We Are Now Buyers of Physical Silver

Ben Davies called for a 3 to 5 day $15 decline in silver and that is exactly what happened. I wanted to catch up with the CEO of Hinde Capital to get his thoughts on where we are now in the silver market. When asked if silver is bottoming Davies replied, “As a firm we have covered all of our hedges on silver and we have started to accumulate physical silver. Let me add that this is the swiftest 30+% decline in this bull market. If you are a cash buyer of physical silver then you should now be accumulating silver. There is always a danger in catching a falling knife, but you have to remember that silver has intrinsic value.”



Davies continues:

“Nonetheless we are keeping an eye on the US dollar which could continue having a bounce post Trichet’s comments. There’s clearly an unwind of commodity positions in general with crude down almost 10%. The market in silver is extremely oversold and it would not surprise me to see a bounce overnight in Asian trading.

We have seen a 10 standard deviation move in silver on multiple periodicities that we track, the likes of which we haven’t yet experienced in this bull market. I want to reiterate that Hinde fundamentally believes that the silver market had reached a point of criticality at this last peak whereby the market was vulnerable to a swift and violent correction irrespective of any external trigger and that is what occurred.

In our opinion, such moves as we just experienced in the paper silver market have been exacerbated by system traders exiting the market. This last decline today was more a function of liquidation due to margin calls as a function of the whole commodity sector selling off.

This is the start of a great opportunity to accumulate silver. All of the key fundamental issues in the world have not gone away nor those specific to silver such as the fact that it is under-owned and short of supply in the medium-term. All of those conditions are still in place for silver. KWN readers should remember that on corrections beyond 20% in a secular bull market you are supposed to be buying.”

When asked about gold Davies stated, “The gold market has been dragged down with the precipitous fall in silver, but we believe gold will hold above $1,450. We believe between now and August we will find a floor and the next up leg in gold will begin. That next leg higher in gold should take us over $2,000.”

Davies is correct, in secular bull markets you are supposed to accumulate positions on significant corrections. Silver just experienced a tremendous decline, so you will start to see the big money accumulate on weakness.

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