Dust flux, Vostok ice core

Dust flux, Vostok ice core
Two dimensional phase space reconstruction of dust flux from the Vostok core over the period 186-4 ka using the time derivative method. Dust flux on the x-axis, rate of change is on the y-axis. From Gipp (2001).

Thursday, June 6, 2013

Whither silver, or wither silver?

Let's look at dynamics of the silver price.

For today's charts I am using the Friday PM London fixes since 2007, which can be obtained here.

This is he week-end closing price for silver over the past 6-1/2 years. Note the trough in 2009 and the spike in 2011. I'm sure we all remember those.

Next up is the reconstructed phase space using the time-delay method (previously described here and here). I actually experimented with several different lags before choosing one of six weeks, as depicted below. Choosing 12 weeks or 24 weeks does not significantly change the results.

Same time period as above.

There are three strong areas of Lyapunov stability around $13, $17,  and just above $30. The mess north of $30 can't yet be resolved as anything but noise, although my opinion could change if the price were to rise to the $40 and stay for a few months.

The price action of the last month is clearly noted. Silver has dropped out of the attractor in the $30 range. Normally, we would expect the price to fall back to at least the $17 attractor, but it is also possible for the price to revert to the $30 attractor. Time will tell.

At this point I would like to look at the fundamentals of silver to help me decide which outcome is more likely. Unfortunately there is a lot of noise and the true fundamental picture is unclear. So we are left with making a gut call. My little pile of silver at the bottom of the sea is telling me that the price will go higher. I think a drop to the $17 area is the most likely outcome--although I think such a drop will be short-lived.

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