"I hope that the long weekend will give you a chance to get rid of that bout of flu.

"I would like to discuss chart theory against silver's upward acceleration referred to in your comment and audio yesterday [Ed: last Thursday].

"I know that such acceleration is usually a trend ending characteristic and understandably so - e.g. company profits can only grow so much whereas the market will realise that the forward p/e ratio after a steep rise is just too demanding, or if corn or soybeans have a substantial price appreciation that farmers will just plant more of that commodity thereby offsetting any shortage. But I wonder if this is really about to happen to silver.

"At the current rate of drawdown warehouse stocks will be depleted within weeks and a squeeze may result, leading possibly to a Comex default, especially if some longs demand physical delivery. Apparently there are no other material stocks of silver, the US and Chinese Governments having sold their holdings. Further, according to reports, JP Morgan and HSBC are currently holding a +/- US$40b short position (of which about $30b is a
loss) growing at the rate of $1b per $1 rise in the silver price, which will need to be covered. Then the gold/silver ratio is reverting to its long term mean of 10 - 15, but still has a long way to go (can you post a chart on this please).

"Silver must rank as a Fullermoney theme where rising demand meets inelastic supply. Some supply might come from scrap and some selling by weaker holders of the Silver Trust, but silver is produced mainly as a by-product and mine supply is inelastic. Equally, silver tends to be used in minute quantities in a large range of products where a rise in the silver price is unlikely to be of any major consequence to the product's total cost so is unlikely to be substituted (assuming that it could be). So it is hard to see any material change in the demand/supply situation in the short term.

"Whilst some pull-back and consolidation in the silver price could be expected after such a good rise, is it likely to be so significant (in depth and time) that long term holders, such as myself, should run for the exit at this stage or could it be shallow so that such holders should just ride out any storm that might be on the horizon? Could silver be a special case as far as chart theory is concerned?

"Your comments would most appreciated as always."

David Fuller's view Well done for seizing your opportunities in the markets and thanks for a very interesting email, certain to be of interest to many subscribers. I also commend you for your diligence in researching and understanding the silver story.

The short answer to your question is, yes; silver could be a special case. However, as an analytical technique, and not just for silver, I would be wary of seductive arguments when they have already produced major moves. For perspective, remember when we were talking about the end of the bear market for silver in 2001-2003, and reports kept popping up, telling us that silver was very unlikely to appreciate meaningfully in price because its main industrial usage in photography would be forever replaced by digital cameras?

Silver has been a Fullermoney secular theme since those days, and remains so. All Eoin and I have done recently is point out that silver was accelerating to a medium-term peak, which I believe we saw yesterday. This may not matter to you if you have invested in a silver bullion ETF, as your email suggests. However, you should not be surprised by a 20% drawdown, not least as most of the trading is in futures. Whether silver fall less than that, or more over the next four months or so, depends on sentiment among other holders.

Lastly, here is the Gold/Silver Ratio since 1975, as requested. It indicates that you have already seen the best of the relative move. We both know that the ratio has been considerable lower, on occasion, over the last two or three hundred years, but I personally prefer not to rely on extreme, outlier possibilities.