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Where is the bottom in silver going to be?

By iwog   Follow   Fri, 23 Sep 2011, 5:50pm   6,973 views   99 comments
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Now that the bubble has blown up, the important question is how low will it go?

There are several ways I've calculated this number. First of all, speculative bubbles tend to bottom out at about 20% of peak value. This was true for oil, the Nasdaq bubble, the 1929 stock market crash, and the 1980 silver bubble. The no-brainer way to analyze this is to simply say silver is going to do again what silver did before. This means silver will be selling for $10 an ounce in 3 months. Here's the chart:

The problem is that silver's chart most resembles the Platinum bubble. The platinum bubble bottomed out at 36% of peak.

Platinum is much more scarce than silver and my guess is that it was speculated in to a far less degree than silver was, therefore I would favor the 20% model over the 36% model. Picture a tight market in industrial platinum versus millions of troy ounces of silver being dumped into the market from SLV and Comex vault hordes. However there's a second way to compare the two that also favors 20%. Both metals were essentially ignored by investors during the 1990s as inflation was low and all eyes were on the stock market. During this time, Silver was selling for $4.25 an ounce and Platinum $400.

After the bubble, Platinum settled out at about $800 per ounce, or twice its value during this equilibrium period. If silver was to do the same, it would settle out at $8-$9. It's a good fit and conforms to the platinum chart I like so much.

So that's it folks. I personally will not sell my short positions or buy long positions in silver until we see $10-$15 again. It might be a short wait, and I'll be ready to buy when we get there. Oil, the Nasdaq, and Platinum all had huge rallies after the bubble collapse and it should be a great time to buy. All the economic factors are still very positive for metals, but they aren't going to stop the selloff for now.

This also means that short plays might still be very valuable.

Disclaimer: I'm short up the wazoo in silver.

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1. hooch_raider Follow Befriend 1 threads 51 comments San Jose, CA

   60   7:35am Tue 27 Sep 2011   Share   Quote   Permalink   Like   Dislike   Silver going to $15???? Gold below $1000???? You know Iwog....anything is possible. In my humble opinion, you are dead wrong. Best of luck to you. -Hooch

2. NuttBoxer Follow Befriend (1) 26 threads 188 comments Chula Vista, CA

   61   10:35am Tue 27 Sep 2011   Share   Quote   Permalink   Like   Dislike   Bubbles and primary trends are not the same thing... Silver and gold r money not just commodities... Widely publicized by GATA physical is way overleveraged, when it gets called in will shoot to the moonand all paper traders will just have, paper... I love hearing people say there 401k dropped 20% for the year while my physical investment has gained 100% each year

3. iwog Follow Befriend (48) 274 threads 12,534 comments 47 male Lafayette, CA Premium

   62   11:11am Tue 27 Sep 2011   Share   Quote   Permalink   Like   Dislike (1)   goatkick says Ok make that a $7 pop off mondays low in Silver. Iwog no comments at all ? Dare I say you only talk ur book ? You're kidding right? I posted my silver thread and detailed my short positions last Monday and Tuesday. Silver was selling between $40 and $41 during that time. http://patrick.net/forum/?p=1035459 As I write this, silver is selling for $31.70 more than 20% lower than last Monday. What would you like me to say? That my silver short has exceeded my wildest expectations? Okay my silver short has exceeded my wildest expectations. I still see silver going under $15 in less than 6 months. Instead of all this posturing, why don't you tell us your prediction?

4. middleman Follow Befriend 2 threads 66 comments Poway, CA middleman's website

   63   1:40pm Tue 27 Sep 2011   Share   Quote   Permalink   Like   Dislike   iwog, I've been screaming silver bubble since Summer of last year. I hope you are right because I'm betting the farm it's crashing.

5. pdh Follow Befriend 53 comments Durham, NC

   64   7:04pm Tue 27 Sep 2011   Share   Quote   Permalink   Like   Dislike   Silver fell because USD spiked on news that it wasn't the Euro. How long is that euphoria going to last? Silver needed/might still need a correction, but you wouldn't buy equities based on past performance, why would you do the same for commodities?

6. iwog Follow Befriend (48) 274 threads 12,534 comments 47 male Lafayette, CA Premium

   65   7:17pm Tue 27 Sep 2011   Share   Quote   Permalink   Like   Dislike   pdh says Silver fell because USD spiked on news that it wasn't the Euro. How long is that euphoria going to last? Silver needed/might still need a correction, but you wouldn't buy equities based on past performance, why would you do the same for commodities? Silver lost 20% in two days. How much did the dollar gain? .2%?

