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Silver: Strongest Volatility In The Market

  • #21
  • Mar 16, 2008 11:46am Mar 16, 2008 11:46am
Quoting branco
Price relation of 1:16 ?
Silver's historical high in 1980 was around $48. Gold's historic high before 2008 was around $850. THIS ratio is 16 to 1.
You know the gold standard ended a while ago right?
Which is why the world's currently in this financial mess.
Actually, the USA , unlike the rest of the world,had a Silver standard and not a Gold standard.
The $ has, since going off the standard, lost more than 80% of it's value. Since then Central bankers have effectively been given licence to run their printing presses overtime and flood the markets with worthless paper (a.k.a. inflation).The simple equation for you to contemplate is that if the gold/silver ratio traded at 16 to 1 in 1980 when the Hunt Brothers tried to corner the Silver market, when there were 3.5 billion ounces of each in existence, how hard is it to picture the ratio achieving that milestone now with 5 times as much gold as silver in existence? With silver so rare compared to gold, how hard is it to imagine the 16 to 1 ratio being blown away to the downside, as the world wakes up to these facts?
The other question you should be asking is: Did the oil price rise to $100 per barrel...Did Gold rise to $1000 per ounce... or did a worthless unbacked fiat world currency simply fall that far down the abyss?
  • #22
  • Mar 16, 2008 12:26pm Mar 16, 2008 12:26pm
Silver so rare compared to gold? I don't think we're seeing the same picture here (not to say I don't think the ration of gold to silver could come lower, just that 1:16 is extremely low and it was artificially created the few times we've seen it... of course it can happen again).

Silver is not rare compared to gold. Silver is much more common (that is why the value of silver is lower) the big difference between the two is that silver output as not been explored to the fullest. The causes for this is the 20 year long bear market that we lived in silver... there is no incentive to mine silver.

Silver (unlike gold) comes as a by-product of other minerals like copper and zinc. This means that people interested in mining copper and zinc usually get silver with it that they have no use for... in time they dump the silver in the market for whatever price and this leads pure silver mines to close.

With rising prices that we're seeing for the last decade it has started to be profitable again to run silver-only mines. This is the reason why the major producer of silver worldwide (Peru) is increasing the available silver in the market for the past year and has investments ready to further increase production until 2008 and trough 2009.

From what I understand, you can't do that to gold. Gold resources are fully exploited, if there is a surge in demand for gold you can't go and open up old mines like you can in silver... moreover the news last months of power outages in South Africa (a major producer of gold) brought fear to the market that production of gold will decrease this year unlike silver which is poised to rise.

We also need to be clear about the distinction between gold and silver. Gold is useless. If I give you a bar of gold there is not much you can do with it except sell it. Gold has historically been seen as a keeper of value (due to the centuries we lived in the good old gold standard) and as such its recent rise to record levels has been due to the financial unrest in Wall Street, the debasing of the dollar by the FOMC and the perception (real or not) that inflationary forces are waking up all over the world after being dormant for over 20 years. If these 3 factors continue to appear in our economy gold has no way but up until it truly enters bubble territory and I've seen analysts coming out with targets that could put gold close to $5000.

Silver is a whole different ball game. Silver has, also historically, been used in currency systems. Of course it has been used as "small change" that you would get in case you would pay something for gold. The real standard was gold, and especially since the discovery of the Americas and the new sources of silver in Peru, Mexico and all other South-American countries the value of the silver dropped dramatically in the European markets.

However, silver is useful. There is lot more that you can do with it than sell it and if we consider that investment purposes make up of less than 10% of total silver purchases (compared to close to 100% in gold) while the rest of silver is being used for industry purposes we have to consider two things:

1) Will economic slowdown reduce the demand for silver?

2) Will perception of a weak monetary system increase the demand for silver as a storage of value?

I believe silver (and gold) are on their way up and I actually have a long position on silver but if you start seeing 1:16 price ratios, that is the time to sell... we would be most likely at the top of a bubble.

For the most part of the bull market I would expect to see ratios between 1:40 and 1:60
  • #23
  • Mar 16, 2008 2:17pm Mar 16, 2008 2:17pm
A very interesting topic indeed.
I found these articles just as interesting as they address both Silver's volatility (the reason the thread was started) and the gold-silver ratio, so I thought it was appropriate to put their links here.

