances developed mainly because of a strong deceleration of global production
growth with China's rapid descent leading the way among sizable economies. The painful process
of rationalizing supply via shutting in production is now well underway. US short term leading
economic indicators have been improving so far this year and China industrial output has
strengthened with a weaker currency. The US dollar has also stabilized after a very sharp rise
starting in 2014, the oil price has strengthened and inflation potential, albeit modest, is on the rise.
So, there has been a recent bounce in the silver price as traders speculate this heavily oversold
market may finally see some sunshine. The improvement in silver fundamentals has been modest,
and economists are very concerned about just how well the global economy will hold up this
year. Silver is modestly overbought, but is clearly in play for now.

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