The silver bell tolls

June 21, 2006 07:21 AM

A massive fund liquidation precipitated by interest rate hikes, fear of inflation and a global economic slowdown has beaten silver back, giving up a third of its value in the last month. “Markets can’t just go straight up,” says Tom Farmer, a metals analyst at RJO Futures. “Overall, the bull run will continue, but if you don’t have to be in, stay on the sides. When you see strength, take the long side.” Farmer expects a range in silver between $7 and $11 per ounce. “Lots of funds and specs were long. Now they are taking profits and taking the other side.”

Robert Fuhrmann, metals analyst at My Futures Online says the price of silver will depend on demand from China and India. “Longer term we are going to see higher prices,” Fuhrmann says, but he suspects the correction is not through and expects silver to range from choppy to lower through the end of July. For July, he picks $8.60 for a low and $11.50 for a high.

“There are too many people in the same trade,” says Charles A. Nedoss, analyst for Peak Trading Group. Nedoss says those longs were stopped out at $9.90. “Technically, they really trashed the market; fundamentally it’s not that bad.” Nedoss finds support at $9.50 and resistance at $12.85. “If I see some sideways trade, it might be time to get in.”

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