Capitulation Phase

This is the big diagram of Bubble Phase.

bubble-phases

 This is the long term silver chart from 2002 – 2013.

silver

If we overlap the 2 charts, it is obvious that we are now in Capitulation Phase. Capitulation Phase is defined as the action of surrendering or ceasing to resist an opponent or demand. Investors give up any previous gains in price by selling in an effort to get out of the market and into less risky investments.

In layman term, it is the phase where many silver investors give up on hoping silver price would go up as much as they expected earlier. I personally know many people who started investing silver when price was $30+. Now, they are not particularly excited when hear about silver. But, they are also not desperate to sell off their silver at a loss.

The ironic part about investment phases is, we never know what phase we are at until we passed the phase. There are 2 directions we can go now:

  1. Whine and complain how silver was a bad investment because you might have enter in a bad timing. Then curse and swear that you will never buy a single oz of silver again in your life, OR
  2. Realize that silver price has came down significantly since April 2011. We now have the timing advantage to buy cheap silver, much cheaper compare to those who bought in 2011.

The fundamental for silver investment remains strong as before. Silver is still an extremely important industrial metal which has no replacement. The underlying global economy crisis is never solved. The can was merely kicked further down to the road. The biggest financial disaster in human history is still waiting for us.

However we need to be aware that further QE (Quantitative Easing) has no more stimulating effect on precious metal price. QE exit in the future would potentially bring precious metal price down. Which is a short-term market reaction.

The potential for silver has not fully shined. I would hold my physical silver for long term and has no plan selling any in the short term. If for whatever reason you need to liquidate your silver in the medium to long term, below are some of the indicators you can look for:

  1. The Federal Reserve (U.S.) and the Bank of Japan end their QE.
  2. Silver has another parabolic rise like it did in April 2011.
  3. Another better investment opportunity comes up that I feel would offer better returns than silver.

One fact is, it is never easy to buy something at the bottom and sell at the top. It is always better to buy and sell an investment at a good price, rather than a best price that might never come. Every investment has its cycle. What went up will come down, and what came down will go up. When one cycle has completed, another cycle will begin. Are you ready to catch the next “New Paradigm!!!“?

Silver Malaysia eBookTo find out more about silver investment in Malaysia, take a look at the eBook: Practical Guide For Investing Silver In Malaysia

4 thoughts on “Capitulation Phase

  1. Bro, I have read through a Wealth Daily site that, they have discovered large deposits of silver in South America. They encourage to buy the company stocks that discovered the findings.

    Could this be a reason to the downside of silver price.

    Regards

    Tarmizi..

    • Some recommend buying mining stocks because stocks provides dividend. The challenge with buying stock is you are putting the money trusting the management is going to do a good job. While investing in physical silver is a much simpler game.

  2. Mr. Foo, I have been following your article for some time now and the advise you have given your readers have help me to make a decision on keeping my physical silver investment for the long term. I bought at 29.51 paying a premium of 1.39 totaling 30.90 Oz that was just before silver dipped, I was very disappoint and considered selling but I am in this for the long haul, as you have mentioned, I believe silver will also bounce back as it has considerable value within certain industries and we are consuming it faster than we are mining it.
    My question to you, where do you see or predict the price of silver being in the next 1 yr, 3 yr, 5 yr and even 10yr or further. As i said, I have invest a considerable amount of money, in hopes that silver will follow in golds footsteps some day, and if I don’t benefit from it, i am sure that my children or grand children will, I am in this for the long haul.
    Thanks again for your knowledgeable advice and i look forward to receiving more of your correspondence.

    • Hi Amrit! Good choice for not selling your silver. The current low price is to shake off the weak hands to sell at lost so that the elites could buy at such cheap price. Frankly, anything on price prediction, my guess is as good as yours. The reality is, no one can accurately make prediction. However, when you look back at the fundamental of silver, silver price was $49 in 1980. Currently 2013 price is $19. Where else can you find an asset class that is still below 1980 price? Take the price of the property that you are living in, what was the price in 1980 and what is the price now? It is amazing how undervalue silver is right now and people tend to run away from it. Everyone knows about “buy low, sell high”. Unfortunately when price is low, people tend to worried and not taking any action. If someone didn’t buy low, how is he going to sell high? Well, back to your question, I’m sorry that I couldn’t make a prediction however for long term investment, I reckon anything below $49 is a good buy. Silver price need to be at least $200 after adjusted for inflation. Hope these help!

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