What is happening to silver?
Bengt Saelensminde takes a look at recent moves in the silver price and finds that he is tempted to invest in silver at this time. What prompts this change of heart from this silver fearing gold investor? Read on to find out more and hear Mr Saelensminde’s views on the silver investment market.
In the past, I’ve made the point that I’m not that keen on trading silver. Trading silver is to ‘dance with the devil’.
But I never say never. The Right Side is all about looking for ways to make a profit. I’m not fussy about where those opportunities are.
Right now, in this environment, we just can’t ignore precious metals. I normally favour gold over silver and I’m still holding my long-term gold position.
But silver’s starting to look interesting to me. Since I gave my last warning on silver, the price has tanked. After nearly hitting $50 in April last year it’s had a nasty fall… right back to around $26 just before New Year.
But since then, silver’s put in an impressive 25% rally that could signal the start of a new bull run. It’s up around 10% in just the past week.
When you get a big correction like we did in silver last year, followed by a strong rally, it can be a good sign that the trend has changed. And it strikes me that a near-on 50% retracement followed by a strong showing over the past three weeks could be just what we’re looking for.
Silver price action
Here’s the five-year chart for silver…
As you can see, long-term silver holders are still doing very nicely. But they’ll have suffered some almighty pullbacks along the way.
And it’s these sorts of pullbacks that can offer the perfect opportunities for people wanting to buy into a bull market.
But I reckon there are two key questions we need to ask before thinking about joining the silver rise. First, is the bull set to continue? Second, have we seen the bottom of this retracement?
Is the silver bull still with us?
I’ve made my feelings pretty clear about why I think Western currencies are due a reboot. Modern fiat money (paper without gold backing) seems to have a lifespan of about a working man’s life. That’s not an academic theory, but it looks about right.
There was a reboot after WWII. That was when the dollar became as ‘good as gold’ for international trade. That lasted until 1971 when the dollar lost its gold credentials. Since ’71 the dollar (and Western currencies as a whole) has only been as good as the Fed’s promise to keep it stable.
I suspect we’re reaching the endgame for this approach… we’re due a system reboot. What can we expect to come next? Who knows… but by my reckoning the transition period is likely to be good for precious metals and tangible assets.
For me that means gold. I’m sticking with my long position. And where gold goes, silver tends to follow. It’s just that she’s a little more volatile than I normally like.
Of course, volatility can lead to some tidy profits… if you get your timing right.
Is now the time for a punt?
Until last week, sentiment on both gold and silver was on the floor. Talk about the end of the bull market in precious metals was all over the New Year press. And that’s great. Because, as the saying goes, bull markets need a wall of worry to climb.
Think back to last year, before the fall. Silver was racing up almost every day. There was no wall of worry. Punters were throwing their money down with wild abandon. And that’s what made me worry.
I suspect there’s a good chance that the ‘worry bottom’ has passed. Last week was the first time in a long time that I saw greed replacing fear in the silver market.
Everything I see going on in the real world backs up my opinion on regime change in paper currencies. The currency war is still on. Fiat currencies are being destroyed – and that’s good news for precious metals.
Silver may well fall back a little after last week’s cracking run. But if you’re happy to live with the volatility then now could be a good time to get some exposure to silver.
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