Spot hits $200/oz for silver - graph is parabolic - people are screaming "GSR is going to hit 5!!!" "Silver is going to $500!" " Gold is going to "$10,000!", people hold on, it crashes, silver drops from $200 to $120 in 2 days, everyone is trying to offload to capture some profit on the silver they bought at $80-90-100/oz - buying capacity will dry up.
Hi GP I understand but that senario makes an assumption that the bubble is not due to a collapsing currency as many suspect it will be. I don't see Zimbabweans rushing to sell gold for Trillions of Zim $? Cheers
This situation could easily arise during a bear trap (not hyperinflation related) on the way to whatever the top is.
If silver goes to $200 and drops to $120 i dont expect many from here now will have been buying in the $80-100 ballpark. Me personally if i have silver i bought at $30 and still hold past the top of the bubble i wont be looking to trade out into fiat. Especially if there is cashflow issues with dealers and other such issues. I see how these could affect the buy/sell spread. And surely in such a senario there would be increased barter style trade going on? Such a senario isnt a regular thing, Im sure the bubble wouldnt peak for all assets that a stacker would be looking to trade into simultaneously. One might very well find themselves missing the fiat top but timing well to trade into realestate or similar?
Telling the difference between collapsing currency and just a bubble may be hard when you're in the midst of it, see http://goldchat.blogspot.com.au/2011/08/coming-goldbug-civil-war-and-your-pm.html
I agree Bron so you need to use a different measure not the $. Like how much stuff will your silver get you etc. It is difficult in the heat of the moment following a rapid move.
With silver it could be one of (at least) four things: 1. Bubble (caused by investors buying). 2. Currency devaluation. 3. Industrial shortages. 4. Any combination of the above. As most of us know, silver is volatile at the best of times. It may be very difficult (if not impossible) to tell the difference between 2 & 3. Especially when there's wild speculation, and stories, on what caused the move.
