Silver implodes. Gold makes a sharp retreat.
Major price drops on Friday. The bull market is very probably over.
The silver price just collapsed. That was after a stunning leap higher in recent days and weeks. Thus I’m sending this to you on a Sunday to keep you up to date.
On Friday, the silver price dropped 26.4% to $85.15 per ounce.
The all-time intraday high was $121.64, briefly reached on Thursday 29th January. This means silver has now dropped a massive 30% from the peak. And that drop happened in less than two days.
Meanwhile, gold is now priced at $4,894 per troy ounce, having fallen nearly 9% on Friday. That is a huge single-day move for gold. From what I can see, the gold price briefly peaked above $5,595 on 29th January, the same day as silver’s peak. Thus gold is already down 12.5% from the all-time high, and again in less than two trading days.
I wrote about silver (and gold) on several occasions in recent months.
“Time for a bet on silver?“ was published on 19th October. This argued that silver appeared to be accelerating ahead of gold. But also warned to keep silver investments small, since they are far more speculative than gold.
“Has silver entered the early speculative mania phase?“ was published on 19 December, after silver rocketed higher. This encouraged any investors with large positions in silver or gold to start paying closer attention, and to trim positions if they had become too large.
This was followed by the “Gold & Silver bull market update“ on 9th January, after further big price climbs. This reiterated the need to review positions to make sure that they weren’t too big, and to bank some profit if needed. It included these paragraphs:
“Personally, I sold a big chunk of that silver position early last week. That was after the silver price shot up over 9% in a single day, on 26th December. If that isn’t a sign of a speculative market, then I don’t know what is.
Silver was and is a relatively small part of my portfolio, for the simple reason that silver is a speculative investment. But, having made a substantial profit in just a few months, I was happy to bank some of it.
The remaining part is up further since I sold. So I’ve given up some upside, but I’ve also dialled down the risk. That’s fine by me.”
Finally, published on 26th January, there was a further update after prices accelerated even faster: “Silver rockets higher“. Once again, I stressed the need for silver investors to keep risk in check by selling into the rally and reducing positions sizes. The final paragraphs said this:
“If you are invested in gold, silver, or the miners of either, then now is the time to stay focused on risk. Remember where they are in the risk stack, make sure your positions aren’t bigger than you’re comfortable with, and watch out for major price falls.
This huge bull market could continue rocketing higher. Or it could slam into reverse after such a fast and large upwards move. Nobody knows, however much they may claim to.
Silver is now in a speculative market. And that means price moves will be dictated by fickle speculators.”
Throughout all of this, my aim has been to help silver and gold investors to not get too greedy, and to focus on keeping risk in check by adjusting the size of investments (i.e. progressively selling into the rally).
As of now, it looks like the silver bull market has come to a very sudden and crashing end. I have a small residual exposure to silver which I will now sell, thus protecting the majority of the gains over the past few months.
I don’t know if silver will bounce back for a while or keep crashing. But the risk of staying in the market is clearly very high now.
As for gold, it’s also possible that the bull market is over. In the past, market peaks have been followed by long periods of sliding prices, until they start to consolidate and climb again.
With no way of knowing whether gold will hold around current levels, fall significantly further, or resume its climb in future months, the important thing is to review positions (gold and gold miners) and decide if they are an appropriate size.
There’s no way of being certain. But I think it’s likely that the precious metals bull market has ended conclusively for now. We’ll find out in the coming days and weeks.
Please send comments or questions to the email shown below.
Until next time,
Rob Marstrand
email: ofwealth@substack.com
The editorial content of OfWealth is for general information only and does not constitute investment advice. It is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Appropriate independent advice should be obtained before making any such decision.