The silver markets fell initially during the session on Tuesday, but as you can see the $19.50 level offered enough support to push this market back up and form a hammer. The hammer of course suggests that there is going to be buying in this market, but I see a significant amount of resistance right around the $20.00 level. With that, although I am longer-term bullish of the silver markets, I recognize that we could be in for some significant volatility in the near-term.
When I have actually been doing is buying physical silver for some time now. This takes a lot of the leverage issues out of the markets, and it suddenly becomes more or less an investment for the longer term, perhaps a retirement type account. However, I see potentially explosive moves in this market going forward, and a daily close above the $20 level has me buying in the futures market, as well as possibly the options market.
Longer-term bull market in my opinion.
I know that this market has been beaten down rather significantly since we’ve seen the nasty pullback from the $50 level. However, this market is still much higher than it was 10 years ago, and I think you need to look at the longer-term trajectory of the US dollar in order to understand the silver market. The US dollar has lost 98% of its value since the Federal Reserve took over. Think about that for a moment, a currency that has lost 90% of its value. This is why gold is so expensive, not because gold is so desired. The same can be said of silver. It really wasn’t that long ago that the silver markets were pricing the commodity at roughly $5 an ounce.
What gets people into trouble when it comes in the silver market is the extreme leverage. This is one of the reasons why I try to stick to physical metals. However, this is a function of being in the United States, where CFD markets are not allowed. If you have that ability, I highly recommend building up large CFD positions over time. In the end, this could be an explosive market for you.
