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Silver Plunges 12%, What's Going On?

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"Silver may be headed higher, much higher."

FavStocks, Mike Shedlock

I was not even going to comment on silver tonight because of my sale last Wednesday as noted in Taking Silver Profits—Swapping Silver for Gold.

What changed my mind was a post this evening by Zero Hedge: More on the Silver Dive: "massive sell orders coupled with Bolivian nationalization halt combine for perfect weak-hand shakeout storm."

Looks like the old sell-into-low-volume trick to flush the stops and kill the weak hands has worked again. Throw in last week's two CME margin hikes and Friday night's margin bonanza by MF Global, and one had a perfect storm set up for another wipe out in silver to start the week.

In the meantime, silver promptly managed to retrace over 50% of the move shortly after the dump. At this point whatever holders remain following last week's margin action and this evening's fine example of shock and awe will likely need far more energy and capital to be shaken out by the same entities whose primary goal is to prevent the surge in silver and ongoing capital-sapping collateral calls. Since none of the actual fundamentals before the long-term trajectory in silver (and gold) have changed, this appears like a rather attractive entry point.

Lastly, one should recall that silver had a mini 10% correction last week and not only promptly recovered but nearly passed the $50 level shortly thereafter. This time will not be any different.

Perhaps Zero Hedge is correct. Silver may be headed higher, much higher.

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