Hi, this is Jennifer from Lone Star Silver Exchange, writing you on a sunny Texas afternoon. I want to thank everyone who joined during our free membership special. We now have members in 37 U.S. states, 2 Canadian provinces, and Singapore!

About 6 weeks ago, silver topped around $15.20, and gold hit $730. Since then, the metals suffered a waterfall decline, rebounding for a couple of days only to drop again. Other commodities like copper, aluminum, and zinc also corrected, even though they haven't been trading in parallel to the precious metals. Silver and gold bounced off lows at $9.40 and $540 respectively, and have stabilized in a trading range for the past week.

Many pundits in the mainstream media have been calling the commodities bull market over. If this were true, it would be the shortest cycle for tangible assets on record. According to Jim Rogers, commodity cycles historically last between 15 and 23 years. Since the low for silver was in November 2001, we should expect to see considerable gains for the next 10 years or more.

To determine if the bubble has burst, we must determine if a bubble existed at all. One characteristic of a bubble is a focus on a particular asset class by the general public. I have seen many seminars offered on real estate investing, but none on trading wheat futures. I've received no tips from relatives or friends on mining stocks. When I tell strangers at parties that I'm a silver dealer, it usually elicits a blank stare and a quick change of subject. In 1980 in contrast, there were lines stretching for blocks for the public to buy precious metals.

Some writers point out that gold almost tripled, and silver nearly quadrupled since the lows in 2001, so that must have been a bubble. However, both metals are still below their all-time highs. In addition, the dollar has depreciated substantially since 1980. According to the Federal Reserve's own inflation calculator, silver should be about $133, and gold should be almost $2,089 just to equal the peak prices in today's dollars. The end of a tangible asset bubble, like the tulip mania in Holland, should show prices bid up to levels which are unthinkable to the public now, but they will compete to pay in the future.

Another sign of a bubble is an excess supply of whatever asset has appreciated. During the tech boom of the 1990s, investors paid high prices for companies with silly names, no earnings, and illogical business plans. Too many people were trying to get rich quickly using the internet. Today some areas of the country have too many unsold houses, and investors are dumping condos on the market because they can't afford the payments on their mortgages.

In contrast, silver is in its second decade of supply deficit. The U.S. strategic silver stockpile is gone. Even the COMEX supply is visibly shrinking, dropping from 120.4 million ounces to 102.8 moz. in about a month. This is the lowest level since February 2005.

Many mining companies are still going bankrupt because the precious metals prices aren't sufficient to cover expenses. Gold and silver production is going down, not up. Even central bank supply of gold is drying up, since many countries are no longer willing to unload additional supply. Some countries, like Argentina, Russia, Iran, and China, are increasing their gold reserves, and taking the metal off the market.

So if the bubble hasn't burst, why did silver and gold drop? Actually, violent moves are to be expected. No market moves straight up or down. For example, the U.S. stock markets crashed in 1987, but then rebounded to make new highs for several years. Traders like to remark that a bull market tries to buck off riders along the way. Silver is especially notorious for its volatility, which will only increase as more participants enter the metals markets.

While a correction from overbought levels was predictable, I didn't expect gold to drop below $600, nor silver to penetrate $10. However, monetary authorities from the Federal Reserve, BIS, and the Bank of Japan have publicly expressed their willingness to intervene in gold, currencies, and stocks to keep markets "orderly." The IMF directs its member banks to count gold as part of its reserves even if it's been leased or swapped to aid in price suppression (see http://www.financialexpress.com/fe_full_story.php?content_id=129715).

Large banks like Goldman Sachs and JP Morgan Chase cooperate with governments to short commodities so that it seems like inflation is low. Silver is a key market, as many traders believe it indicates monetary inflation. Its small market is easily overwhelmed by large trades. The rumor was that many influential short sellers needed to be bailed out by government intervention on the London Metals Exchange, so commodities needed to be crushed in the short term.

However, we do have monetary inflation all over the world, and this excessive money printing will inevitably push the price of commodities upward. To protect their exports and inflate away debt, the central bankers continue to debase their fiat currencies. It will take greater numbers of dollars to buy everything you need in the future, and that includes precious metals. In addition, as more and more countries question the dollar's reserve status and diversify into real assets, dollars will increasingly flood the marketplace. If a monetary panic ensues, you will want to have your wealth in the only assets that have been money for millennia, silver and gold.

We will be closed on July 4th for the Independence Day holiday. Have a great weekend!