Silver Bubbling — A Few Cents Shy of $50 per Ounce

Sorry for the lack of updates in the past several days. I was in Spain, relaxing in a house one of my friend is building, and was not aware that he didn't have running water — they have built a well to fix that — nor anything than solar panels to provide hot water but solar panels. Oh, and don't even think about a nice road to get there, or a telephone line. So I was seriously disconnected from the world, which was good, as I needed a change of scenery.

So today, a friend calls me, and asks me:
— "Have you seen silver?"
— "No, I was totally disconnected for the past week or so."
— "Well, it's quite close to $50"

And I was really amazed. A couple of weeks ago, I wrote that I was buying out of the money puts on silver, when it was trading at $38. Now, it's up about 25% in just a couple of weeks?! I am happy I was only using options. They are great instruments when you are very right, and also very wrong. Anyway, I was wrong on this one, but it doesn't mean I have lost the case...

Well, while I carefully avoided using the term bubble during the great bull market of 2009-2011, I believe now is the time to have it back in our vocable as silver is showing all the properties of a speculative bubble.

Silver traded to historic highs Monday, taking out the $49.45 an ounce that held for more than 30 years when the infamous Hunt brothers tried to corner the market.

It has since fallen back several dollars $47.295, after touching $49.79 an ounce in the spot market. With London markets closed for Easter, early morning buying came into a market described as thin and illiquid.

"Textbook example of a buying climax," says Richard Ross, Auerbach Grayson Global Technical Strategist. A buying climax occurs when markets push to new highs, but fail to hold that level and are followed by a bearish intraday reversal.
Jim Steel HSBC Chief Commodites Analyst. "Momentum is with the buyers," he says. [...] He also says there could be more room to run. "$125 is the price in real or inflation adjusted terms", he says.
As for my personal updates: I am relocating to Singapore this week, so posting will probably be quite sparse during the next 2-3 weeks. Please bear with me before things get back to normal.

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