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Such Precious Metals

The shiny, sparkling metals have certainly gained favor this year. In particular, Silver has put in a rock star performance. Since its recent lows of about $9 per ounce in late 2008, silver has rallied over 300%. What is more interesting is that at $37 per ounce, we are only a stone’s throw away from the nominal high of $49.45 set on January 18, 1980 when the Hunt brothers tried to corner the silver market.

Only a few more points till the Fed surpasses the Hunt Brother’s feat

With silver’s recent out-performance, it has more than made up the ground it lost during the financial crisis and actually looks expensive versus gold unless I am missing some massive silver demand.  Yes, silver is used in industrial production, but it is more the jewelery market that drives its price.  I doubt that record silver prices translate into anything less than decreasing demand from the jewelry market.

I will not be participating in any of the upside in silver above $34 per ounce, but I feel just fine about this.  I always believe that if something looks too good to be true it usually is and that it is better to get out before the top then to the last person buying.  At this level it almost seems certain that silver will at least test the $50 barrier set over 30 years ago.  I will be one of the people looking for a retracement.  Yes, fiat currencies are a sham….but nothing ever occurs in a straight line.

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Continuing the Discussion

  1. Three Levels to Keep an Eye On | SurlyTrader linked to this post on May 3, 2011

    […] I brought up silver yesterday because it has been a hot topic and it seems that it has topped out.  I made a reference to the silver/gold ratio showing that it was less than half the level it hit in 1980, but in reality I have felt silver has been overpriced for a while.   I have had multiple very good calls on this blog, but I have never rehashed them for fear that I would portray myself as a pompous prophet…which I am not.  The funny thing is that I receive emails about my posts saying “the three days after you posted that article saying that volatility will increase, it actually decreased….<you’re an idiot!!!>”  Well, volatility has increased and we will see where it goes, but I hate the fact that everyone is looking for daily calls….which are absolutely impossible.  Going  back to our current topic of Silver – on March 24th when Silver was at $37 I stated: […]



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