May 17, 2012

Silver Prices Make Gains On China Data

Silver prices gained a little today based on some news out of China. A relatively neutral inflation reading from China, combined with news that investors are pouring money into stocks allowed silver to add 67 cents to close at $35.41 an ounce while the U.S. dollar index was down 0.23% at $74.28, which was helping support a precious metal rally.

Gold also added $8.80 to settle at $1,524.40 an ounce at the Comex division of the New York Mercantile Exchange. While we understand silver prices gain and lose in big jumps, it should come as a surprise to nobody that gold has yet again increased in price. If you are invested in gold right now, then you are probably sitting very pretty looking at your returns.

The news coming out of China, combined with other inflation readings from around the globe doesn’t look like it will have much of a current effect on silver and gold prices. Typically investors buy up gold and silver as protection against high inflation, low rates, and devalued currencies. Some experts expect this trend to continue.

Silver Stocks Fall Over 2%

Silver stocks continued to drop today as he Global X Silver Miners ETF (SIL) fell 1.5% to $25.34 per share. The overall fall came out to around $0.82, or 2.2%. Silver price now sits at $37.67 per ounce.

So what can we attribute to the latest drop? It seems that the primary reason for the big drop in silver is directly related to the ADP employment report.  ADP reported that 38,000 jobs were added to the U.S. economy in May, which as first glance looks good, but it was the smallest rise in eight months.

As noted before, silver prices are extremely volatile and the rise and fall of silver prices is based on a number of outside factors. All you have to do is look back over the last two months to see how quickly the price of silver can rise and fall. April saw the price of silver rally to a new 31-year high of $49.82 per ounce. While May brought with it heavy selling pressure, as silver plunged to $32 per ounce in the first two weeks of the month.

Even with the dramatic highs and lows of silver, it remains a pretty hot commodity, as most investors think that this current low will be followed by another dramatic high, especially if Gold continues to rise and stay steady.

The Volatility of Silver

It seems that no other precious metal is a volatile as silver. Silver hit a record $49.51 per ounce in late April before falling sharply shortly thereafter based on a number of factors.

A pretty major sell-off in commodities occurred shortly after the record price due to the fact that exchange operators in Shanghai and New York raised the amount of money required to trade silver futures. We were hoping to hit a nice round number of $50.00 per ounce, but since the record spike, silver now sits at $37.28 as of this posting.

After this heavy sell off that occurred at the beginning of the month, silver now seems to be retracting a lot of those initial heavy gains. When gold prices go up, silver prices go up even more.

While silver may be tied into gold prices some, it is much more volatile, as with every gold increase silver increases even more dramatically, and vice versa.

The Price of Silver Heading Back UP

The price of silver is on the rise again. This is the first sustained rise since the precious metal lost nearly 12% a few weeks back. Investors who were bearish on the metal were revealing in their infinite wisdom of the call at the bottom.

However, we’ve seen glimmers of hope during that time with China, India, and others snatching up the silver contracts and bullion that institutional investors have been dropping. Or at least that’s what it appears by a quick search around the web.

Will China have enough buying power to make the recovery sustained or is it coming from somewhere else?

Well that somewhere else could be the dismal days on Wall Street that we’ve been witnessing the past few weeks as well. That, coupled with Europe’s debt and and worries that the US will fall back into a recession has people buying silver a little quicker than they did previous.

Of course, silver isn’t the only precious metal on the rise. Gold is also headed up with prices rising considerably recently, even amid silvers downturn.

Where these prices will go in the next few months is anyones guess, but we’re still holding out for $50 per oz silver.

The Price of Silver Flat as Gold Rises

The price of silver is looking like it’s going to end flat for the week. Silver started out on Monday around $35 per ounce and currently is trading at just over that mark to 35.01 per troy ounce.

Meanwhile, the price of gold is skyrocketing from a pullback that has left investors wondering if both precious metals were doomed for a bubble burst of some kind. But it doesn’t look like the gold investors stayed in that mindset for very long. The price of gold is up $17 today in mid-day trading of futures with $1511.70 per troy ounce.

So what does this mean for investors? Well first off, it means that the gold to silver ratio is had a chance to come back around but a half point. Which isn’t much but for some, every little bit helps. The ratio is fairly out of whack from a historic perspective. The ratio 20 years ago was in the 80s and 90s while now it’s down to just above 40. Although it has seen lower in recent weeks, the ratio appears to be on a minor correction if gold will continue to rise withe silver flat.

It was a bumpy ride for commodities and the equities markets this week. Next week, we predict more of the same.

Silver Investors Keeping Weary

The price of silver, as those of you who follow it know, took a beating last week. A major beating, dropping the price per ounce by over 10% on futures contracts.

The reverberation was felt on mining stocks, and ETFS as well. Unless of course you were invested on the short side of the market because you just couldn’t understand why the price had risen so high.

This week, money started to flow back into the silver market but at a much slower pace. It looked early in the week like prices were going to break through the $40 mark again when silver hit $38 but a quick pullback brought the price down to near where it opened the week.

So why are investors still thinking about pushing up the price?

Well first off you have investors who are just excited to get on the next ride, bubble or not, up again. You don’t want to be the investor who listened to the bears on commodities and miss out on a 15% bump do you?

Second, the economy still stinks. Inflation is rising, the dollar is still weak, and there isn’t much holding up the market. With QE2, the governments quantitative easing looking like it’s going to officially end, the market will have to stand on it’s own. And not many people out there are sure what it’s going to be able to stand on.

It’ll be a shaky ride moving forward so hold on.

Silver Rebounds to Start the Week

The price of silver which took a beating last week dropping some 12% by the end of the day Friday from Mondays start is looking to get back some of the luster it had from the beginning of the year. Silver per ounce is up today in early trading touching off of $38.

A lot of bears came out of the woodwork yesterday to let us all know that they were right and the price of silver was way too high to sustain any type of fundamental. Although it seems obvious to make that call with the price of the commodity doubling in such a short period of time, you may not want to be that quick to believe them and ignore a possible buying time for silver and gold.

The price of silver doesn’t seem to be following historic ratios to gold or other commodities, and rightfully so. There are new demands for silver. From solar power to components in a computer, the price of silver isn’t just naturally tied to what investors have thought of as commonplace in years past.

Yes the meteoric rise in silver is a little crazy, we’re just saying to step back and take a look at what might be driving the price these days.

Is Now the Time to Buy Silver?

Silver has gone through a major price correction as it tumbled from the high forties (reaching $50 per ounce) to now resting at $34.84 per ounce as we head into the weekend. It looks like that’s where silver will remain until trading opens back up next week.

So what does this mean for those investors out there who didn’t sell, or didn’t short the market that doubled in less than six months? Should you buy into the market or sell now, take what hopefully are profits and don’t look back at this “bubble” that has been created and burst?

Well if you believe the bears, you should do just that. Don’t look back. Or should you. While we don’t give investment advice, we definitely give our opinions on the matter. And our opinions are that you should look strongly into ratio’s, investor sentiment, consumer sentiment, and the value of the dollar.

All these seem to have been helping to drive the price of silver through the roof over the past few months although the ratio of silver to gold was extremely high, historically, as silver outpaced gold price increases. But with this correction, the ratio of Gold:Silver is now down to 42 meaning 42 ounces of silver buy 1 ounce of gold. Is that still too high for you?

Well as you can see by this chart that gold to silver ratio has seen a high of 93 and a low of 32 in the last 15 years. The high coming in 92 when the price of gold was around 350 and the price of silver was around 3.80 per ounce. The low coming more recently, and we know what the prices are now.

So does that mean you should run out and buy a bunch of silver bullion from APMEX Gold and Silver or head over to eBay and stock up on everyone’s old jewelery? Probably not.

But the gold to silver ratio is definitely something to watch. If gold now goes on a move upwards while silver stays stagnant, we may want to reconsider.

Chart from goldprice.org

Silver Plummets as the Bear Investors Rule

The bears have come out to play and be proven right as those that bought into NYSE:ZSL the ProShares Ultrashort silver ETF have made 10% in the last 5 days as those that were still long NYSE:SLV have lost more than 11%. It’s been a crazy road for silver and we don’t think the fun has stopped.

The bears who’ve been calling for a pullback in silver which, quite frankly was the safer bet than those of us promoting the price of silver to continue to rise, have all been saying I told you so. From the Wall Street Journal, to Forbes, to The Street, to Seeking Alpha have all been publishing articles about how they each called the pullback and bursting of the commodities bubble (both gold and oil have seen pullbacks as well.)

So what’s the price of silver? Well, at writing this, the spot price of silver is at… gasp… $34.93 per ounce. Yikes. That means, the price of silver at $50 no more than 2 weeks ago, we’ve seen almost a $15 drop in the price of spot silver, futures, or whatever you want to call it. The price of silver is way down.

While we don’t try and tell you what to do, invest in silver or short the market, we’ll be looking at whether or not this a good time to buy silver or keep shorting the market as it goes down.

Silver Investors Yo Yo The Price

The price of silver has been taken on quite a ride over the last couple of days starting last week.  Futures contracts have been up down and all around with the price settling around $41.20 at the end of trading yesterday, an amazing pull back from silver reaching $50 last week.

So is this a buying opportunity or is this a turnaround that all the bears have been talking about saying that the price of silver has finally met it’s ceiling at $50?  Only time will tell.

Using a few new methods to play the silver market, namely the silver ETFs, investors are causing a ruckus with the market.  Is there really something to the bears that are saying the demand hasn’t increased much in the past years and that should be the only push for the price?  Or is there something to the bulls that say the demand, even staying the same, should be enough to finally allow the bulls theory that inflation has finally caught up to the silver market.

Either way there are a lot of theories that we are going to share with you over the next week that you should take into account before getting into the market.  Seems like all the analysts are coming out to give their opinion.