As you can see in the chart above, silver fell all the way down to $26 from $31 in four hours of Asian trading on Monday morning, only to recover all the way back to $33 here at the open of US trading here on Tuesday. That's a 27% move in 27 hours. Gold had a similar panic and is also recovering very strongly.
There was a margin hike by both the US and Chinese metals exchanges on Friday, resulting in a number of forced liquidations on Monday. Like the May takedown in silver, the logic of exchanges seems a little bit backwards. If they are trying to keep the price stable, their tactics need some work. Hiking margin rates right after at 15% drop...tends to result in a 30% drop. Which is quite the opposite of stability. However, if their goal is a massive collapse, then perhaps their tactics are right on.
The May action leaves open the possibility that more margin hikes may be in the cards. But, this should be different, as we haven't had the same level of price appreciation that we saw in April. The soverign debt problems are still here, and consequently I am still bullish on precious metals. Though I'm already long silver (and taking a beating), I am using this dip to buy more.
Separately, there appears to be a multi-decade cup-and-handle formation on gold. More on that later.
MONKEY BUSINESS:
Buying: AGQ @ $126.33, UGL @ $91.00
Holding: AGQ ($159.70)
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