Saturday, 1 October 2011

Clive Maund bearish, my call on Fresnillo and the Pt:Au ratio breakdown. 2011-10-02

I liked Clive Maund's commentaries on silver recently:

As someone interested in the silver miner Fresnillo that is on the UK stock market (I live in the UK and have some Fresnillo shares), I had noticed a magnificent bearish rising wedge pattern that had formed as it made repeated new highs in the face of poor performance from silver and the rest of the stock market:

This pattern worked out wonderfully and the price crashed to below 1600, the target zone.

I wondered if the target for the deline in gold and silver had been reached after this decline in Fresnillo. So, one might have expected a bounce here, perhaps. Also, there is a gap down in the decline between about 1920 and 1860 that ought to be filled on the upside.

However, the silver chart has looked so ominously like 2008 since May this year, with a tepid post-decline rally being like that in 2008. So I am not sure that it is the end of the decline and it is great to see an important commentator whom I have watched since about 2002 give great charts to show this.

There instinctively looks like a target of about $21, which was the last major high in silver from March 2008, in the same way as the late 2008 silver crash went to the previous major high from 2004 (and 1998) at $8.40 after a brief consolidation in the $15 area.

To my view, the $50 top now = the $21 top in 2008, $32.50 now = £16 in 2008 and $21 now is potentially the bottom = $8.40 in the 2008 crash.

It would also be a magnificent 60% decline from $50 to near $20, the same percentage as 2008. The big worry is that we haven't had big bank failures yet and if we do get them we could easily get a crash to $20 or maybe even lower!

To me the chart of Fresnillo crashed below the 1600 target to less than 1500 - and 1600 now looks to me a bit like potential resistance. If that is true, then things could get very nasty quite soon in the silver space. The signals though are a bit mixed.

More nasty signs are the breakdown of the platinum:gold ratio below the 2008 low of 0.965 and the recent upsurge in the gold:silver ratio.

I am going to watching Clive Maund's commentaries like a hawk to see if he is correct.

I wonder though if silver might hold up better this time, since after going down to $8.40 in 2008, it then went up by nearly x6 to $49.75! I wonder if that might bring buyers in sooner this time, anticipating this possibility. It's a fascinating market; history is being made here.

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