Tuesday, May 24, 2011

Independencia Y Libertad!

12:53 am (Hawaii) I'm hooked a bit on Mexican silver pesos. I've been shopping for physical silver (and gold) lately and, frankly, said no to myself many a time, far more than I've said yes. But I definitely appreciate the distinct and regal look of many coins that used to be currency, more so the ones from south of the border than north. The 1947-48 Mexican 5-peso silver coin (below) is especially cool. What can you say? No matter how original and heroic George Washington (definitely) or Queen Elizabeth (not so much) were, how can they beat the style and warrior-esque look of this coin?

Of course, what also appeals to me about Mexican silver coins is the growing possibility that silver could become currency again in that nation if Hugo Salinas Price has his way. But that's a big novella yet to be written.

For now, Spot Gold (1522) and Spot Silver (35.80) are up nicely this morning. I really can't determine whether it's true or not, but from afar it appears possible that the opening of gold futures trading at the Hong Kong Exchange on May 18 was a turning point for precious metals. Up to then, it was an all-out barrage followed by a few desperate takedown attempts by the CME Mafia, using five margin requirement changes to stifle what had seemed to be a free-market explosion in silver. Not only is the HKMEx in the paper gold game now (for better or worse), Shanghai announced yesterday that it will open a paper silver futures instrument by the end of this year. It seems, from plenty of the prognosticators who wrote about China recently, that there will be no explosion of price, not when their central bank is still in acquire mode.

Mao would be shaking his head, yet applauding right about here. As a cheapskate who loathes credit cards and loans, I understand the principle of austerity. It pains me to know that most of my friends and most of this great nation fell into that obscene lifestyle of living on a lie for years and years. Now? Now we pay the price and, worse yet, the rest of the planet is forced to pay the price for our stupidity and greed.

I don't buy the assertion that Spot Silver will never get over $60/oz just because industry and defense need it so much. If silver rose way above that level, I'm sure Congress and/or the Fed would work out a price-containment system for absolute essentials (weapons, etc.). As for tech companies (solar, iPads, etc.) that need silver, they can always hedge by going long Spot Silver on the open market. That will work itself out, no doubt at all.

It is gold that has remained relatively stable and could be ready to ride back to the recent high. Silver holding strong above 35 is good news for long-term investors who have stacks of physical metal. I've been saying that the time to get physical was last year and the year before, when Spot was still below 20. I didn't buy any paper or physical until this spring, so I'm way behind the times. I also realize that I'm better off trading the paper than buying at the peak. I didn't buy or even consider buying physical silver above 40 and 45. But since Spot dropped to 35, I've picked up a few ounces here and there. I'm not going to be shocked if it still moves back to 33 or 30 or 27. But the ride from 19 to 49 left us with a 50% retrace level of 34, and it has proven to be an excellent pit stop.

There is still nearly an hour until the peon premarket (for people like me) opens, so I'm not assuming these spot prices will hold. But if they do, XG will likely be up ... but then again, it does hardly any trading in premarket or afterhours. So I may have to wait until the opening bell in 2 1/2 hours to make a decision on whether to exit or remain in the position.

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