7. E-man Follow Befriend (31) 34 threads 2,545 comments San Jose, CA Premium

   66   12:52am Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   goatkick says Silver almost $6 higher from recent low Be careful. Any bounce up to $35 is an opportunity to SELL, not buy. Lock in your profit while you still have it. Good luck. :o)

8. E-man Follow Befriend (31) 34 threads 2,545 comments San Jose, CA Premium

   67   12:55am Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   Bellingham Bob says LOL, conveniently dated from the hole. We're DOWN 6% on the 3 year chart. Cylical bull in a secular bear mumbo jumbo technical analysis B.S.? No? :-)

9. mdovell Follow Befriend (4) 28 threads 776 comments

   68   8:11am Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   I'm surprised no one mentioned the shipwreck found with 200 tons of silver http://newsfeed.time.com/2011/09/28/200-tons-of-silver-found-in-north-atlantic-shipwreck/ If this can get on the market even in the next few years that can lower demand a bit... at 30 oz at 2,000 lbs a ton..200 tons... 192 million more put on the market.

10. terriDeaner Follow Befriend (7) 70 threads 1,151 comments

    69   10:12am Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   I saw that too. Since it's basically in a locked vault for a while (needs to be salvaged with lots of paperwork to do... ), I'm not sure it will affect events over the next 6 months much.

11. thunderlips11 Follow Befriend (13) 51 threads 2,632 comments Premium

    70   10:20am Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   To me, it looks like Gold and Silver will be moving down slowly another 5-10% for the next few weeks, and then move sideways for a couple of months. At that point, it could surge again if things are still lousy. But both need to settle out for now - Barring any market shaking events like an EU collapse, which I don't think is likely. Most EU doomsayers are politically motivated, IMHO. "Damn Socialists! John Galt told you it would all burn!" Given the huge power and wealth of French, German, Scandinavian businesses and overall economy (approx California/Texas/NYS in power and size), they can more than prop up a few Arkansas (Portugal and Greece) indefinitely. Fiat is even expanding into the US domestic market for the first time. Greece and Portugal are nothing, the have a GDP like one or two poorer US states. Italy and Spain will be in a coma but won't die. Ireland is already out. China is still the black swan. There is so much local fraud and corruption, particularly in land sales and leases, which the central government tries to reign in. One big bank or business failure can send a shockwave through the economy. I think the key to China is to consider it a late 19th Century economy. It will run up big for a decade or more, and then have a helluva slump.

12. iwog Follow Befriend (48) 274 threads 12,534 comments 47 male Lafayette, CA Premium

    71   10:59am Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   middleman says iwog, I've been screaming silver bubble since Summer of last year. I hope you are right because I'm betting the farm it's crashing. I think you're pretty safe. $20 by November and under $15 by February.

13. terriDeaner Follow Befriend (7) 70 threads 1,151 comments

    72   11:02am Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   thunderlips11 says Given the huge power and wealth of French, German, Scandinavian businesses and overall economy (approx California/Texas/NYS in power and size), they can more than prop up a few Arkansas (Portugal and Greece) indefinitely. thunderlips11 says Greece and Portugal are nothing, the have a GDP like one or two poorer US states. Italy and Spain will be in a coma but won't die. Ireland is already out. Interesting comparison... consider though how these countries would be screwed by the Eurozone outcome you describe. They are all heavily interconnected in terms of banking and trade. As far as the analogy goes, consider also that many of the the big US states are broke (Cali, IL, and NY in particular...) and would have no political will or means to bail out a smaller state. And it seems like there is less and less political will in Germany for further bailouts. thunderlips11 says China is still the black swan. There is so much local fraud and corruption, particularly in land sales and leases, which the central government tries to reign in. One big bank or business failure can send a shockwave through the economy. I think the key to China is to consider it a late 19th Century economy. It will run up big for a decade or more, and then have a helluva slump. Another good point. Without Chinese demand, Germany would be screwed.

14. uomo_senza_nome Follow Befriend (13) 787 threads 1,542 comments

    73   11:29am Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   iwog says $1350 puts on GLD. Iwog - you mean $135 puts on GLD or $1350 put on gold futures? Also is there an easy way to correlate gold price fall to GLD? For instance, if gold hits $1300 by Dec, what will be the price of GLD? $120?

