Silver Shortage More Evident Now

Both gold and silver are showing more signs of life today. The patterns in the graph are remarkably similar. There remains a large amount of open interest in both of the metals. One would have expected the short interest to drop, but it has not. Therefore, there is still an overhang of influence in both. Gold is trading at 905.80 and silver at 17.48 as this is written. Perhaps, the recent correction is over, but there will be more.

I believe we will see a strong resistance at the 1000 level. It may be very difficult to break through it the next time around. There were too many late folks who bought near the end of that upward move and many were burned, because they had hoped for a quick profit well above 1000 and were caught with big paper losses. They are likely to cash out near 1000 next time, rather than risk another blood bath.

Those of us in for the long haul are not as concerned about the corrections along the way. Certainly, they hurt, but we must realize that bumps occur. Nothing goes straight up forever. In fact, there will come a time when there is a blow off in the precious metals. That is when we hope to unload the mining stocks at a handsome profit. However, it remains wise to keep trailing stops on a portion of your mining stocks to prevent substantial paper losses during the climb.

This from Casey's Daily Resource Plus this morning,

"In silver news, the silver ETF did not liquidate one single ounce of silver during the $5 drop in price we just had. Here's what Ted Butler had to say when I asked him about the ETFs in an e-mail exchange we had yesterday afternoon...."The ETFs have been interesting though. GLD has held firm as far as holdings, with no decline during the sell-off this week, which is unusual. SLV has not only held at record levels, but added 2.5 million to a new record yesterday. Looks like more may be added soon as a result of volume last couple of days." It's a good bet that SLV is having real trouble getting enough silver to meet its obligations. This is something I intend monitor carefully from now on."

I am planning to buy more calls on PAAS, SLW, and CDE, to take advantage of the dwindling supply of silver which should make silver an outstanding play for the immediate future. There must truly be a real shortage here. Certainly, it will be good long term as well. It is wise to watch the market to see how this plays out. I would recommend cautious buying.

We will have to see what the Lord has in store for us in the markets this Friday. Fridays are always interesting. Early today the DJI is off about 25 and most mining stocks are up.

Remember to answer our God's call to corporate worship on the Lord's Day. It is our duty and pleasure before the One, True, Living God of all.

Best to each, Doug