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Silver Market Update

By Clive Maund      Printer Friendly Version
Oct 20 2008 2:26PM

www.clivemaund.com

Silver may be classed as a "Precious Metal" but it has certainly not received any special treatment these past few months, during which it has been sold down heavily along with most other commodities, in marked contrast to gold, which has held up well.

We can see this at a glance by comparing the long-term charts for silver and the commodities index, which are stacked one above the other below for direct comparison. These charts make it abundantly clear that as far as the markets are concerned, silver is just another commodity. We had observed this weakness compared to gold a long time back hence our gravitating more towards gold. What useful conclusions can we draw from this for the future? In the first place we might want to reconsider whether silver should still be classified as a Precious Metal at all. In the old days, when wild-eyed guys with long matted hair used to hand over silver coins in the woods for hunks of salted meat, it certainly was, but its recent performance makes clear that its role as an industrial metal is, at least for now, its dominant one and it is being dumped along with base metals. The main conclusion of course, is that gold investments should be favored over silver at this time, although it should be kept in mind that silver comes alive and really performs well towards the end of gold uptrends, at which times it is often advantageous to rotate out of gold and into silver. It is because silver is often a by-product of base metal production that big silver stocks have been terrible investments for a long time and should continue to be avoided. The small silver stocks that are pure silver plays are much more interesting and some of the stocks of those companies which do not fail over the next year or so could end up being exciting and highly profitable investments. We will of course remain on the lookout for these and for signs of a reversal of fortune for the sector.

On the silver chart we can see that while it continues to weaken it is now approaching strong support in the $8 area, which is likely to generate, at the least, a sizeable bounce. If The Grand Rescue Plan, described in the

Clive Maund
clivemaund@gmail.com

 

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The above represents the opinion and analysis of Mr Maund, based on data available to him, at the time of writing. Mr Maund's opinions are his own, and are not a recommendation or an offer to buy or sell securities.

Mr Maund is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations mentioned in his reports. As trading and investing in any financial markets may involve serious risk of loss, Mr Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

Although a qualified and experienced stockmarket analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr Maund’s opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction.