Silver gains 7% to close at new high, where to next for prices?
Posted on 06 March 2011 with 11 comments from readers
Silver advanced seven per cent last week, just outperforming its nearest rival crude oil. Meantime, the stock market sell-off that might derail this silver price spike just did not happen, albeit markets managed only to eek out a tiny advance.
That makes deciding to enter silver at this level fraught with hazard. It was the same story last week, only those who stayed in cash missed out on a seven per cent rise in a week to $35.65 an ounce, a post-1980 high although still short of the $50 touched 31 years ago.
Of course, you do have to consider the downside risk for a commodity as notoriously volatile as silver which lost more than 50 per cent in the global financial crisis two years ago. Waking up to $17.80 silver would not be such a pleasant experience for investors in the shiniest of metals.
Black Monday?
Did we just miss a week and the stock market downturn is to come? Certainly a whole load of alarms are going off for those who follow the charts. Then you have the fundamentals of the oil price and Arab revolts.
But the main driver for silver prices is simply a surge in investor demand. It’s becoming harder and harder to buy the physical stuff and the paper derivatives are increasingly being questioned in the absence of the real metal. Perhaps it is all those Chinese buyers we predicted (click here).
Silver is the new gold for investors (click here). It is actually rarer because physical stocks are around half those of gold. It has been a currency in the past so has some of the same appeal as gold. And it is cheaper, at the moment, although the price gap is closing up fast.
You also have to wonder at the number of folk sitting and waiting for a price correction. It’s not going to be very big when it comes this time if all those people really then decide to buy.
So far ArabianMoney is very happy to have called silver as the buy of 2011 (click here). Now having made that boast we ought to get a slump in the price!
11 Comments posted by readers:
I heard on the radio that the State legislature of the Western USA State of Utah, where a LOT of Mormons live, is considering legalizing gold & silver coins as currency. The House has already passed the bill. Mormons tend to be rather conservative and are generally well educated. They see what could be coming with the USA deficit, and its’ inevitable effect on the value of the US dollar. They want to be ready, if the dollar becomes nearly worthless.
I’m watching the carnival revelers attending parades on TV, confined by the portable barricades invented here that have spread worldwide.
You may want to note that MANY websites having anything to do with gold are infested with computer malware. I just got a Norton notice of an attempted attack while googling the Utah events. (One of the few red dot alerts in over 120,000 web pages visited! I think a newspaper site was infected, because the alert popped up as soon as I clicked on the article on the Google list.) Some of that malware might get you in trouble or cost you money. I don’t own any of their stocks. You may want to be sure you keep the automatic Microsoft Internet Explorer updater enabled, if you don’t want to buy an additional service and use Internet Explorer. If nothing else, the malware can slow down your computer and make you waste time.
Ed Note: Bill buy a Mac!
If the silver price is going to $100 or higher, why should a possible temporary correction deter buyers now?
Ed Note: because you could buy even cheaper than today, and make a bigger profit…
Where is the best place to buy physical silver in Dubai?
I asked around the Gold Souk and no one knew: they direct you to silver jewelry shops. I eventually found some small joints in the side streets (Lakhoo and Mahendra) selling locally minted 1kg bars (no coins). Low premiums and “guaranteed buy-back”.
Ed Note: Silver Eagles are your best bet – but not sure where to get them in Dubai. Or open an account with Perth Mint. If you buy bars that are not certified then maybe you should be…
Maybe we could now use a Silver Souq in Dubai just like the Gold Souq we have..
I wonder if there is a stock market correction/crash about to take off. We still got Dr. Bernanke printing lots of money. The dollar Index is about to crash not the US stock market. So this time around we can see a totally different ‘crash’ as in 2008. The stock market will probably correct in real terms, but not in nominal terms. look for a dow/gold ratio of 1:1.
When ECB starts to raise interest rates and the FED don’t, the dollar index is about to test new lows I guess. This can happen within the next 3 month because:
1. Crude can easily get to 200 as Shia moslims start to rebel in Saudi-Arabia. http://english.aljazeera.net/news/middleeast/2011/03/201135143046557642.html
2. ECB will absolutely react with raising interest rates. The Germans will insist on that, you can count on that one..
3. Bernanke will try the same trick as he always does: Printing dollars in other words not changing policy.
4. This can create a substantial rush into precious metals and a COMEX Default in paper silver trading?
So I would look for a dollar correction/crash instead of a stock market correction/crash. The next crash will be a inflationary depression not a deflationary depression unless the FED and the ECB are chancing policy.
