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We are convinced, by a preponderance of all the available data to us, that even with the marginal increases in silver production over the past couple years, a structural imbalance between the combined overall global demand for physical silver and the quantity of available metal has been and is now developing. That applies most especially to the available quantity of commercial sized, average 1,000 ounce good delivery bars which form the basis of the market price everywhere. As a consequence of that imbalance we do indeed believe that over time the market will become more and more tuned in to it. We believe the market is in the process of re-valuing silver back to its historic relationship to gold metal because the forces which had artificially suppressed silver in the past have all receded to near zero.
Nothing excites a market more than the notion that the commodity in question might be in shortage relative to demand.
Perversely, the idea that a commodity might be becoming scarce has the tendency to encourage higher, not lower demand. It also encourages increased, not decreased speculation, hoarding, accumulation and, of course, it encourages higher prices as positive money flow takes hold (more capital flooding in to the market than flowing out of it). When a commodity is in real (or imagined) shortage, it takes higher prices in order to induce holders of that commodity to part with it at the same time that users and producers anticipate and expect to have to pay or recieve more for it in the future.
Looking at the chart above, we have taken the view that silver is very likely involved in a giant flag consolidation. A pause, a waypoint in a great trend of silver to reclaim its role as a truly scarce and valuable monetary metal, alongside its more respected and much more available yellow cousin, gold. The process and the trajectory is choppy, for sure, but we think the trend is clear enough in the chart above.
We cannot see the future and we do not know for sure what the price of the metal shall do just ahead, but if we are right about our view of the small, but vital silver market (we could be wrong, of course) … if we are right that the flag consolidation forming now is merely a correction … merely allowing the market to catch its collective breath and digest a new higher paradigm … to adjust to a new reality following the blow-off of the fourth parabolic advance of this Great Silver Bull Market (we call them definition moves) … if we are right Vultures and friends, then in the words of the Bachman Turner Overdrive, “You Ain’t Seen Nothin’ Yet.”
Mother of all Mid-Point Consolidations
It is somewhat ironic that last year when we were stopped out of our silver trade in the $28 region (with our then largest-ever profit on a single silver trade, more than $8 the ounce) after it had tested $31, we said then that we thought silver was likely then in a mid-point consolidation (it was). But we had chosen a too-low reentry target then and missed the fulfillment of that call with our short term action. Well, friends and fellow Vultures, there we were again with a second shot at that $26 opportunity on December 29, so we were not about to let that second chance go by. And, once again, as we study the charts and all the available data, we are struck with the very same notion in an even bigger, more fundamental way. We have to say it now, in January of 2012, taking appropriate anti-jinx measures as we do – Look at the chart, friends, and look at it well. What we are seeing today very well may be the mother of all mid-point consolidations for silver metal.
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http://www.gotgoldreport.com/2012/01/got-gold-report-silver-you-aint-seen-nothin-yet.html