Thursday, April 14, 2011

Has The Silver Market Become Dysfunctional?

One might ask...Is it time to throw caution to the wind?  I guess that depends.  Are you an investor, or are you a trader? 

If you're a Silver investor, and you think Silver is going to $100-200-300 an're asking, "What is there to be afraid of?"

If you're a Silver swing trader, and you sell into strength and buy into're probably wishing you were an investor. 

Investor or swing trader, we have ALL been sucked into witnessing this voracious run up in Silver prices the past four weeks.  Since Silver gapped higher on the open at 35.66 in Asian trading on Sunday evening March 20, Silver has now risen 16% in 20 trading days.  Silver is runnin' wild!

"The interbank silver market [in Asia] is dysfunctional" says one Hong Kong dealer's note. "Liquidity is getting worse while the price action is getting more exaggerated as a result."

With ever-more money looking to buy silver, "The furiousness of such moves has been increasing in the past two weeks...[and] the flow in/out of silver is excessive with respect to the capacity of the market."

Speaking to BullionVault from Chennai about India's current retail demand to buy silver, "People believe the rumors that silver is going ballistic even from this level," says Daman Prakash Rathod of MNC Bullion. "[There's] huge speculation here as people have money to invest in physical buying."

Having earlier heard clients identify the equivalent of $42 per ounce as a key profit target, "On the contrary, $42 silver revived the frenzy of buying.

"It's a bit calmer now after seeing the correction to $40."

"The type of demand for silver that we have experienced in the last few months has never been seen before," says Prithviraj Kothari, president of the Bombay Bullion Association, to the Financial Times.

"Demand has gone up 25% compared to a year ago as people are going crazy for silver because they think it will give them better returns than gold."

Has the Silver market become dysfunctional?  Or has the Silver market simply begun to overcome the dysfunctional handicap of the CRIMEX banksters that has held it back the past ten years?  Is Silver now just playing catchup by leaps and bounds because the CRIMEX banksters have lost control of it.  Or has physical demand for Silver bullion finally swamped the paper pushers on the CRIMEX?

Perhaps we need to look at the Big Picture of Silver.  The weekly chart can often show us things that the daily gyrations of the market hide from us:

No matter how you slice it, Silver is in Maximum Overdrive.  The big question is can this stampede into Silver be sustained.  Dip buyers are waiting in the wings to buy every 2% drop in price.  Fundamentally there is little reason for Silver prices to react lower.  Market sentiment couldn't be more bullish than it is now, and that is what continues to scare me.  The Silver market desperately needs a rest.  One wonders if the CRIMEX goons haven't allowed Silver to run this far this fast just to scare as many people out of it as they can when they swoop in to crash this party.  ...that is if they can crash this party.  There is NO market in the World scarier than the Silver market.  What began as a short squeeze at $31, is now a full blown buying panic.

This just in this evening:

China's economy slows, as inflation remains feverish CNN 
China growth sizzles, inflation bubbles Reuters
China Economy Grows More-Than-Forecast 9.7% Bloomberg

It will be interesting to see how this is interpreted by the markets overnight.  Will the markets focus on a "small" slowdown in Chinese growth, or it's 5% year on year rate of Inflation?

This news seemed to push Silver higher late today, though the news is not really new...and this story actually hit the wires on April 13:

Bolivia plans to expropriate mines‎
Bolivia's President Evo Morales plans to expropriate zinc, silver and tin mines sold off by previous governments, an official said

The Fed Heads were out in force today in an effort to have their cake and eat it too.  This blah-blah, along with today's unexpected rise in unemployment claims.

Fed hawks look for exit, doves in no rush
BALTIMORE/HELENA, Montana (Reuters) - Federal Reserve officials differed on Thursday over the urgency of withdrawing monetary stimulus on Thursday, with some saying inflation is in check despite oil price rises while others warned of risks if the central bank drags its feet.

I continue to maintain that despite a plethora of perma QE believers, the Fed will allow QE2 to end as planned, and will pause "for effect" before instigating another round of "monetary stimulus" causing a reaction lower in both equities and commodities.  The Fed will NOT raise interest rates anytime soon in an effort to support the nonexistent economic recovery.  Bumbling Ben Bernanke will make this scenario the centerpiece of his press conference following the Fed meeting on April 27.

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