Tuesday, May 3, 2011

The Silver Sledgehammer Arrives

I sat down to watch some HBO on Sunday with silver comfortably snug next to $50.  On Tuesday after as I am eating my lunch, silver is now at close to $40 and appears to be in free fall.

During the last few months, long time readers and friends have contacted me to ask if it was too late to get into silver as prices crossed $20, $25, $30, then $40.

I usually answered their question is a simple word: "No."  Then I would spend the next five minutes focused exclusively on preparing them for their first silver pull back.

I used phrases like, "getting punched in the stomach," or "getting hit over the face with a sledgehammer" but nothing really describes a silver pull back unless you live through one.

And here we are. 

For those that are new to this experience I wanted to briefly review the silver pull backs (above 10%) over the last 7 years:

April 2004: Silver $8.25 to $5.50. A 33% correction.
May 2004: Silver $6.10 to $5.40. A 12% correction in only 4 trading days.
Sept. 2004: Silver $6.80 to $6.12. A 10% correction in only 8 days.
Dec. 2004: Silver $8.00 to $6.60. A 17.5% correction is only 2 weeks.
Jun-Jul 2005: Silver $7.55 to $6.80. A 10% correction for the summer.
Apr. 2006: Silver $14.25 to $12.10. A 15% correction only 2 days.
May 2006: Silver $15.00 to $12.00. A 20% correction in only 10 days.
June 2006: Silver $12.50 to $9.70. A 22% correction in only 9 days.
July 2006: Silver $11.75 to $10.50. A 11% correction in only 7 days.
Sept. 2006: Silver $13.25 to $10.75. A 19% correction in only 10 days.
Dec. 2006: Silver $14.10 to $12.50. A 11% correction in only 14 days.
Mar. 2007: Silver $14.30 to $12.50. A 13% correction in only 4 days.
Aug. 2007: Silver $13.10 to $11.60. A 11.5% correction in only 10 days.
Mar. 2008: Silver $21.00 to $17.50. A 17% correction in only 3 days.
Apr. 2008: Silver $18.50 to $16.50. A 11% correction in only 13 days.

And then the grandaddy of them all......
July-Oct 2008: Silver falls from $19.40 to $8.85. A 54% correction in under 3 months.

Feb-Mar 2009: Silver $14.50 to $12.70. A 12% correction in 3 weeks.
June 2009: Silver $16.00 to $13.70. A 14% correction in 20 days.
Jan. 2010: Silver $18.75 $16.25. A 13% correction in 18 days.
May 2010: Silver $19.70 to $17.50. A 11% correction in only 11 days.

Did life end during any of these corrections?  Nope.  But it felt like it.  If you had just held onto your metal during this period, what would your total return be?

Jan. 2004 – May 2, 2011: Silver rises from $5.95 to about $40.80. A gain of 685%

The United States of America has no way to fund its deficit without the use of a printing press.

Hope for prices to fall lower. 

Your goal should be to focus on the number of ounces you own, not the dollar value of those ounces.

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