To state it has been rough in the precious metals sector the past month is a gross understatement. Many in this sector, including this writer, have experienced losses that just a few short weeks ago would have seemed nearly impossible.
I do not like to admit a mistake, but to maintain integrity with one’s self and all readers of this column, it is required. The following excerpt is what I sent to our members only in the middle of August. At that time I pointed out that the decline in the silver market was scary and yet not unlike others experienced in the silver market previously.
From The Morgan Report Update on the Silver Market – August 16, 2008
This update will be brief in words, but the main intent is to objectively look at one of the most powerful yet volatile markets—THE SILVER MARKET.
I gave this part of the update a great deal of thought, initially thinking perhaps a daily, then a weekly, and finally a monthly chart with annotations, would be the most valuable to you. However, my conclusion was to be so precise and accurate that the sheer simplicity would not only provide confidence that the bull market is intact, but historically the move we all experienced with a great deal of grief is not all that unusual for silver.
The graph below shows three ovals that are historic fact, of sharp sell-offs in the silver market. The one we are now experiencing is a bit different because it came after a long consolidation period, but, much more importantly, it is taking place only in the paper market. The other two sell-offs were sharp fast, and in both cases you could acquire real silver near the futures (paper market) price.
Right now I do not want to be too bold, because I know how quickly things can change in the silver market, but so far almost all of the input I have received from around the world is that physical silver is not only hard to obtain in many instances, but the price is much higher than the futures price.
(End of excerpt.)
As this is being penned, I am watching the gold and silver open in New York, and both continue their declines. Silver has pierced the major uptrend line that was presented above and from a technical perspective has caused many of us that are technically oriented to ask if the bull market is indeed over.
Yes, it must be stated that the major uptrend line has been penetrated. However, only a pure technician would state this is an absolute proof the bull market is over. The more fundamental question is whether you now trust the instruments issued by the financial power brokers or your own belief that precious metals will do what they have done under similar circumstances in times past. Do you now trust that financial systems are experiencing failures structured by the most authoritative institutions ever imagined? Or does your common sense lead you in another direction?
These questions will be addressed in my next formal report, scheduled for the first Monday in October, but for now, suffice it to say you must ask the right questions. Why is the price of gold in the physical realm not agreeing with the futures price? Why is it difficult to find silver from many dealers and, when it is located, why is the time required to deliver quoted in weeks or months? What significance does the banking and financial sector play in the overall picture?
Today is the anniversary of 9/11, and I recall sitting at my computer in the dawning hours of the day that was about to become “9/11” and watching the price of gold skyrocket early in the morning. I had also checked with one of my many sources and read that they too saw the price of gold screaming upward, yet did not want it to take place for fear of the reasons behind it. I do not and cannot explain, to this day, why this vague sense sparked me to rise from my computer, run to the next room, and turn on the television, only to witness the twin towers disaster. I too felt my gold holdings were nothing compared to what I saw and could not believe on television.
Today is a reminder to me that freedom, integrity, responsibility, and trust are essential in all human activity. Honest money is integral to a system that neither favors nor slights anyone. Yet of all principles, protecting freedom stands above all of them.
It is an honor to be,
September 11, 2008
Mr. Morgan has followed the silver market daily for over thirty years. Much of this Web site, www.silver-investor.com, is devoted to education about the precious metals.