The Bull 'n Bear on Silver Decline
Last Friday, I published two articles defending the idea that both gold and silver are in bubble territory and that their prices could suffer substantial declines (on the order of two-thirds, according to my calculations).
Between Monday and Friday, silver fell 12%.
What does this mean? Absolutely nothing. I am not a seer and I was careful to point out that I have no ability whatsoever to time a deflating bubble. Furthermore, given the surge in activity in the silver market, incresed volatility -- upward and downward -- is to be expected. There is every reason to believe that gold and silver could go on to new highs from here
It's interesting to note that silver's fall made the front page of the Wall Street Journal; this is evidence of nothing, but I think it is symptomatic of a bubble. The article went on to point out that some very savvy hedge funds have been selling their gold positions. Soros Fund Mangement and Passport Capital are reportedly acting on the basis that deflation has been avoided and the Fed will need to raise rates relatively soon (i.e. 2012). As Heard on the Street points out, rising real rates will act like a pin to these precious metal bubbles. I share this view.
It is notable, however, that John Paulson, he of the Greatest Trade Ever, believes that gold could go to $4,000 within the next 2-3 years.
I've been doing some more work on silver and gold. Results to follow.
Enjoy your day!
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