Sunday, February 6, 2011

Silver in Complete Backwardation, First Time Ever

Last week, I mentioned how silver prices were moving up while gold was moving down. Not only have I never seen this, but many suggest that markets are rigged. Silver and gold usually move in % harmony. I have noted physical supplies were exceedingly tight worldwide.

I have over allocated in silver. I added a measly 10 oz bar this weekend.

There is significant evidence that the physical run is ON! This week. I would not be surprised to see a 10% move or higher in the price of silver by the end of the week. Very, very interesting shit going on. Not to mention that oddball piece floating around the internet which has been spot on. Pun intended.

For a great read on contango and backwardation...please read this piece. It is not nearly as mystical as it sounds.

If silver moves beyond resistance at 32.00 this week or the next do not be afraid to step up and buy. There is no overhead supply waiting to sell and a a lot of naked shorts may have to deliver the physical commodity. The first delivery months is March. If we rise to that level, I will pop for another 100 oz. bar.

Prices moving up slightly across the pond at 0035 EDT. Even higher at 0045.

I cannot tell you how tempting it is for me to jump into paper silver here. The leverage and profit opportunities are dramatically higher. However, it is the lack of the underlying commodity- people taking actual possession of silver that will lead this rise. It costs about the same to mine silver as it does gold. It is our one true advantage over the paper silver traders like Bank of Hong Kong and Shanghai and JP Morgan. Millions of Chinese are buying. If it works- it doesn't need fixing. Gonna stick with the plan although I wouldn't fault anyone else for jumping into some paper here.

Are you listening Uncle L.?

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