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Lottery Odds Events Keeping Gold and Silver Prices Contained

Commodities / Gold and Silver 2011 Oct 04, 2011 - 02:30 AM GMT

By: Rob_Kirby


From Bill Murphy’s “Midas commentary” on Friday, Sept. 30, 2011:

HSBC has published an interesting study of the recent precious metal volatility:

"Based on almost 40 years of data, the drop in gold prices last week represented a 3 standard deviation move, down 8.54%. According to the data, this has occurred only seven times since gold became freely convertible in 1972. This made the week ended 23 September the seventh-worst week in terms of percentage price performance in almost 40 years of trading, or more than 2,000 weeks.

The last time volatility was this high was in the week ended 21 March 2008, when Bear Stearns collapsed. To find higher weekly volatility levels,we have to go back to the first week of March 1983, when gold prices dropped more than 11%...

Based on 41 years of data, the drop in silver prices last week represented a 5 standard deviation move, falling 23.42% for week ended 23 September. According to the data, declines of this magnitude are rare and have occurred only four times since 1970"

I was so taken with the news that HSBC is reporting that silver’s most recent fall in price was a 5 std. deviation move – I asked good friend and resident Ph.D. [Dr. Jim Willie] in statistics what the odds are of a 5 standard deviation move.

His Reply:

ANSWER :  1 in 1.744 million

any questions, just ask

/ jim

Devs    bell interior prob.                      tail probability              odds
1          0.84134474607                       0.317310508               3.151
2          0.97724986805                       0.045500264               21.978
3          0.99865010197                       0.002699796               370.398
4          0.99996832876                       6.33425E-05               15,787
5          0.99999971335                       5.73303E-07                1,744,278
6          0.99999999901                       1.97318E-09                506,797,317

The latest assault on silver was not a product of free market capitalism.  It was a contrived, manufactured event

Be advised folks, anyone claiming that our global financial morass is the product of “capitalism” is sadly mistaken or shilling for those who are inflicting these lottery-odds salvos against tangible wealth and real money.

Got physical precious metal yet?

By Rob Kirby

Rob Kirby is proprietor of and sales agent for Bullion Custodial Services.  Subscribers to the Kirbyanalytics newsletter can look forward to a weekend publication analyzing many recent global geo-political events and more.  Subscribe to Kirbyanalytics news letter here.  Buy physical gold, silver or platinum bullion here.

Copyright © 2011 Rob Kirby - All rights reserved.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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