Precious metals have risen to new highs on deepening concerns about the US economy and the growing risk of currency devaluations internationally. Gold reached new nominal record highs at $1,364.77 per ounce and silver reached new 30 year record nominal highs at $23.52/oz.
Gold is currently trading at $1,355.95/oz, EUR968.88/oz, lb848.97/oz.
While gold has been grabbing some headlines recently, especially in the financial media, poor man's gold silver remains the "ugly sister" and is rarely covered in the financial media and almost never in the mainstream press and media. From a contrary perspective this is bullish as it shows that silver remains very much off the radar of the retail investor and "Joe Public" - most of whom do not even know the price of silver - let alone how to invest in it.
Silver is currently trading at $23.29/oz, EUR16.64/oz and lb14.58/oz.
Silver - 42 Year (Weekly). Click on image to view full size
Silver surged on Tuesday after rising above the long term resistance identified last week at $22.38/oz. Most analysts remain bearish on silver and believe silver's rally is overdone and are expecting a pullback. However, silver is looking very strong technically and has a habit of surprising most market participants. This could lead to silver challenging the psychological round numbers of $25/oz and $30/oz prior to a pullback. Long term, the nominal high of $50/oz remains a strong possibility given the favorable supply demand dynamics. Indeed, if the allegations of artificial manipulation by bullion banks (as alleged by GATA) through very large concentrated positions is proved true, then silver could go parabolic as it did in 1979.
Gold and Silver - 10 Year Comparative Performance. Click on image to view full size
While gold's rise has been gradual in recent weeks, as we expected, silver has outperformed. Silver trades like a leveraged form of gold and if gold rises 1% to 2% in a day than silver almost always rises by more - normally by some 2% to 4%. Conversely, when gold falls by 1% to 2%, silver will fall by 2% to 4%.
Prudent investors should not be put off by silver's volatility and, as ever, those who adopt a 'buy and hold' strategy to silver will likely be rewarded in the coming years - as they have been in recent years. Trying to trade silver is extremely high risk but investors can take profits and sell part of their silver allocation after very sharp price gains. However, they should always keep a small allocation as financial insurance against a systemic or monetary crisis.
Platinum Group Metals
Platinum is trading at $1,713.00/oz, palladium is at $594/oz and rhodium is at $2,175/oz.
Mark O'Byrne is managing director of Ireland-based GoldCore.