Saturday, January 9, 2010
Silver - Ready To Rumble
I think silver looks VERY bullish here and this is good for Gold and Gold stocks as well as for silver bulls. Watching corporate bond funds (e.g., the HYG and JNK ETFs) blow out into highs above their 2007 highs tells me the speculative juices are running into overdrive. Sector rotation of this "hot" money suggests that the imminent rotation out of equities and corporate bonds into precious metals is going to be lots o' fun.
Recent history is all that is needed to suggest a template for how this may play out. Here's a chart of the S&P 500 ($SPX, the candlestick plot) versus the U.S. Dollar price of Gold ($GOLD, the black linear plot) in the mid-2007 to March of 2008:
I think we are headed for a similar situation. The Hong Kong Hang Seng Index ($HSI) to me is an interesting chart suggesting a resumption of the bear market in this index is imminent (4 year daily linear scale chart):
Palladium and platinum have broken out short term and are getting overheated. I think silver and Gold are about to get overheated as well. The silver chart looks particularly potent to me and seems set to outperform given an early break-out in the silver to Gold ratio. Here's a 1 year chart of the silver:Gold ratio (i.e. $SILVER:$GOLD):
Here's a 10 year weekly chart of the U.S. Dollar price of silver in log scale to show where I think we are in this silver bull run:
I think we could easily be at $25 silver before March is over. Even if the stock market is going to start going down soon, this does not mean Gold, silver or Gold and silver stocks are going to go down. Even if the U.S. Dollar Index goes up, this does not mean Gold, silver or Gold and silver stocks will automatically go down. The precious metals bull is snorting and pawing the ground, getting ready to gore the paperbug metal bears into submission. Still strongly long all things Gold (and still long a little physical silver, too).