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« Next Step: A Home Cancer Test Kit? | Main | The eurozone crisis is on pause, not over »
Tuesday
Jul262011

Excerpt From SK OptionTrader on Silver Market Mentality

The following is an excerpt from an update that was sent to SK OptionTrader subscribers at the end of last week, discussing the changing mentalities in the silver market.

We present this excerpt as it may be a valuable read to those interested in the silver market and to give a sample of the type of commentary that comes with a subscription to SK OptionTrader.

We cannot provide the update in full as it contains information that is for subscribers only.

"[Regarding silver,] there was an interesting piece out from Citigroup which said that silver prices could hit $100. We do not find it interesting because of its content, but it is interesting that a major financial institution is paying attention to such a small market. The piece basically said that silver prices multiplied 5.3 times from Nov 1971 to Feb 1974, the corrected 44% before rising 13 fold to the 1980 peak. It then went on to note that silver prices multiplied 5.8 times from Nov 2001 to Mar 2008, corrected 60% and therefore could rise 13 fold again to over $100 (since the low in 2008 was roughly $8.50 and 8.5 x 13 = $110.50).

We are not sure how sound this reasoning is, although we concur with the conclusion. What we find interesting about this is that a large bank has finally set an aggressively bullish, and perhaps more realistic, target for silver prices. Usually silver is largely ignored by such institutions and those who do publish forecasts are seldom correct. For example Goldman Sachs covers gold (and they have made some decent calls to their credit) but for silver they simply multiply their gold price forecast by its historical relationship to silver. Goldman’s current 12 month forecast for gold is $1730 and their 12 month forecast for silver is $28.90. So they are saying that gold is going to increase 8% whereas silver is going to decline 28%. We will not delve into the absurdity of that hypothesis.

For a number of years there was a great deal of talk about the rumoured massive short positions of banks such as JPMorgan in the silver market. We suspect that much of this has been covered by now. We are fairly sure that no trading operation would be allowed to maintain a short position on something as it rose from $8.50 to nearly $50. In fact a great deal of silver’s parabolic rise early this year could perhaps be attributed to such short positions being squeezed.

What will be interesting is when large banks and other financial institutions start dabbling on the long side of the silver market. Such institutions are not very familiar with how the dynamics of the silver markets function, especially relative to their understanding of other financial markets. If they were familiar they would demonstrate this by giving silver more coverage and would already be long. The Citigroup piece is an indication that such institutions may be going to establish long positions in these markets in the near future, which is extremely bullish."


In the interest of full disclosure, we do have trades open at present and all of our open trades are showing significant gains.

In fact a recent trade is showing a gain of 260% in three weeks and we think it could still triple from current levels.

In the near future we are planning to open a number of new positions that we feel will be extremely profitable, so now is a perfect time to subscribe and increase the profitability of your portfolio.

We provide our subscribers with simple straight forward trading signals as well as market updates and commentary on the market situation.

Now all you have to do is click the subscribe button to see our trading recommendations that could have more than tripled your capital in three weeks, and paid for your subscription fee 12 times over in a matter of days.

Other key stats on the performance of SK OptionTrader are as follows:

Our model portfolio is up 338.11% since inception
That's an annualized return of 117.00%
We have an average return of 40.41% per trade including losses
We have closed 81 trades, 78 closed at a profit
The average trade is open for 46.27 days


Our full trading record is available to view on our website www.skoptionstrading.com

For those subscribers who are too busy to trade their own accounts we are now able to offer an Autotrading program with our SK OptionTrader service, as we are pleased to announce that we have entered into a partnership with Global AutoTrading and therefore auto trading is now available for SK OptionTrader signals.

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Reader Comments (1)

"We are fairly sure that no trading operation would be allowed to maintain a short position on something as it rose from $8.50 to nearly $50."

Yeah, they wouldn't...IF the trading operations involved weren't being effectively indemnified...if they weren't being directed to put on the trades in the first place and keep them on with a guarantee to be made whole or at least backstopped on their losses...by an entity or entities behind the scenes.

Who would have an interest in "breaking the thermometer" that indicates mismanagement of the country's finances and currency? Who wouldn't want it to look like people were rushing to abandon the clownbuck? Who wouldn't want regular folks to look to silver as a store of wealth and possible alternate currency for the time when the paper money regime collapses?

The Federal Government? The Fed?

Yes.

The people at JP Morgan and HSBC aren't stupid and it's not as if they aren't used to taking trading losses. But, they clearly haven't in this case, based on the COT and the bank participation reports. Why not?

The big shorts are JPM and HSBC. That much is obvious. So, why are they stubbornly resisting the obvious trend? Why are they fighting a rising tide?

Because they're simply agents. They aren't really at risk. They're doing someone else's bidding. They're a "not for profit seller" in the words of Ed Steer.

This is why Chris Powell says, "There are no markets anymore...just interventions." Amen.

But at some point, it becomes time to put up the actual silver or cover your shorts. The Crimex lets JPM get away with murder. But there's new competition from the nascent Chinese exchange. That could make things more interesting.

July 26, 2011 | Unregistered Commenterfallingman

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