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Why you should buy silver as well as gold for 2010

with one comment

Gold is the solid riser, dependable and true. Silver is the unpredictable genius that outperforms gold but can lose you sleep. Best then to own both of these precious metals.

However, if the theory of reversion to a previous high means anything in markets then silver has greater upside than gold. The present price of $18.50 is still way off the $50 an ounce it touched in 1980. No other commodity costs so much less than in 1980.

Short squeeze

Goldmoney’s James Turk says he sees a real possibility of a short squeeze in silver this year or in 2011: ‘That short squeeze will propel silver to – and probably over – its January 1980 record high of $50 per ounce. That event will mark an important step in silver’s bull market. Everything that has occurred in silver over the last thirty years is simply base- building.’

Gold bug supremo Jim Sinclair has early 2011 in his diary for a 50 per cent rise in the gold price from current levels. Silver usually moves in leveraged step with gold and could easily double in price or even treble in such circumstances.

Once silver has cleared its old all-time high then the sky is the limit, according to Mr. Turk. At that point he sees the lift-off for silver prices, just as $1,000 was an important base for gold prices over the next few years.

It is important to appreciate that the silver market is much smaller and restricted than the gold market, and that therefore the potential for a massive price spike is always there. Skeptics might turn to Mr. Turk and ask why has this not happened in 30 years?

Base-building

Well, to be fair silver is up from $3.50 in February 1991 to $18.50 today so that is a five-fold increase. This is the base-building for the big price surge to come, according to Mr. Turk.

Jim Rogers is another investment commentator who strongly believes in holding silver over gold because of the low price relative to the previous all-time high. But if you put all your money into silver then last year you would have seen the price fall to almost $8 before rebounding to current levels, and that is volatility indeed, so buy both.

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Written by Peter Cooper

January 14, 2010 at 9:56 am

One Response

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  1. A worthwhile commentary, Peter!

    There are many reasons for investors to buy and own physical silver (as well as physical gold), and clearly, the long term outlook for both gold and silver is “up significantly”. . . in spite of the FED’s price suppression of precious metals. Other comments:

    1. Don’t Buy SLV as a Substitute:
    Please do not think of the ETF SLV as a “substitute for owning physical silver. It ain’t. The Custodian for the SLV ETF is JP Morgan (JPM); JPM “coincidentally” happens to be the biggest short seller of gold and silver on the fraudulent COMEX (anyone see a conflict of interest here?). Physical silver is difficult to get in large quantities; so much so that when the price of silver rises too fast, JPM adds to their “short positions” in SLV in order to drive the silver price back down. This also drives the SLV price down, so that JPM doesn’t have to add physical silver to the SLV inventory.

    2. SLV short Positions Exceed 300M Oz:
    This amounts to approx. 50% of total world production of silver!!! Admittedly, some of these short positions are entered by JPM at the “request” of the FED. But JPM certainly holds a large percentage of that total short position for their own book (Anyone see a conflict of interest here?).

    3. SLV is a Fractional Reserve Fraud:
    Even with these grotesque shorts, silver is STILL RISING. Ask yourself: how would the ETF SLV perform, if JPM were not allowed to maintain such a huge net short position in COMEX silver? Answer: SLV would skyrocket. Since SLV is manipulated by JPM, it is highly likely that JPM is the perpetrator of a system of “fractional-reserve” silver banking, all of which has, as its foundation, a huge conflict of interest.

    For a more interesting read on this topic, here are some links:
    Link #1: http://seekingalpha.com/article/149209-are-gld-and-slv-legitimate-investment-vehicles?source=email

    Link # 2: http://www.bullionbullscanada.com/index.php?option=com_content&view=article&id=532:will-a-silver-bullet-finally-kill-the-manipulators&catid=51:commentary&Itemid=99

    Link # 3: http://www.baltimorechronicle.com/2009/052909Lendman.shtml

    In brief, buy silver anyway, even though it is manipulated. The so-called “investment banks” are nothing more than gambling houses, and they can not stop the inevitable rise of gold and silver.

    obewon

    January 14, 2010 at 8:55 pm


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