Silver drops to $25 as we forecast for the late summer low

This is proving something of an inverse Indian summer for silver. The low of $25 we thought might come in late July (click here) has actually come at the start of October.

At the worst this sudden sell-off – now so clearly seen by the chartists who equivocated a week or two ago – could push the most volatile of metals down to $20. These are great buying opportunity levels.

Stocks crashing?

It would not be surprising if the real low in this silver sell-off came later this month with a stock market capitulation and crash. October is the month for stock market crashes and there is little optimism about the immediate outlook among professional analysts or even the die-hard bulls of the hedge fund world.

What we have does look very much like a case of history repeating itself all over again with the autumn of 2008 back once more. Then silver dropped by almost 60 per cent from its high and that is happening again.

Market timers would love to have caught the silver turn and we take our hat off to Clive Maund who will doubtless win new subscribers to his first-rate technical analysis. But if you are looking for an old fashioned opportunity to buy volatility at a low point then this is also it.

2008 precedent

In late 2008 any holder of silver was dumbstruck by the price fall to under $9 but then remember the five-fold increase to $50 over the next two-and-a-half years due to speculation about inflation and a soaring gold price.

The eurozone crisis might leave us stuck in a new Great Depression or it may be that the incredibly rich Germans decide it is best to inflate the world economy after all. If you think it will be the same as last time then you will do well buying silver at bargain prices. It is hardly likely the Germans will ultimately commit economic suicide is it? So you are betting on that.

Or will we have a long depression with the dollar as king? Have we so soon forgotten Bernanke’s $16 trillion in money printing? That will still come back with a vengeance and precious metals will then be the place to be.

However, what has not changed either is that gold and silver prices are highly volatile and particularly prone to depression as markets sell down but they are also the best and most reliable choice to make for the recovery phase.