Silver still more than double the price of a year ago
Posted on 07 May 2011 with 6 comments from readers
Last week is another for the history books for silver bugs with a record one third price correction in a week. It still falls short of the 52 per cent plunge of the 2008 financial crisis. Silver is notoriously volatile.
However, the silver price is still more than double what it was last summer. Judged by that yardstick it is still way out front in terms of investment performance for the past 12 months. Gold has only managed half of that surge.
Buying opportunity?
Does that make silver an instant buy at $35? It certainly has the potential to bounce higher. But normally after such a big sell-off the spirit of speculators is broken, and they do not leap back in even if they have the cash left.
Besides the rumbling of the avalanche in the commodities space last week is most likely a prelude to a wider sell-off in financial markets. The bulls managed to ramp the stock market a little higher on better than expected unemployment data yesterday, albeit the unemployment rate actually rose to nine per cent.
For now the market is interpreting lower commodity prices as a benefit for business, and not as a sign that the world economy is slowing down again. How long before the obvious truth is reflected in lower stock market prices?
Oil prices in particular got pushed up by the flow of money into the economy from the QE2 program. That is now close to an end, and hey presto oil prices are on the way back down. And let us not forget that QE2 is what pushed the stock market up too.
Speculative spike
Silver got caught up in a speculative frenzy over the past couple of weeks, as this precious metal does from time to time. The long term chart of silver is full of dramatic ups and downs but the bull market for precious metals looks far from broken.
Gold has been far more resilient, only dropping below $1,500. Speculators had simply driven silver too high, too soon and the Comex margin changes brought the market back to earth with a bump.
The ArabianMoney newsletter this month explores how best to profit from silver but prophetically warned investors to do this after a summer correction and not before it. That prediction came right and we still stand by our advice on how to best to invest in silver for maximum gain (sign-up here).
6 Comments posted by readers:
Dear Ed,
Do you think this correction is over?
Ed Note: Probably not, we still most likely have a bigger financial markets correction to come first! The usual historical pattern is for precious metals to be at the lowest point for the year in July/August. We did say this in the ArabianMoney newsletter published before this week’s crash.
Dear Ed ,
Thanks!
In another related ArabianMoney silver commentary, I offered my best guess as to where silver prices will go between now and September 2011. In brief, I think that the “Cartel” will hold the silver price “in check” for as long as they can this summer. Then, as Peter suggested above, watch out!
The Cartel’s Next Dilemma:
Without a doubt, the Cartel’s participants closely coordinated their egregious actions, and performed “spectacularly” over the past week to force the silver price back down. The only question now is what will this FED/CME/CBOT/CFTC/JPM cartel do after the next gold and silver spike, which will surely happen again (and probably sometime next fall).
For an interesting read on this topic, go here:
http://www.zerohedge.com/article/how-cbot-comex-and-cftc-coordinated-break-last-silver-price-surge
The central bank of Mexico just bought a lot of gold. Gold is probably viewed as a better substitute for paper money than silver. You can make money trading both, but if you just want to protect wealth, and be able to sell some metal for immediate cash that you may need on short notice, gold would seem to me to be a better investment. Silver seems to go through far greater swings in value that gold. Central banks, governments, dictators, and very wealthy individuals hold gold, far more often than silver. I can remember someone saying on CNBC TV about a year after the fact, that during the 2008 financial crisis, some very rich people were buying substantial quantities of gold BARS and storing them in their mansions. (There are virtually no burglars roaming around upscale mansion neighborhoods.) You have got to figure that the expanding rich upper class in China will buy a lot of gold as a hedge against inflation. If you try to buy enough silver to do that, you will find that it is quite bulky, heavy, and difficult to hide. Gold you can bury in your back yard (not recommended) and dig it up 20 years later, and it will look just like the day you buried it. I don’t own any. Oh, and you can hide wealth from the government like that, should they start means testing government benefits in the future, although I don’t advocate breaking the law.
@ Bill Near Slidell:
Several interesting “caveats” in your comments, so I’ll add another.
Caveat Regarding 400 oz and 100 oz Gold Bars:
Anyone who is wealthy enough to purchase one of these babies should realize that, a few years ago, approx. 10,000 to 20,000 400 oz. gold bars are counterfeit. The content of those counterfeit bars consists of about 98% tungsten, with approx. 2% gold covering.
The density of tungsten is 19.299 times that of water, while the density of gold is 19.3 times that of water. That means when you measure the size of the counterfeit bar and its weight, it will be the same as the real gold bar. Sadly, many wealthy people in the world bought those bars without seeking the professional services of an assayer.
Back in 2009, one Hong Kong bank that was holding a fair amount of “gold bars” (we don’t know exactly how many!) hired an assayer, who determined that 50 of the bars were counterfeit!
Wealthy buyers beware!
For those on this web blog that are interested in silver investing, I strongly recommend that you read all the gory details on how the FED/JPM/CME/CBOT/COMEX/GS/etc Cartel executed a well-coordinated and vicious attack on the silver price last week (oh, add the CFTC to that bunch, because they know with certainty what the Cartel is doing; since the FED itself is deeply involved, this vicious attack has the support of the federal government. Hence, the CFTC is an idle and complicit observer! . . . yet paradoxically, the CFTC’s motto is “Ensuring the Integrity of the Futures and Options Markets”, yeah, right!).
Go Here:
Lots of great details in this commentary by Avery Goodman here:
http://seekingalpha.com/article/268691-anatomy-of-silver-manipulation-how-low-can-it-go