Volatility Reigns: Weekly Silver Recap

Silver traded above $16.20 on Tuesday this week, but that was as high as it could go before falling the next day to the 15.30 level, rocketing back to 15.90, and then crashing Friday under 15.20, before closing at $15.28, down 3.1% for the week.  Yes, it is getting volatile after the strong 5 week advance since late April.  Gold fell from $980 to $956 for the week, putting the Silver:Gold Ratio at 62.6, up a half point on the week after getting below 61 on Tues.

The argument that silver has started a basing period is still valid with this price action, but with these turbulent economic times, any major fundamental development could completely take over the price action, driving silver right through support/resistance levels.  Of course, looking at the fundamental background – money printing, higher interest rates, record deficit spending, record investment demand, continued excellence as an industrial and medicinal metal, along with flat to down production – that move is more likely to be up than down, I would think.

The real volatility this week was in govt long bonds, where yields jumped around all over the place in the continued bursting of the treasury bubble.  In the last two weeks, the 10 yr yield has moved at least 15 basis points in 5 of the 9 trading sessions, remarkable volatility.  10 Yr yields jumped from 3.72% to 3.86% on Friday, closing up 11.2% from last week’s close and now up 72% on the year since closing 2008 at 2.24%. 

The Fed is actively attempting, and failing, to artificially suppress long rates.  All short term rates are near zero, and we send Tiny Tim to beg the Chinese to continue to buy the U.S.’s latest version of toxic debt – its own (‘of course we’ll repay you, we can always print more dollars!’).  These are the acts of a desperate nation still scrambling for quick fix solutions to major fundamental problems, and completely disregarding fiscal responsibility.

Other Markets of Note:

Govt Bonds – 30 Yr yields jumped from 4.34 to 4.66% this week, a nice 7.3% move, while the aforementioned 10 yr went from 3.47 to 3.86%.  Think how far yields still have to go to accurate reflect their risk…it could get ugly.

$Dollar$ – the dollar index stayed with its inverse bond market theme, rallying for the week 1.8% to close 80.7.  On Tues it traded under 78.50.

Oil – After bursting 8% last week, black gold rallied another 4% this week to close at $68.95, officially double its late 08 and early 09 lows…tell me more about deflation please?  It’s inflation in necessities, and deflation in non-essentials.

S & P 500 – amazingly, the S&P was up exactly 3.6% for the 2^nd week in a row.  Great news that only 345,000 jobs were lost last month, and unemployment is now at 26 year highs of 9.4%…and those unemployment numbers are radically understated as well. Check http://www.shadowstats.com/ for the true numbers.

As the son of a stockbroker, I got into stocks during college, ultimately reading Jack Schwager’s ‘Market Wizards’ book senior year, which really opened my eyes to trading and investing in other asset classes. I worked on the Pacific Stock Exchange for most of the 1990’s as an assistant specialist and eventually a specialist. I developed a very contrarian trading style, searching out closed end funds and micro-cap stocks to trade. Trading for almost 20 years now, it wasn’t until Dec 07 that a friend turned me on to silver, after I queried him about gold’s prospects during the early months of the credit bubble bursting. The next month I made my first purchase of silver bullion, and have followed the silver market closely ever since. I am also a huge sports fan, and contribute to the website www.sportscity.com with a general sports blog (Speedburner on Sports), a tennis blog (Todd’s Tennis Takes), and NBA commentary (NBA Daily Awards).

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