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Richard Russell - Expect Huge Rebound in Silver

With continued volatility in gold and silver, Richard Russell, the Godfather of newsletter writers had this to say in his latest commentary, “There was the incredible cheering and gloating about the fall of silver. The media and various experts were laughing and giving the "high sign" in reaction to the 30% decline in silver. The only regret seemed to be that gold didn't sink 30% along with silver. And I wondered why all the cheering over silver's decline. My conclusion was that actually very few people were "in" silver and when silver rocketed up to near 50 dollars an ounce, most investors' reactions was "sour grapes."

Russell continues:

“And they grumbled, "Who were those damn buffoons who made a killing in silver over the period of only a few months?" When silver plunged from 49.75 to 33, down by a third, the anti-precious metals crowd cheered. Of course, the drop in silver and gold was accompanied by a plunge in oil and many other commodities, which elicited a few sighs of relief.

I don't think I've ever seen so much gloating in the face of a plunge in a sector of the market. And I wonder, just wondering, whether silver will now cross up the crowd by bouncing back to a surprising degree.

Gold, as you can see on the chart below has been advancing above an ascending trendline. Over the last two years, gold has declined to test the trendline twice (red arrows). As I write, gold, despite recent weakness, is still well above its bullish trendline.

Not so, in the case of silver. The chart (at the top of the page) shows silver being heavily overbought (RSI), and then the plunge to just above its rising trendline. The fact that silver did not penetrate is trendline is a plus and may allow for a surprising bounce.

Over the last week a lot of the greedy amateurs were knocked out of the precious metals, and today gold and silver start up with a "clean slate." The questions on my mind -- "Will gold make it to 1600?" And if it does, what will hedge fund manager John Paulson do with all his money?

And thanks, subscribers, for all those love e-mails about your profits in gold. In this business, there's nothing better than rich, happy subscribers. I did my best, now it's up to the yellow (golden) metal.”

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