JULY 12 2007 12:30PM - Silver and gold romped today as the dollar remained in record low territory. Even if the dollar were to bounce here, the fact that it has taken out the December 2004 low is meaningful in terms of its future direction. Indeed, a projection of the downtrend channel established in November 2005 indicates that support might only be found down in the 74-75 area on the dollar index. And for the purposes of timing, such a decline can certainly occur over the course of a month or two. This timeframe fits in very well with many of my other fundamental and technical indicators, which have been pointing to a major, perhaps historic, rise in silver and gold prices this summer. It may not be long before my call for $25 silver actually starts to shed the vestiges of lunacy.
On the PM stock front, the XAU has broken out today and looks to close above the psychologically and technically important 150 level. On the other hand, the HUI is still futzing around below 360 and needs to move convincingly north of that level before investors are likely to start mobbing the PM stocks. Yet despite these indexes being near or at record levels, there are still a number of silver companies that are well shy of their own records set last year -- some that I like here include Bear Creek, Avino, Starcore, Impact and Sabina (most of which I own). Also, Silver Wheaton and Pan American are both doing very well, although my horse at the moment is Pan American for the reasons I mentioned recently.
On the physical demand side, the iShares silver ETF SLV added another million ounces yesterday and is now knocking on the door of 140 million ounces. I continue to believe that investor demand for this ETF could pick up very quickly, leading to the gobbling up of a lot of silver over the course of a few days. Perhaps our first clue that this is happening will be the recovery in lease rates, which already seem to be completing a bottoming process.
I'll close today with a quick update on the Serengeti/Southern Arc/Exeter speculation, with which I seem to have become obsessed. First off, I am nearing the point at which I will re-establish a position in Southern Arc. Second, I still keep trying to make sense of Serengeti's drill plan but I'm in no hurry to buy the stock at the moment. Last but not least, my sense is that Exeter is due for another report on its progress (still looking for those re-assays of silver found in the extremely high grade drill core) so it might be a good time to buy it again soon.
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