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Buy Silver Now
Timothy Silvers
July 2, 2007
This article is not as timely as I would like as I have been traveling in the remote Indian Himalaya, and have very little access to internet. Since my advice to sell at the end of February, we did get a nice pullback with buying opportunities in the high $12 range. There was another intermediate high in mid to late April but I was in the middle of nowhere in Turkey then and could not publish a timely article to advise taking profits. I'm trying to do research and post this on a dial up connection so wish me luck. This will be a highly summarized article -- and if you read my previous work you can follow the logic I use.

I bought recently on June 13 at $12.90 when silver corrected to its 200 dma, which has been a good place to buy during the past two years. Then I bought the remaining half of my position on Friday around $12.30. I am now fully invested. It is important to note that I am not currently using any leverage because I can't follow the markets daily. Keep that in mind as you follow my analysis and make your own decisions. Silver fell discouragingly through its 200 and 300 dma but appears to have bottomed. It has broken through the lower end of the upward channel I drew on the Feb 27 graph in my last article. This doesn't necessarily mean we are going lower, but I would watch carefully the $12.25-$12.00 range. If I were using leverage, I would exit long positions at a loss if we close below that. This would indicate that we will have a rough summer for silver and lower prices possibly even below $11 could be realized. I cannot give you an estimate of an absolute bottom. I can only analyze week by week as the market moves.

Gold is holding support at its 200 and 300 dma and should help keep a floor on further drops in the silver price. A breach of $640 would also be bearish for gold and silver in the short to intermediate term so keep an eye on that. Gold and silver both have RSI in the 30 to low 40 range right now although they are closing higher today as I write this. Based on RSI history this is a relatively low risk time to buy. The third graph I posted below I have been maintaining using COT data for almost 4 years. The COT data are not as reliable (correlation to price now only 69% for 2007) as they once were, probably because institutions are using the Silver ETF to do some trading and it is not all going through the commercial traders making the market on the COMEX. However, we are near a relatively low point (good for buying) with commercials net short 47,922 contracts and non-commercials net long 27,852 contracts.

Summary

In any event, I think this is a very low risk buying opportunity for cash purchases of silver (and gold, for that matter) for long-term holding. I would not be surprised to see a small rally in the next month or two, which I may miss in the next 30-day trek in the Ladakh/Zanskar wilderness. If we rally quickly to an RSI in the high 60's you might take consider taking partial profits or hold for bigger gains in the fourth quarter of this year. It is possible to see again a great buying opportunity in silver and gold sometime between the end of Aug and the end of October. This is typically a weak time for the metals, and if you are waiting or hoping for further weakness to buy, you should complete your purchases during that time frame. However, the lowest point may have already past last week, so you might miss out if you wait for lower prices. I will try to post further analysis as my travel schedule and internet access permits. If you'd like to follow our world travel adventures, please check out the travel blog which my wife has been maintaining at http://travelingsilvers.blogspot.com. Again I regret that I cannot respond to emails personally due to limited internet access but I still enjoy getting feedback and comments from readers.


Timothy Silvers

Timothy Silvers is an independent analyst who has been following the silver market since the late 1990's. Yes, Silvers is his real last name, so it only makes sense that he follows the silver market. If you are interested in more of his analysis, please visit his website at www.silverbrothers.com

Disclaimer: This article represents the opinions and personal views of Timothy Silvers and is not intended to be investment advice. If you choose to use this analysis for your personal trading, Timothy Silvers assumes no liability for the direct or indirect losses you may incur due to using this article to make your investment decisions. You are totally and completely responsible for your own investments. At any given time, Timothy Silvers or his friends and relatives may have positions in silver related investments that may or may not follow the recommendations contained in this article. The information in this article may not be completely correct and accurate. Even though Timothy Silvers has done his best to review the content and accuracy of this article, he is in no way liable or responsible for any mistakes or omissions.


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