Since reaching a low of just under $9 per ounce in November 2008, silver has more than doubled in price…. and it’s now closing in on its highest point in more than a decade.This price strength from the “poor man’s gold” has spilled over into tremendous investment demand – especially for silver coins.
The U.S. Mint sold more Silver Eagles in the first quarter of this year – just over nine million – than any prior quarter in its history. The Royal Canadian Mint produced 9.7 million silver maple leafs in 2009, also a record.
Take a look at the jump in U.S. Mint coin sales since 2007 courtesy of Casey Research:
Silver bullion ETFs are growing, too, experiencing a five-fold increase in metal holdings since 2006.
I’m a huge long-term bull on silver and gold. The only way the Western world can pay for its huge unfunded liabilities is to print more money… which is very bullish for precious metals.
The question is, “Is this a good time to buy?”
Let’s first look at the big picture. The following chart shows how far silver is below its inflation-adjusted peak reached in 1980.
As you can see, from a big picture point of view, silver hasn’t run up all that much in the past decade. This is almost identical to the same picture we’ve looked at in Gold.
So, my advice to anyone who does not own silver or wants to accumulate more, and wants the long-term wealth protection precious metals offer, go ahead and buy. The risk of buying silver at current prices is lower than owning none at all. When inflation hits it will also drive up the prices of all commodities including Silver.
Let’s take a technical look at Silver. The Chat below shows a definite “V” pattern as silver continues to make higher lows. Once Silver breaks through its resistance it will race to new highs.
On the bottom of the chart, I’ve divided the iShares Silver Trust (SLV: 18.67 +0.41 +2.25%) by the SPDR Gold Trust (GLD: 122.76 +1.46 +1.20%). You can see that this line is in a weak downtrend. This shows that gold is outperforming silver (for now). However, that will not last much longer as the ratio of Gold to Silver is at all time highs over 70:1.
The next Chart is a 3-month daily chart of silver, gold and the S&P 500. While gold has outperformed silver over the past three months, both metals are running rings around the S&P 500 …
To summarize, if you don’t own silver yet, go ahead and buy some now. It’s enjoyed a considerable run recently, but is still well below its previous highs when viewed over the long term. If you simply want to add to your silver holdings, take advantage of its volatility and wait until prices correct at least 10%.
The important thing is to make sure you definitely own as much as you feel comfortable owning. It’s a great investment as well as protection against inflation and dollar devaluation.