http://news.silverseek.com/SilverSeek/1205273785.php
http://www.kitco.com/ind/Chaize/feb202008.html
  • #24
  • Mar 16, 2008 3:14pm Mar 16, 2008 3:14pm
Quoting Doji Star
I've been spreadtrading Silver for years now and found the volatility immensely profitable provided of course you're on the right side of the trade and you stick to reasonable stops.
I trade looking at North Finance and WHC Spot Silver MT4 charts, but I trade Silver using a South African SpreadTrading Platform which offers a good 35-60 pip spread (depending on news events)on the ECBOT Silver futures trading instrument.
You can check out my Silver trades (I call them live) on my journal:
http://www.forexfactory.com/showthre...45#post1905545

it is not really an instrument you'd want to keep trades alive on for days on end as it is really volatile of late, so most of my trades don't last that long even though it's taken off Daily or 4hr charts.
Do you perhaps know any other South African brokers that offers commodities and Fx on MT4 just like NorthFinance. Please help if you know I am askinf cos I am from that region and looking for reputable brokers
from South Africa using MT4
  • #25
  • Mar 16, 2008 3:20pm Mar 16, 2008 3:20pm
ok traders so lets step into the subject be4 the open
now wat im thinking is that this week and due to rate cuts we will have a bullish week for silver possibly we will see it over 21 again.
unless of course dollar news is bullish.

any insights are much appreciated since this thread is made to try and analyze silver movements so that we can make the best of them and make the big bucks.

u know 2 minds are better than one so how about tens of minds!!!!!!!!!!!!!!
"what doesn't bankrupt me, makes me stronger" modern nietzche
  • #26
  • Mar 16, 2008 3:52pm Mar 16, 2008 3:52pm
Quoting salah k.
ok traders so lets step into the subject be4 the open
now wat im thinking is that this week and due to rate cuts we will have a bullish week for silver possibly we will see it over 21 again.
unless of course dollar news is bullish.

any insights are much appreciated since this thread is made to try and analyze silver movements so that we can make the best of them and make the big bucks.

u know 2 minds are better than one so how about tens of minds!!!!!!!!!!!!!!
I have not taken serious look on silver in the past.
But as a day trader and from my chaos setup
right now, silver is heading south and not north though
daily is showing a re-test of 21.10.

If I have to do anything right now I will wait for it to touch
20.85 and watch if it will break to 21.10 and short from there.
or else short below 20.85 .

I will observe it starting from tomorrow and see if I can add it to profitable
pairs to trade beside FX
  • #27
  • Mar 16, 2008 3:56pm Mar 16, 2008 3:56pm
Quoting fxbroker
I have not taken serious look on silver in the past.
But as a day trader and from my chaos setup
right now, silver is heading south and not north though
daily is showing a re-test of 21.10.

If I have to do anything right now I will wait for it to touch
20.85 and watch if it will break to 21.10 and short from there.
or else short below 20.85 .

I will observe it starting from tomorrow and see if I can add it to profitable
pairs to trade beside FX
to tell u the truth i prefer shorting silver more.
but im afraid it reacts viscously to USD news.
so if news is bad it will head north. but if it was good im pretty sure its movement south will be much more aggressive.

awaiting your analysis bro
"what doesn't bankrupt me, makes me stronger" modern nietzche
  • #28
  • Mar 16, 2008 4:12pm Mar 16, 2008 4:12pm
Quoting Doji Star
Experienced traders often advise against trading Silver as in comparison to forex it is a very small market and one big player can send the price tumbling or soaring.
There are position limits man...Plus Silver itself was manipulated once in the past and investigations were run and the manipulators were hardly punished...You can trade Silver without worrying about this issue ...


Thanks,

Nader
  • #29
  • Mar 16, 2008 4:16pm Mar 16, 2008 4:16pm
Quoting Doji Star
The truly scary part about Silver is that in relation to $1000 Gold, it is W-A-Y undervalued and has a lot of catching up to do.Traditionally the gold-silver ratio works like this, you divide the Gold price by 16 to get the price of Silver.
If you take $1000 divided by 16, you get $62,50!!That means it has over 40 000 pips to go to catch up to a centuries old correlation!!
This is based upon a bimetallic standard, which was exercised when both gold and silver were used daily as money. The ratio was fixed between 15-16 to 1.
Believe me!! Silver ALWAYS (through the years) catches up to this ratio sooner or later, so whenever Ihear talk of a Silver top, I take it with a pinch of salt.
I totally agree with you about the ratio, although conservatives usually take it at 20...However, since everything can happen, in order for this ratio to become true, it is not necessary that Silver goes up to maintain the mentioned ratio...Silver can stay the same and gold can go down and they can still approach the ratio you are talking about

Btw, don't consider me as bearish on gold or silver....I am not...I am long silver and I am bullish on both of them...


Thanks,

Nader
  • #30
  • Mar 16, 2008 4:25pm Mar 16, 2008 4:25pm
Quoting Doji Star
Which is why the world's currently in this financial mess.
Actually, the USA , unlike the rest of the world,had a Silver standard and not a Gold standard.
The $ has, since going off the standard, lost more than 80% of it's value. Since then Central bankers have effectively been given licence to run their printing presses overtime and flood the markets with worthless paper (a.k.a. inflation).The simple equation for you to contemplate is that if the gold/silver ratio traded at 16 to 1 in 1980 when the Hunt Brothers tried to corner the Silver market, when there were 3.5 billion ounces of each in existence, how hard is it to picture the ratio achieving that milestone now with 5 times as much gold as silver in existence? With silver so rare compared to gold, how hard is it to imagine the 16 to 1 ratio being blown away to the downside, as the world wakes up to these facts?
The other question you should be asking is: Did the oil price rise to $100 per barrel...Did Gold rise to $1000 per ounce... or did a worthless unbacked fiat world currency simply fall that far down the abyss?

