Silver Is Testing $14/ounce Again; How Low Can It Go?

Blue line=30 day MA; Green Line=200-day MA

Since my late January burnout, I've been sick, quit a part-time job, plotted a move from New York to Tennessee (more on that later, scheduled for October), and decided to resume writing "Money Daily," employing first person singular style with less of a focus on stocks.

It's something of a relief to be able to write as I speak, discarding the strictures, stultification and distance of the third person.

That means I can mean what I say, say what I mean, directly, closing the space between me, and you, the reader (2nd person).

Enough semantics and style, for now. Let's get right to the subject matter.

Silver has long been a favorite investment of mine, though over the past number of years - since the heady days of 2010-11, when the price rose close to $50/ounce - it has been rather disappointing. My holdings did, however, manage to provide some relief against rising interest rates on credit cards in 2017 and 2018, as I was able to liquidate to cash and pay off the loan sharks otherwise known as banks and credit issuers.

Since my basis was right around $17/ounce and buyers paid a hefty (15-30%) premium on my offerings, I was actually able to cash out at a profit and still maintain something of a stash for future purposes.

As an aside, that's what investments are about.  Generally, people don't hold assets for the sake of holding them, except, of course for precious metals, gems, art, and some real estate. Eventually, they want to convert to cash to spend on something else. In my case, cutting up a couple of credit cards which were obliging me with ungodly - and rising - interest rates was the purpose of some of my silver. The rest, I continue to hold as a store of value, even though that's still a questionable proposition.

As anyone who plays in the gold and silver markets already knows all too well, the metals have been squashed in recent years by central banks because the metals pose competition to fiat currencies. That's all right if one manages to ignore the Sprotts and Caseys of the world who insist with regularity that gold and silver are on the verge of a breakout. Nothing could be further from the truth.

Gold and silver have been in a slow, long, excruciating bear market since mid-2011. They have been and continue to be relentlessly beaten down in the speculative futures markets and they will continue to be for the foreseeable future.

The question, for gold bugs and silver surfers, is "where is the bottom?" The chart at the top suggests that we may be getting close, especially if silver takes another dive into the $14s.

Blue line=30 day MA; Green Line=200-day MA

The most recent bottom came in 2015, when silver struck out at $13.71 on December 14. In 2018, it approached that figure, but never quite made it, bottoming at $13.97 on the 14th of November. This year, the low was $15.025, on April 2.

With no bounce in the charts other than the usual 1-3% noise, silver is headed back in the
14s soon, likely within the next week. Stocks and first quarter earnings will be all the rage for the next three weeks, so there's no interest in shiny metals, presenting a tempting opportunity.

It might be prudent to avoid that temptation, because the commodity will have every opportunity to set a three-year low. Like any asset, the time to buy is when everybody else has given up. Silver may never again get to $48/ounce, but it's also likely that it will never again sell for $6 or $7, which was the norm in the 1990s, prior to the great awakening.

I do believe $12 or even $11 per ounce or lower is possible, and, if you're doing your investing right - buying small amounts on a set schedule - you may be able to dollar-cost average your way to a very low basis for your holdings. Of course, anybody who got in at $16 or $17 last year may still be buying right now, and nobody can blame them for lowering their basis.

What it will take to get silver to some more reasonable valuation - say $20-22 - is anybody's guess and a fool's game. Silver is a hedge and it's certainly better than paying 18% interest on credit cards or blowing your money on dinners out, vacations or other life-changing "experiences."

Having a vault full of 1, 10, and 100-ounce bars is likely to be a more life-changing, exceptional, and satisfying experience.

Per Aspera Ad Astra,

Fearless Rick

Coincidentally, this article on silver - by a (ahem) respected investment writer - popped up right as I was publishing mine. Of course, his conclusive approach is completely incorrect.