First Gold, Now Silver!

Site Administrator | November 14, 2011

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We received such overwhelmingly positive comments from our session on the 2012 Gold Forecast last week with Geof Smith that we asked him to do a follow up post on his thoughts on Silver.  We asked him to take a longer term view and give his 2012 forecast for silver which he touched on in his last presentation.

Is Silver a Long Term Buy?

Geoffrey A. Smith

 Silver is the “poor man’s” precious metal.  This is said because its price is only 2% of that of gold.  You can buy 1 oz. of silver for $35 or pay $1785 for an oz. of gold.  So, doing a little math, you can buy 51 oz. of silver for every 1 oz. of gold (basically 50:1).  Despite the price differences, silver is a very viable metal to own.  So should we buy it?

There are basically 4 ways of buying silver.  Buy silver coins/bullion, ETF’s, stock in companies that mine silver, or silver futures.  The first one is more difficult because once you buy coins, you have to sell coins. You can’t use them at Wal-Mart.  You can carry them in your pocket, but you will have to find a special venue to get rid of them.  The last three are the easiest way to control silver and take advantage of its move and not worry about trying to sell it.  I’ll let you decide which is best for you.

Silver has outperformed gold decade over decade since 1980.  However,  this year, it is the under performer.  It opened the year at 30.85 and it is currently at 34.50 (up 10.5%), whereas gold opened 1420 and is currently at 1785 (up 20.4%).  Silver has a tendency to correct down more so than gold.

Below is a weekly chart on silver with a 3 week, 21 week and 65 week simple moving average.  Notice the 2 big red bars.  The first moved silver from $48 to $35 per oz., the second moved silver from $41 to $30 per oz.  Both were 27% moves down in 1 week!  Also notice that silver is holding the 65 week SMA.  As long as silver stays above the 65 week SMA and above its year open at $30.85, it should move higher.  If playing the long side, bulls can look to buy silver between $30-$33 per oz.

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Risk Disclaimer: Past performance is not indicative of future results. Futures trading involves substantial financial risk. Views of guest commentators do not represent those of  Article intended for educational purposes only and not meant in anyway as a soliciation to buy or sell certain securities.  Please consult your personal financial advisor before using this information for your own trading purposes.