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BookmarkWith the price of gold surging above $1,230 and silver trading higher as well, today James Turk told King World News that this is the start of something big in the silver market. Turk also discussed the collapse in open interest in the gold market.
– “Everyone who understands the precious metals, Eric, knows that they are undervalued. So they also intuitively know that the downtrend in the price of the precious metals over the past several months will eventually turn higher…
Do This And You Won’t Have To Worry About A 2008 Scenario
Of course no one can predict when that turn will come, so I continue to recommend the same strategy that precious metals should continue to be accumulated for the simple fact that you are buying undervalued assets. View these purchases as saving money that is outside the banking system, and therefore immune to those types of risks that we saw in 2007 and 2008.
The same logic applies to the shares of mining companies. If you are prepared to invest in them and accept the risks, accumulate those you have concluded are good value. The good ones will turn higher when the precious metals themselves turn higher.
Collapse In Gold Open Interest
While we wait for the precious metals to reverse their downtrend and turn higher, I’ve been watching for clues that might indicate the turning point is near. And there have been a couple of important ones recently. One of those clues was the collapse in Comex gold and silver open interest over the past several days as the December contract approached first notice day. I didn’t check the historical records, but the collapse in open interest is the largest I can ever recall. I take it as an indication that the market is sold out, which itself might be saying that a turn is at hand.
Another clue is today’s action, which I see as very important. Is it telling us something we need to know? You bet it does, particularly given how undervalued the precious metals are at the moment. One thing I have learned from my five decades of experience in trading and investing is to let the market tell its story, and then listen to what it is saying. I do this by watching price trends, so take a look at this chart of the spot silver price, Eric.
Silver Breaks Out Of Downtrend!
Today the price of silver closed in both London and New York above a long downtrend line that goes back all the way to June. This event over time may prove to be a big deal.
The Start Of Something Big In Silver
Are price trends the only thing to rely on? No, when it comes to markets there is no perfect formula. It is possible that silver may remain in the trading range marked by the two horizontal lines. It is even possible the price may drift lower. But today may be the start of something big, and if so, spotting trends can help.
Silver Finally Turning Higher
Who could have predicted that crude oil would collapse from $70 to $50 during October and November? A lot of money was made there by the shorts. As the saying goes, “the trend is your friend.” So if following the trend is helpful, so is watching for any clues that a trend reversal may be at hand. And right now this break of the downtrend line could be saying that the trend in silver is finally turning higher. If so, maybe a lot of money is about to be made by the longs in the previous metals.” AL
