A Gigantic Crazy Silver Spike

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Business Intelligence Middle East

     

Legendary global investor and chairman of Singapore-based Rogers Holdings, Jim Rogers hardly sees how silver could be a bubble when, even at its top, it’s still below its all-time high.

Last week’s plunge in prices was good for the market especially for silver which needed a set back and consolidation, according to Rogers who was hoping prices would go down so he could buy some more.

Speaking to Alix Steel in a TheStreet interview, Rogers said: "When something goes up 25%-30% in a month, that’s something to worry about a great deal. I don’t know what caused it maybe it was short covering, maybe it was rumors. I have no idea. I know that 25% in a month is dangerous".

"Silver went down a great deal but if you raise margin requirements 150%-200% you would expect something to collapse," he added.

Asked if this was a bubble that burst, Rogers said: "I hardly see how silver could be a bubble when, even at its top, it’s still below its all-time high. That’s not much of a bubble," adding a bubble is "when things are screaming up every day and they go to new highs, two to three times their old highs".

"We’ll have a bubble, we’ll have a bubble in commodities, we’re not there yet," he said.

Last week, silver futures plunged the most since at least 1983 after the Comex exchange in New York boosted margin costs by 84%. The price rebounded 9.1% in the past two days. On April 25, the metal reached US$49.845, the highest since the Hunt Brothers tried to corner the market in 1980. In that year, the commodity climbed to a record US$50.35.

Silver recovered a third of its 30% plunge from end-April’s 31-year high, hitting US$39.18 per ounce at today’s London Fix.

So was it a parabolic rally?

"I’m not sure I would call it parabolic, I would certainly call it a spike, it didn’t quite reach parabolic status in my view, but it certainly was a gigantic crazy spike," Rogers told Steel.

Uptrend not broken

"You’re still in an uptrend, despite the sharp sell-off" as shown by an intermediate-term trend from the lows on August 24 and January 28," Mary Ann Bartels, the head of US technical and market analysis at Bank of America Merrill Lynch in New York, told Bloomberg yesterday in a telephone interview. "The uptrend was not broken."

Futures will face so-called resistance around US$45 before topping US$50, a "very important number" that "called the end of the bull market in commodities, with the Hunt Brothers getting squeezed out of silver" in 1980, Bartels said.

The metal may rise to US$80 in three to five years, she said.

"I was hoping it would go down so I could buy more", agrees Rogers.

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Jim Rogers has taught finance at Columbia University’s business school and is a media commentator worldwide. He is the author of Adventure Capitalist, Investment Biker, Hot Commodities, A Gift to My Children, and A Bull in China. See his website.

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