15. uomo_senza_nome Follow Befriend (13) 787 threads 1,542 comments

    74   11:37am Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   austrian_man says For instance, if gold hits $1300 by Dec, what will be the price of GLD? $120? Never mind, answered my question: (total ounces * projected price per ounce) / total outstanding shares For $1300 - GLD share price equivalent is $126.

16. iwog Follow Befriend (48) 274 threads 12,534 comments 47 male Lafayette, CA Premium

    75   11:42am Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike (1)   austrian_man says Iwog - you mean $135 puts on GLD or $1350 put on gold futures? $135 puts on GLD. I'm only toying with gold futures. All my big money is on silver futures, silver options, and SLV.

17. Goatkick Follow Befriend 6 threads 101 comments Clarendon Hills, IL

    76   11:44am Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike (1)   There u are Iwog I was getting my feelings hurt because you didn't respond to me that day. Listen I know you're never wrong and you love Ronald Reagan but don't get snippy with me. I'm the real deal my friend. Nice shorts you crabby old liberal BTW guys I trade SI futures along with CL and GC and I'm not mocking you when I say "BE Carefull " Also I leave the predictions for u guys meaning pro bloggers. I have to turn on a dime u know be like water. I'm also filthy rich and I vote Republican . :)

18. Goatkick Follow Befriend 6 threads 101 comments Clarendon Hills, IL

    77   11:59am Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   Hey Iwog What do you think will happen to premiums on the physical Silver Eagles ect if we hit your target? Have you sold all your physical Silver/Gold or is this a hedge? Thanks u crabby Pekin Duck

19. terriDeaner Follow Befriend (7) 70 threads 1,151 comments

    78   12:15pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   goatkick says I'm also filthy rich and I vote Republican . :) So then why are you hanging around here instead of zooming about and running over peasants in your solid gold rocket-car?

20. EBGuy Follow Befriend 4 threads 2,095 comments

    79   12:21pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   a_m said : Never mind, answered my question: (total ounces * projected price per ounce) / total outstanding shares For $1300 - GLD share price equivalent is $126. Don't forget the time component. All other things being equal, GLD loses around .12% (not an absolute max) of its total ounces per quarter to pay trust expenses and marketing fees. Not a huge deal, but IF the GLD trust becomes a heavy net seller, those still holding shares bear a greater percentage of the past expenses.

21. iwog Follow Befriend (48) 274 threads 12,534 comments 47 male Lafayette, CA Premium

    80   12:22pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike (1)   goatkick says Also I leave the predictions for u guys meaning pro bloggers. I have to turn on a dime u know be like water. Gotcha. So how would you describe someone who's not willing to take a position, who's not even willing to even take a guess at the direction of the market, but sits back and flings insults at people who do?

22. Goatkick Follow Befriend 6 threads 101 comments Clarendon Hills, IL

    81   12:25pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   A regular guy who's in a business and see folks pretending on the internet Hey I'll leave u alone in ur sand box

23. Goatkick Follow Befriend 6 threads 101 comments Clarendon Hills, IL

    82   12:26pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   terriDeaner says goatkick says I'm also filthy rich and I vote Republican . :) So then why are you hanging around here instead of zooming about and running over peasants in your solid gold rocket-car? Have posted here maybe 2x in the last 2 years but my car is made of Platinum silly.

24. iwog Follow Befriend (48) 274 threads 12,534 comments 47 male Lafayette, CA Premium

    83   12:30pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike (1)   goatkick says Iwog You're such a whiny bitch You edit everything and have no sense of humor. I'm beyond ur peer yet I was willing to shoot the shit my bad. That's nice, but you didn't answer my question. Why would you refuse to take a position, then sit around hoping someone else's prediction will come up wrong so you can attack them? What would you call him? Pretty scummy behavior if you ask me.

