Looking For A Silver Lining

Investing in precious metals hasn’t been much of a fun ride lately. In late April of 2011, silver spiked to its still standing nominal high of $50, last reached over 30 years ago, back in 1980. Afterwards it plunged to about $32, before recovering to around $44 in September. At this time gold – which wasn’t nearly hit as hard in May and rallied to a new high of $1,920 in September – was up for the hammer drop and fell by 20% to $1,530. Expectedly, silver had to be dragged down with gold and got smashed to the $26 level for an almost 50% correction from its April highs.

As if these big and fast corrections in price were not enough, an equally painful correction through time set in. While support at $26 for silver and $1.530 for gold was successfully tested many times, it seemed that with every new test the number of precious metals skeptics increased and many bulls buried their remaining hopes. As David Morgan likes to say: ‘The market will either scare you out or wear you out'.

This however is the natural behavior in a healthy bull market, which tries to take with it the fewest number of people possible and only rewards those with the strongest nerves, who are ready to trust their beliefs and weather the storm of fear. After the ‘scare’ and the ‘wear’ the bull will be ready for its next round.

In his latest interview over at King World News, Bill Haynes suggests that there are indeed those strong hands draining the market of physical metal and causing the prices to bottom. They seek gold and silver as protection from the worsening debt and fiat currency crisis and are never sellers. Interestingly, he points out that ‘we are seeing an equal amount of money going into both gold and silver’.

Fasten your seatbelts: The ride won’t stay dire forever.