Has silver bottomed?
That is the $64,000 question.
Of course, we really need to clarify what “bottoming” means, because on the one hand, while the spot price could go lower on paper, pun and no pun intended, then yes, the silver price could go lower. In the real world, even if the spot price goes lower, prices for real, physical silver, in-hand, could actually go higher.
Let me explain: If spot prices go too low, then Silver Bugs, stackers and other smart investors have shown their quick-reflex ability to take advantage of those low spot prices by adding physical gold & physical silver to their savings, or to their rainy day funds, or to their bug-out bags, or to their whatever, and, consequently, this type of purchasing can and does really wipe out bullion dealer inventory.
That said, with inflation picking up, and with retail inventory low, if we live in the real world and make ourselves aware of the Laws of Economics, then the only way to entice supply back into the retail market is by offering a higher premium. Additionally, new products, that is, new bars, coins, and rounds from the various mints, both sovereign and private, are also subject to this upward price pressure on premiums, especially this year because of all of the additional costs brought on by the various supply chain disruptions. We’ve seen the supply chain disruptions all year long, and they persist to this very day.
Therefore, to ask the question, has silver bottomed?
All things considered, I think silver did, at $21.96 on Monday morning:
By Tuesday afternoon, the price of silver was up about 10% off the lows!
That's some massive volatility!
A lot of analysts, experts, pundits, and traders say Monday's drop was the panic-selling needed to shake out the last remaining weak hands:
Silver did not put in a lower-low if we go off of the intra-day spike low from late September, and so in my opinion, Monday morning was a bear trap.
There is a lot of trading week left, however, so we'll have to see.
Gold, on the other hand, did put in a lower-low on its daily chart:
Not that past performance is indicative of future results, but notice what happened the last time gold traded under its 200-day moving average!
Could it be a bear trap in gold?
If we look to platinum for clues, we can see that we may indeed be breaking-out:
It's been a rough year for platinum, but platinum just charged into the green, year-to-date, and the finish to the year may be nothing like the start of it!
Palladium's uptrend is still intact:
That's another good sign that gold & silver may have finally bottomed.
Furthermore, check out the massive surge in copper:
Copper has been on fire, which is another reason I think gold & silver have bottomed.
Even crude oil looks to be breaking out of its $40 price range:
Are the commodities not telling us that price inflation is here?
What is not here is a whole lot of fear in the markets:
For now, it appears that market participants don't really care whether it's a Trump win or a Biden win.
Because the stock market just keeps on hitting record high after record high:
Would dropping down to the 50-day moving average even raise an eyebrow?
The yield on the 10-Year Note is rising, but the yield is still not even at 1.0%:
If inflation is running hotter than interest rates, however, then even if nominal yields are rising, real yields will go even lower.
The US dollar index does not look good at all:
If consumer prices are already rising, but the US dollar hasn't yet fallen out of the bed, then what will happen to consumer prices once the dollar begins to fall?
Thanks for reading,
Paul Eberhart