Silver is about to explode to the upside. Devaluations tend to happen overnight as history shows us. Buy Physical or the Silver ETF from mr Eric Sprott. Thats the only one I trust. But do your own research.
Dont sell your silver unless the gold/dow/silver ratio is 1:1:16 or we suddenly have a healthy trustworthy international monetary system and Peak Oil is not a problem anymore.
Ed Note: ‘This time is different’ – the four most expensive words for investors!
Another great commentary, Peter. Here’s some more info that I hope is helpful.
US Mint Not Minting Silver Eagles:
Of special note is the new ruling that was made by the US Mint 4 days ago; they indicated that, for the foreseeable future, they will not be minting any more silver eagles, due to the difficulty in obtaining the physical metal. Last Thursday, I checked with several coin dealers and discovered that the premiums have gone up already. Several weeks ago, the premium was $2.40 over the spot price; then it was raised to $2.70, and now it’s $3.40. I expect the premium will continue to rise.
You Can Buy Eagles from US Dealers:
Some US dealers are willing to ship silver eagles overseas, after they obtain the wire transfer. There are several reputable ones, and as always, there’s lots of dishonest ones (i.e. under no circumstances should you buy from a US dealer named “Monex”). If you wish, I can provide the names of a few reputable ones.
@Bill, Near Slidell:
Two points of interest:
1. Take the Editor’s advice: go buy a Mac, or an iMac (really!)
2. Besides Utah, there are an additional 13 states in the US that are contemplating the same thing. The Utah legislation is expected to pass in the Utah Senate next week.
The others states are Colorado, Georgia, Montana, Missouri, Indiana, Iowa, New Hampshire, Oklahoma, South Carolina, Tennessee, Vermont and Washington.
@ Martijn:
Interesting commentary and perspectives. I agree with your assessment of Sprott Asset Management’s physical silver ETF; the ticker symbol is PSLV. Their gold physical ETF has the ticker symbol PHYS. Each of these is backed by the physical metal. The precious metals ETFs that are managed by JPM (they are the custodian for the SLV) and HSBC (they are the custodian of GLD) are fraudulent.
For example: in order to meet the demands for physical silver, JPM and their manager, BlackRock, have been steadily draining the small amount of physical silver from SLV. This ETF is now “owed” tens of millions of physical silver, and quite possibly over 100 million oz! Any readers who have money in SLV should withdraw it, and buy the physical stuff.
Go here for more info:
http://www.zerohedge.com/article/comex-default-or-hunt-brothers-redux-comex-silver-inventories-drop-4-year-low
Silver is on a roll this morning in the Spot market. We are now at $36.33 party time. I want to see this one go to $40. Hope these gains hold until open as I have quite a bit of SLV calls that I am holding. Oil is up too which is great if you are holding USO calls as well. So far this Monday morning looks excellent.
Dear Editor re: your comment to Philcu above.
You state that “you could buy even cheaper than today, and make a bigger profit…”
You underlying assumption is that it will be available to buy. Hopefully many who read your site have a core position in the metals they like, and they do not trade those. I have no problem trading with 10 – 20%…but I will not jeopardize a core position. This is an extremely squirrly market, meaning that it is subject to a wide range if influences. My biggest concern is that there may be changes that come almost instantenously that will pop Silver $20 or $40 in a single day, and I don’t want to be on the side lines having traded out of a position. I the long term outcome is a forgone conclusion, then the intermediate steps are somewhat meaningless.
You may be able to get silver, gold & platinum coins at a reasonable mark up from http://www.blanchardonline.com.us They have been around for 35 years, and have a real office in downtown New Orleans. I don’t know if they ship, but you can call them and find out. (Not on Tuesday, the 8th, it’s Mardi Gras) I have no financial interest in the company, but sure wish I did.
Obewon, I have heard of this supposed “poor reputation” for MONEX and ,Though I have been at it only a short time, I’ve collected nearly $20K worth of the white stuff from them recently, without a hitch. What gives about people badmouthing Monex, anyway
Is the price of silver goin to drop more before it goes up. An if do wen an how much do u think its gna drop.
Ed Note: If financial markets meltdown again so will silver – how much is impossible to tell.