Last week (20th Feb), silver price has a drastic drop of almost $1 within 6 hours:
In the past 30 days, silver price felt from $32 to $28.
Take a look at the longer term for silver chart from September 2012 to February 2013, we can observe the following:
This chart shows a lower high pattern. Lower high means each of following high is lower than the previous high. High 1 peak is about $35, High 2 peak is about $34.40, High 3 peak is $32.25. In other words, High 3 is lower than High 2, and High 2 is lower than High 1. Let me repeat this, a lower high pattern where each of the following High is lower than the previous High.
Lower high is a pattern that signals market is losing strength. Does it mean silver price will continue falling? I can’t be sure as market tends to always surprise us. I won’t call the current price as a rock bottom price but it certainly is a good buying opportunity. Remember, in order to sell high, you need to buy low; unfortunately most people are afraid at that point that price might drop even further.
Throughout the last 10 years, there are many good buying opportunities. If you missed out the previous opportunity, you might not want to miss out this time. Remember my previous question on when is the best time to plant a tree? The first best answer is 10 years ago. The second best answer is now!
If you are wondering whether you should cut lost now, I will share with you a simple guideline when to continue holding to an investment and when to consider let go. The solution is to refer back what were the fundamental factors that made silver a great investment. If the fundamentals have not change, keep holding. Remember, an arrow can only shoot forward by pulling backward first.
When comes to investing silver, you have to mentally overcome your own emotions, step back and look at the fundamentals silver. The world has limited supply of silver, rising costs of mining, growing investment demand and industrial demand, and an active currency war where the winner is the central bank with their paper money (fiat currencies).
Since about 75% of new silver supply came from mining, it is important to keep an eye on the mining cost. In Mid 2012, Pan American Silver (PAAS) claimed mining cost for silver is $13.87 per ounce. Many experts think the number is totally illogical and the actual mining cost for silver is $26.54. This would make perfect sense as why silver price has been strongly supported at $26 since 2011 until 2013 because that is exactly where the mining cost is. It cannot go lower than!
Is the price currently going to $26? If it reaches there can it be supported at $26? Most importantly, when is the best time to buy?
In Malaysia Silver Investor Membership, I showed a simple yet effective formula to the members on when is a good time to buy and sell silver. At the point of writing this ($28.76), the indicator shows it is a good time to buy some silver. You could wait till silver price touches $26 (the very strong support), but if silver price doesn’t go there and re-bounce to $30 range, you might have just missed a good buying opportunity. In silver investment, you would rather be 1 year too early and not 1 day too late!
On 20th Feb 2013, Eric Sprott (silver expert and billionaire fund manager) said he still believes silver is the investment of the decade. Eric stated silver should be $100 today, and he expects silver to massively outperform gold. He conservatively expects the metal to reach $200/oz, however $200 is not be considered as the top. He said, “When you trade 1 year’s silver production in a day- matter of fact I think we traded one year’s worth of gold production yesterday, which is absolutely ridiculous!“. All we know is that the price should be up massively, he added.
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