Very strong momentum in silver drives prices to a 30 year high
In the same time that the price of gold has moved from its recent lows of $1155 to a new record high, a hair below $13500 an ounce; an increase of 17%, the price of silver has moved from $17.50 to $23; an increase of 31%.!
In The Delaire Report issue number 24, I clearly stated that “we will see the price of silver make a decisive break above $18.50/oz and a rapid move to $21/oz. Thereafter, it should challenge the $25/oz level. It is also my firm belief that silver is going to be one of best performing assets during the next five years.”
During the last six weeks the performance of silver has been exceptionally stellar and to be frank, it has surpassed my expectations. By that I mean the price has got to a level in a shorter time frame than I expected. But, the price level does not surprise me, nor does the percentage move. On many occasions I have written about the percentage moves in silver and how they are generally much greater than those in gold.
Like gold silver is effected by the global currency crisis and as the dollar continues to weaken, silver prices will continue to increase. As the price of silver trades at a 30 year high and as the price has increased by 31% in less than six weeks, everyone is asking if there is going to be a correction. Well, of course there will be a correction, but I am not sure if we will see it occur at these levels or if we will see it once the price of silver hits $25. But, as long-term investor who cares? I am not in the business of trying to time every move in the market and believe that it is impossible to do that. However, the longer term bullish trend is very much intact and the price has a long way to go before it peaks. As the price of gold gets more expensive some investors may prefer silver to gold because it is less expensive and because it is still very much undervalued.
“Wealth preservation are the key words… We expect silver to keep trading in parallel or stronger than gold, but with higher volatility as recovering industrial demand and even stronger investor demand gives the metal an extra boost,” stated Filip Petersson of SEB Commodity Research in an article in The Wall Street Journal.
On Tuesday, holdings in global silver exchange-traded products rose by 103 metric tons to set a record of 13,867, reports Barclays Capital. In India, the world’s largest importer of gold, there is a growing sentiment that silver is replacing the yellow metal. For the first half of 2010, silver imports in India have risen 579 percent, for a total of $1.69 billion. Many analysts see the momentum in India rising through the festival/holiday buying season.
Last week the United States Mint raised their wholesale pricing above spot on American Silver Eagles to all authorized dealers from $1.50 to $2.00, an increase of a whopping 33%. This year will go down as a record year for Silver Eagle sales, as the United States Mint has already sold more than 25 million coins year-to-date.
The forecast for silver is overwhelmingly positive, and I still urge investors to buy some of the physical metal. Buy bullion bars and bullion coins no matter the premiums. In a few years time the prices that you pay now are going to look very cheap in comparison to prices you are going to have to pay in the future.
The recent move in silver has been very strong as evidenced by the number of bullish candlesticks. A market with such momentum seldom collapses overnight. It is possible for the price of silver to move higher before we see a correction and some consolidation.
David Levenstein is a leading expert on investing in precious metals . Although he began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients.
His articles and commentaries on precious metals have been published in dozens of newspapers, publications and websites both locally as well as internationally. He has been a featured guest on numerous radio and TV shows, and is a regular guest on JSE Direct, a premier radio business channel in South Africa. The largest gold refinery in the world use his daily and weekly commentaries on gold.
David has lived and worked in Johannesburg, Los Angeles, London, Hong Kong, Bangkok, and Bali.
For more information go to: www.lakeshoretrading.co.za