Hecla is the oldest US precious metals miner and also the largest and lowest cost silver producer. According to it’s website its cost for silver is a negative $1.45, which simple means that “side-show”, consisting of other metals pays for the entire operation and then some.

From an EW perspective the rise from below$1 to $13 is probable one single large “wedge”. In 2008 this wedge collapses towards the base but does not quite make it. This collapse, by the way, is a pretty good indicator of how well the precious metals actually “hedge” or protect you against financial turmoil. Then from the lows in late 2008 the stock rallies in what almost certainly is a B-wave counter-trend correction. In plain English that means that we have to go down again and establish a new low , $1.  Alternatively a more complex correction may be unfolding, but even then a return to about $ 4 is almost a given. The stock is already down by more than 40% and there has not been a shortage of turmoil lately. Looking at the SLV, it certainly does support the notion that silver may , in fact, have topped already.

Fortuna sheds some light on the situation but it is not conclusive one way or another. The stock appears to be making a triangle but that does not really fit, so I suspect that it is a 1-2 on the way down. A drop now through the lower trend-line should resolve the matter. That this is possible , regardless of what silver does, becomes far more plausible if one realizes that this company has some major environmental issues to overcome.

It took the Hunt brothers’ fortune cornering the silver markets to push the price to about $55 an ounce. That was in 1981 when Kodak still made film and your dentist poured the stuff as an alloy in your tooth cavities. Those days are long gone and today, even after shooting up like a rocket the stuff is trading at pretty well half that price, give or take 30 years later. What an inflation hedge!  Here are charts of the SLV and HL (Hecla) one of the few pure silver plays.

Just to belabor the point, silver has made new highs over the past 2 years but the HL stock is still far from double-topping. This non-confirmation does not bode well. The vertical uptrend is equally worrisome. For those that cling to the inflation–hedge myth it may be helpful to consider that HL at about $9 is trading at 1/4 of the 1981 value, a period of 30 years during which the value (purchasing power) of the dollar has lost at least 1/2, so combining the two, HL is now at 1/8 of its ‘81 value!

I would get out of the precious metals ETFs. In the old days the commodities were traded by way of the futures and the CRTC had limits to what size an individual player was allowed. Those limits were waived for a number of players such as GS, JPM etc. arguable adding to the financial debacle. The ETFs allow this same expansion of the number of players and the size of the bets to the point where the financial game is completely divorced from reality. This is fine as long as you realize that the game now is not about “ïnvesting” , instead it is more akin to playing Russian roulette with 2 bullets in the chamber!