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Implications of Extreme Gold, Silver Price Volatility
By Patrick A. Heller
May 21, 2013

A man who attended a financial conference earlier this year told me that the famous speaker began his presentation by asking the audience how many thought that the price of gold had peaked. He was stunned that almost everyone other than him raised their hands.

In contrast, I have repeatedly expressed in my writings, interviews, speeches, and radio programs that the world’s financial problems that are the reasons why gold and silver prices have risen steadily for more than 12 years have not been resolved or cured. Therefore, in my judgment, prices of precious metals are due to continue rising for the foreseeable future.

I try to make my explanations straightforward and easy to understand. As a result, I am rarely asked if I think the price of gold (or silver) has peaked. Instead, the questions I hear most often are if the recent price declines have reached bottom or when will prices start to go back up.

In the short term, it is pretty much impossible to tell when prices have bottomed until after the fact. Instead of trying to guess the exact day or the specific price that gold and silver will turn back up, I take the long-term perspective that if gold surpasses $5,000 and silver exceeds $150 (which I consider to be questions of “when” not “if”) it won’t really matter whether someone now pays $1,700 or $1,350 for an ounce of gold or $22 or $35 for an ounce of silver. In other words, I consider today’s prices to be a bargain buying opportunity whether or not we are near the absolute market bottoms.

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When markets get ready to turn, they often experience extreme volatility. Yesterday, for instance, the price of silver ranged all the way from $20.20 to $23.30, about at 15 percent swing. Almost no one was a buyer right at the moment that silver was at its daily low, as prices quickly soared. As I write this Tuesday morning, the silver price is about 10 percent above yesterday’s low.

So, did those who bought silver over the past several months when prices were higher than $20.20 overpay? Taking the long-term perspective, I don’t think so. Since most potential buyers didn’t jump in at yesterday’s low, does that mean that it is too late to get into silver? I emphatically say no!

There are technical traders who are waiting until the price of silver reaches higher levels, with many waiting for a price anywhere from $24 to $29 to enter the market. Should the price of silver reach $23 again, there is a strong likelihood that the short-sellers who bombarded the price by selling paper contracts will start closing out their positions by buying contracts to close out their position. Should a rising silver price gain any momentum, the price could easily increase several dollars within one to two weeks.

Gold could experience the same price recovery, though it will move by smaller percentages because it is a much larger (measured by dollar volume) market.

The extreme price volatility indicates that those trying to suppress prices are being seriously challenged by purchasers eager to load up with physical gold and silver. That could (and I have to emphasize “could”) be a sign that we are closer to the day when the nearly eight-month slump in gold and silver prices are over.

When the momentum turns positive, though, don’t expect prices to rise in a straight line. And, if prices rise too much too fast, expect the U.S. government to blatantly manipulate the markets. In the long run I don’t think the U.S. government is in the position to suppress prices of gold and silver indefinitely. Keep that long-term result in mind as we continue to see volatile prices.

Patrick A. Heller is the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner. He owns Liberty Coin Service in Lansing, Mich., and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at

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