Silver bugs bugged out as margins increased on silver and the market's recent failure at what seemed to be everyone's market objective of $50.00 an ounce. Oil tried to hold up while silver was crashing, yet the wave of selling impacted oil as traders looked to preserve profits on part of their portfolio or they simply had to cover to meet a margin call.
The sudden reversal of fortunes raises significant questions. Is the bull market for precious metals are over? Or is this a great buying opportunity? Well the answer to the first question is no. The answer to the second question is yes but with reservations.
The last time the silver market was seriously threatening the $50 an ounce area, we were in the days of the legendary Hunt Brothers. The ketchup magnets got it into their heads that they could corner the silver market only to have the silver market corner them. After silver soared from $2 to near $50, the ensuing collapse brought the silver back to earth and the Hunts to justice.
Yet while silver failed in spectacular fashion, the truth is that the fundamentals that brought silver to this level have not really changed. While we focus on margins and demand from China and India we also have to realize that seasonal demand for silver tends to weaken in May. So while silver may struggle for some time, it still seems to be on target for a longer-term potential objective of near $77 dollar an ounce. The problem is that silver could correct to near $30 an ounce and still have the same objective. Such is the burden of a long-term bull move.