... basically, the price of silver drops from 42 (which appears to a key short term price point - somebody might have a derivative position that kicks in here, who knows?) down to 40, and today is around 39.
Gold is relatively steady - yesterday's high was around 1680, and today it's around 1660.
Silver Prices
Chances are it will be a very rocky ride. It won't be comfortable. Overall, though, it can only go up. Here's a James Turk - Eric Sprott interview explaining why.When silver prices are low, it gets consumed at an even greater rate, and physical stockpiles (COMEX reserves) drop to all time lows. Today, it is estimated that there is something like 27 million ounces available for delivery from the COMEX. Eric Sprott tried to purchase a few million ounces of silver to start his Physical Silver Fund, and it took him several months. Some of the silver that was eventually delivered, was mined some months after he had paid for it.
Price is the result of supply and demand coming to agreement. It looks like the supply is low, and demand is constant. At some point, we should see a major correction in prices.
What About Additional Margin Hikes?
At the start of May, Silver was close to $50/oz, and the price collapsed to the mid-low $30's. This happened due to 5 margin increases issued by the CME in the space of 9 days. In essence, somebody changed the rules mid-game as the wrong people were losing. Can't this happen again?
It's possible. But, the more the kind of action takes place, the more people will come to believe that the market is manipulated. If people believe the market is manipulated, some will leave in disgust, while others will understand that when markets are manipulated in a particular direction, it means there will be an even bigger correction going the other way. These people will not operate in margin - and hence will not be effected by margin increases, and will demand physical delivery. Others will purchase actual physical silver - depleting any physical supply.
The end result will be a depletion of any physical inventory followed by a massive correction in prices.
Junior Mining stocks?
Looks like prices on junior mining stocks (and silver streaming stocks such as Silver Wheaton (SLW)) have taken a major beating. These stocks were hit significantly harder than makes sense, when looking at the silver price. But several of these companies are flush with cash - as the price of silver is far above the cost to mine it (ie: digging doesn't cost that much, you just have to have the right place to dig).
Endeavor Silver (EXK) just had a conference call yesterday discussing their recent Q2 earnings. They have a growing cash position, and last quarter decided not to sell silver (growing their inventory) which hurts their earnings numbers. Due to the IFRS accounting rules, they cannot put this silver inventory on their books at the current market value, but must put it on their books at their cost of production (mining cost). There have already used some of the cash to expand operations, and purchase additional land. But since silver revenues are bringing in a ton of cash, it's conceivable that they could purchase other miners.
In essence, while the stock price of silver miners are oversold, and at the same time, certain silver miners are flush with cash, it's only natural that a consolidation phase might start in silver mining shares. Some mining shares might decide to buy back their own shares (as it could provide better return than mining).
So, miners will increase the number of ounces of silver (mined, in the ground, etc) per share, taking advantage of the cash build-up combined with discounted silver prices.
So, miners will increase the number of ounces of silver (mined, in the ground, etc) per share, taking advantage of the cash build-up combined with discounted silver prices.
Finally, we see rumors that silver mining stocks are being naked shorted. If this is true, then when these shorts get over-run, the up-side correction for junior miners will be spectacular.
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