25. Goatkick Follow Befriend 6 threads 101 comments Clarendon Hills, IL

    84   12:38pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   Why make a prediction here ? So I can be like u and argue I was right when I was wrong ? EX 2007-present Wheres your clearing house statement showing your position ? No google docs either Seriously I'm not going to virtually spar with you . Like every Lib when you have no point or facts u call someone a scumbag. It's useless

26. Goatkick Follow Befriend 6 threads 101 comments Clarendon Hills, IL

    85   12:39pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   Last word. It's pointless for u to post again I got the last word be a man and dont reply

27. iwog Follow Befriend (48) 274 threads 12,534 comments 47 male Lafayette, CA Premium

    86   12:42pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike (1)   goatkick says Why make a prediction here ? So I can be like u and argue I was right when I was wrong ? EX 2007-present Obviously not, therefore I was correct. You don't want to make a prediction (because being wrong is too horrible) so you sit back and wait for other people to be wrong, then you come troll them. Like I said, pretty pathetic.

28. ¥ Follow Befriend 35 threads 5,700 comments Bellingham, WA

    87   12:42pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   LOL. The conservatives on this site are some of the lamest minds around. Surely they can't be this stupid in real life.

29. Goatkick Follow Befriend 6 threads 101 comments Clarendon Hills, IL

    88   12:58pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   Bellingham Bob says LOL. The conservatives on this site are some of the lamest minds around. Surely they can't be this stupid in real life. “Nessuna soluzione . . . nessun problema!„ My point exactly I know this is a California site What's lame and why do u resort to name calling ? What's your point ? Thanks

30. Goatkick Follow Befriend 6 threads 101 comments Clarendon Hills, IL

    89   1:01pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   Iwog I made a prediction here in 2007 and I was right but what's the point ? You made predictions and u were wrong but whats the point? You said u were long from 2007 - 2009 the DJIA and could actually been short and me long . It's pointless I know you're a self proclaimed intellectual but believe me you have thin crispy skin. You would get ur head dunked in toilet on any trading floor / room /office

31. iwog Follow Befriend (48) 274 threads 12,534 comments 47 male Lafayette, CA Premium

    90   1:04pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike (1)   That's nice. So how would you personally describe someone who's not willing to take a position, who's not even willing to even take a guess at the direction of the market, but sits back and flings insults at people who do?

32. Goatkick Follow Befriend 6 threads 101 comments Clarendon Hills, IL

    91   1:06pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   Pardon my grammar but the SPU's shit them selves at the close here. My question was about premiums on Silver Eagles if Silver trades down into Iwogs targets. Thanks

33. uomo_senza_nome Follow Befriend (13) 787 threads 1,542 comments

    92   1:07pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   EBGuy says Not a huge deal, but IF the GLD trust becomes a heavy net seller, those still holding shares bear a greater percentage of the past expenses. thanks ebguy! good point.

34. Goatkick Follow Befriend 6 threads 101 comments Clarendon Hills, IL

    93   1:10pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   Iwog Argue with ur partner I'm just asking a simple question here. If insulting someone who talks his book constantly is wrong I dont want to be right. There is no proof ur short none what so ever and I was pointing out the nominal draw downs with the counter trend rally from Mondays low in Silver but ur such a virtual bully u took it personal.

35. Goatkick Follow Befriend 6 threads 101 comments Clarendon Hills, IL

    94   1:13pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   I'll hang up and listen for my answer. Thanks gents.

36. iwog Follow Befriend (48) 274 threads 12,534 comments 47 male Lafayette, CA Premium

    95   1:15pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike (1)   goatkick says Argue with ur partner I'm just asking a simple question here. goatkick says I look forward to rubbing salt into the 100% I'm certain calls here. goatkick says What you experts have day jobs ? Guess someone will show up when we head lower goatkick says Iwog no comments at all ? Dare I say you only talk ur book ? goatkick says I was getting my feelings hurt because you didn't respond to me that day. goatkick says You're such a whiny bitch. I'm beyond ur peer

37. Goatkick Follow Befriend 6 threads 101 comments Clarendon Hills, IL

    96   1:28pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   Iwog You're scaring me >yes I think your a douche bag but get over it man. You showed up when we headed lower just like I thought u would... Hey I made a prediction !!!

38. Patrick Follow Befriend (54) 5,188 threads 6,157 comments 46 male Menlo Park, CA Premium

    97   3:14pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   goatkick says he who cant be named without a hissy fit. Personal insult. Deleted.

39. Patrick Follow Befriend (54) 5,188 threads 6,157 comments 46 male Menlo Park, CA Premium

    98   3:16pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   goatkick says You're such a whiny bitch Your account is now disabled.

40. atst1138 Follow Befriend 42 comments

    99   3:45pm Wed 28 Sep 2011   Share   Quote   Permalink   Like   Dislike   Thank you Patrick!

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