Young Bui

OW! Silver had a wild ride since my last article.  It ran up from $18 in August of last year to a high of almost $50 at the end of April.  It is now in a major correction, and it will continue to fall further into the mid or high 20s, according to some analysts. I do not think it will fall below $32 because that is the 200-day moving average, and there is strong support at $33. It only broke the 200 DMA twice in the last ten years, once for a week in 2007 and once very badly in 2008 when the market crashed. If it happens to break it, I would start buying at $30 and then cost-average down to $26. I think silver will move sideways between $33 and $37 until August. If you don’t have any silver yet I suggest you buy some now at $33. You can always cost-average down if it goes down.
     I was correct in predicting the strong correction, but I was two months off.  That is because of the manipulation of the Comex in having five margin hikes within an eight-day period to drive down the price of silver.  If that is not manipulation, then I don’t know what is. The correction has allowed the big banks to cover a lot of their short positions. Silver should turn around in late August after the next big Fed meeting in Jackson Hole.  It is there where they announced QE2 last year and I think they will announce QE3 or something to that effect this year too.  Silver will have another great run after that. QE2 has ended and the stock market is still going strong at the moment. However, the economy has started to show some signs of a downturn. The housing market is in a double dip, and the unemployment rate is inching back higher on the most recent announcement. Without the injection of Fed money, I don’t know how much longer the market will stay up this high.
     Another problem looming is the debt ceiling, which will be reached by August 2nd. The US will have to default on certain loans and cut back on Social Security, Medicaid, Medicare, and other programs if Congress cannot agree to increase the debt ceiling. And if payments to investors are late, that would likely cause interest rates on Treasury debt to skyrocket, raising rates across the board and potentially choking the flow of money through the economy. Our bonds will be downgraded, making it harder for us to obtain loans from foreign countries.  A default by the US would be catastrophic for worldwide markets, much worse than the 2008 market crash. The cascading effect will destroy many currencies, which will be great for gold and especially silver. However, this is one scenario that I do not want to see us in.  
     If they increase the debt ceiling, then the Fed can start their printing press to create more money to pay off the interest on our debts. The government takes in less money than the amount it shells out to pay short-term loans and other expenses. The only way for the US to pay our loans is to print more money. This is also good for silver as you have witnessed the crazy run-up of silver last year.

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