An excellent post....I totally agree with you..However, I believe that what actually happened is that both happened....Both gold price rose and the unbacked fiat USD declined in value at the same time...

To get a real feeling if Gold, Silver and Oil really appreciated in value or not, compare them to other currencies, EUR, GBP, JPY and CHF...If you do this, you will find that all of them are in steady uptrends against those currencies in the previous 5-7 years....


Thanks,

Nader
  • #31
  • Mar 16, 2008 4:56pm Mar 16, 2008 4:56pm
Quoting narafa
An excellent post....I totally agree with you..However, I believe that what actually happened is that both happened....Both gold price rose and the unbacked fiat USD declined in value at the same time...

To get a real feeling if Gold, Silver and Oil really appreciated in value or not, compare them to other currencies, EUR, GBP, JPY and CHF...If you do this, you will find that all of them are in steady uptrends against those currencies in the previous 5-7 years....


Thanks,

Nader
exactly the u c the dollar has been falling for almost 7 years (since the start of the bush adminstration---> OMG wat a conicidence )
yeah right

however i dont think dollar can get much worse
which means that we might c those low levels of silver by the end of the year like 17 $ or possibly 16$

but if dollar keeps getting nailed. well thwn the sky is the limit.
"what doesn't bankrupt me, makes me stronger" modern nietzche
  • #32
  • Mar 17, 2008 2:54am Mar 17, 2008 2:54am
640 pips up after FED decision.
thats worth discussing.
"what doesn't bankrupt me, makes me stronger" modern nietzche
  • #33
  • Mar 17, 2008 5:41am Mar 17, 2008 5:41am
You've really raised valid points, Nader. Some food for thought.
Truly a great discussion we've got going.
  • #34
  • Mar 17, 2008 5:55am Mar 17, 2008 5:55am
Quoting salah k.
640 pips up after FED decision.
thats worth discussing.
Maybe we can cash in on this...

This is nothing new, but I noticed that each day at the New York open (12:30 GMT) the sudden incease in volume causes a breakout in Silver. Here's an example http://www.kitco.com/charts/livesilver.html
  • #35
  • Mar 17, 2008 7:15am Mar 17, 2008 7:15am
Seems today it was the other way around. Which is going to make the 2 weeks top at 21.20 hard to break.

Anyway, extreme volatility is here
  • #36
  • Mar 17, 2008 7:19am Mar 17, 2008 7:19am
technically speaking traders silver looks like a gr8 sell but news drives it
i think traders keep in mind that dollar will fall tomorrow because of FED rate cut and gold and silver are safest buy.
after that i think a gr8 selloff will be done.

any comments?
"what doesn't bankrupt me, makes me stronger" modern nietzche
  • #37
  • Mar 17, 2008 7:33am Mar 17, 2008 7:33am
Dear salah k.

i can tell u a simpel ralation in between silver and gold

gold price is 1017 right now just divide the silver price on gold

silver is 20.50 in cas just divid them Awnser will be 49.60 its mean gold is

relitivly playing strong than silver. this ratio almost play in between

47.....57 so if ratio near to 47 your playing action will be buy silver and

sell gold if you get ration near to 57 buy gold and sell silver.

First of all check this farmoula in mock then play it Real.
  • #38
  • Mar 17, 2008 7:38am Mar 17, 2008 7:38am
Collected $455 from silver with 0.10lots
It is good easily predictable but need low % risked form equity.
margin quite high like oil and gas.

In all commodities still better than fx at the moment.
  • #39
  • Mar 17, 2008 7:43am Mar 17, 2008 7:43am
Quoting fxbroker
Collected $455 from silver with 0.10lots
It is good easily predictable but need low % risked form equity.
margin quite high like oil and gas.

In all commodities still better than fx at the moment.
The above result was actually based on my one time analysis last
night posted here:
http://www.forexfactory.com/showpost...1&postcount=26
  • #40
  • Mar 17, 2008 7:56am Mar 17, 2008 7:56am
Quoting habshi
Dear salah k.

i can tell u a simpel ralation in between silver and gold

gold price is 1017 right now just divide the silver price on gold

silver is 20.50 in cas just divid them Awnser will be 49.60 its mean gold is

relitivly playing strong than silver. this ratio almost play in between

47.....57 so if ratio near to 47 your playing action will be buy silver and

sell gold if you get ration near to 57 buy gold and sell silver.

First of all check this farmoula in mock then play it Real.
thank you very much bro
i will study it

plus this volatility is much better than any currency
1220 pips so far
"what doesn't bankrupt me, makes me stronger" modern nietzche
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