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Silver Topping, Here Is Why



February 22, 2011 – Comments (4)

In the short run, silver appears to be topping. The iShares Silver Trust (NYSE:SLV) traded as high as $32.68 before pulling back to its current level at $32.20. Silver opened sharply higher on global worries along with gold. The SPDR Gold Trust (NYSE:GLD) opened at $136.92 and has since pulled back as well.  The key to the silver trade being ready to correct is that it is an industrial metal as much as it is a store for safety.

As instability jumps and oil prices rise, GDP all over the globe will take a hit. The higher oil and gas prices go, the bigger hit to growth across the globe. Think of oil prices as a tax on companies and people. This limits their spending thus slowing global growth. The slower global growth, the weaker demand for silver as an industrial metal. In addition, many silver company charts have surged into major double tops. A great example would be Silver Wheaton Corp. (NYSE:SLW). The double top level hit today was $41.85 - $42.35. Silver may not pull back much but could see a fall on the SLV back to $30.00 in the short term. 

Gareth Soloway

4 Comments – Post Your Own

#1) On February 22, 2011 at 1:48 PM, caterpillar10 wrote:

if it was simply a run-up in oil i would agree but this is a run up accompanied by the spectre of possible escalation toward world war and global financial catastrophy - silver's viability as stored value could far outweigh the industrial aspect - i'm not even sure i agree with this opinion but i am certain many will, and that's all it takes. 

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#2) On February 22, 2011 at 3:19 PM, silverminer (30.03) wrote:

Gareth, While I appreciate the effort, this strikes me as an oversimplification of a very complex market.

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#3) On February 22, 2011 at 3:38 PM, ChrisGraley (28.49) wrote:

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#4) On February 23, 2011 at 11:30 AM, caterpillar10 wrote:

here's what I really like about silver - unlike gold it can still tap a massive global mass market - it's still affordable for working stiffs to pick some up and start hoarding it. i smell a double-up:) 

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