The parabolic move up in Silver is making money for the average joe six pack who has a couple of coins his grandmother gave him when he was a kid. Outside of that, who is really riding this move? The following chart is for Silver over the last 2 years. The chart does not include the move up in the last 24 hours, which has Silver trading above $46 per oz as I write this.
The Smart Money has said that it wouldn’t be a buyer up here. The long term holders have cost basis in the single digits, so who or what is driving this latest move? Have the Cavemen found access to some kids E-Trade account?
Jim Rodgers, the commodity guru, made a comment lately about silver breaking $100 per oz in 2011. It caused a stir in the last week. I want to share the Q & A as posted here.
FSR: But what we’ve seen so far, you wouldn’t consider parabolic?
JR: No, not yet. But I’m worried about silver. If silver continues to go up like it has been over the past 2 or 3 weeks, yes, then it would get to triple digits this year. And then we’ll have to worry. It’s not parabolic yet. I hope something stops it going up in the foreseeable future and we have a correction. You never know what might cause that correction. But if they turn into parabolic bubbles in 2011, all parabolic bubbles have popped in the end. There’s never one in history that hasn’t popped.
Now, maybe the US dollar is going to become confetti in 2011, and if that’s the case and silver goes to $150, then obviously I wouldn’t sell my silver. It would be the US dollar which is collapsing. But if silver goes up the way you’re talking about without currency collapse, I would be very worried.
The collapse of the US dollar index in the last few weeks, has helped to drive up the price of commodities lately. So while the Federal Reserve says that it is not responsible for the rise in commodities directly, they are responsible for the destruction of the buying power of the US dollar.
While everyone talks about Silver and its move in the last year or two, I believe that the price per oz is just a symptom of the US dollar being devalued in the international FX markets. What I find interesting is the lack of comment from the rest of the pundits about how China has just devalued the Yuan against everyone else.
If the US dollar drops by 20% against a basket of currencies, and the Yuan rises by 3% against the US dollar during that event, the Chinese have managed to pull off a stealth devaluation of the Yuan. No one talks about that. Its almost as if a Caveman cant…