Summary
Silver has gone up by nearly 132% in the last 8 months.
Silver has burnt many an investor between 1980 and now………… When priced in silver gold is plunging….We're getting close to recent lows in the gold :silver ratio, and days like today, when gold is up but lesser % and silver jumps strongly %, only bring us closer to the most extreme levels.
Point to ponder is the convergence of silver and gold and crude moving along side a static dollar index...........historically this was a divergence trade and they moved inversely – but now they are moving in tandem...and then moving inverse again. Thus no diversifications of portfolio or mitigation :- risk on – risk off
Analysis
Some of the reports and comments out there are too bullish if not obviously positioned and predicting 220$ Brent crude oil / 180$ WTI crude oil ; 200$ silver and 6000$ gold ; what happens to paper money in that case and where will food prices, fuel prices, electricity and transport costs go – to make that happen ? That kind of hyper inflationary call scares me.....
Nov/Dec 2010 ‘ to Jan/Feb'2011 : It all looks very positive, I must say. But I warn you now – caveat emptor. Silver is an extremely frustrating and volatile metal. I keep a position in silver at all times, because you never know when it is going to soar. And one day it will, just as it did in 1980 when it went to $50, beyond the wildest dreams of almost everyone. And a ratio of 17 basis 50$ silver and 850$ gold
Personally speaking -- Ideal position is – stay away from speculative punting , if you are not long already sometime ago as an investor then avoid listening to TV punters and local rumours who are getting on the silver bandwagon now.......we had suggested silver being under-bought over 1 year ago. Indian futures prices of silver last weekend at 71,000/- per kg suggest a 50$ plus spot futures silver price worldwide although the Comex closing this weekend was at 46.67$ per ounce. In other words certain markets are at a premia of 3-4 $ per ounce.
Some of this is a currency quirk including import duties and local premium being priced in. But it cannot be 4$ over a 46$ base price per ounce. Thus either the backwardation is too steep - and will effect physical demand soon enough or the short covering going on is so phenomenally large that the analogy to Hunt Brothers squeeze in 1980 and Paul Volcker raising interest rates very high to combat inflation around then is gonna be very apt very soon.
Silver historically has also corrected sharply over times
Certain historical observations made are as follows:-
04/08/2008-17.5$
15/08/2008-12.1$
Within a span of 11 days silver fell by 5.4$ or nearly 32%
31/05/2006- 13.15$
13/06/2006- 9.56$
Within a span of 14 days silver fell by 3.59$ or nearly 27%
Even on single day silver has fallen more than 10% on several occasions historically.
On 10/10/2008 Silver high 12.09$ against the low of 9.32$, which is nearly 2.77$ or 22%.
21/08/2010 Silver was at Rs.29,000
21/04/2011 Silver is at Rs.67,400
