Silver price up 14% in best week for five years and ready for an autumn spike?
The most volatile of commodities posted a thumping 14 per cent gain last week, its best week in five years. Is this just a flash in the pan or is silver now set up for an autumnal price spike?
Step back a little and consider the win-win position for precious metals. Silver is just a leveraged play on gold, also up by 4.5 per cent last week.
Basically if the recovery scenario emerges on top this autumn then industrial demand for silver is going to be far more robust than anticipated by the price crash of April. If the US uptick makes it to the eurozone and UK and China stabilizes then silver is overdue for repricing as an industrial metal.
Then again if the US recovery proves unsustainable in the face of rising interest rates then gold and silver will benefit as safe haven assets. That is what we saw last week with both the stock market and bond market selling off as precious metals rose.
A third scenario has a global financial crash with more money printing and a rush to inflation-protection assets.
It is always nice to be on the right side of a win-win situation as an investor. Hedge funds like to operate in this kind of niche. They’ve been the biggest drivers of the bear market for precious metals this year and will also be the biggest buyers now.
Indeed in the past six weeks some 1,400 tonnes has been added to the silver exchange traded product SLV, a favored investment choice of the hedge funds. This is a convenient trading vehicle and it has to be admitted silver is a bit heavy in proportion to its value at the moment.
However, price fireworks are almost inevitable for the most volatile commodity. Silver is a tight market and anybody short of the metal is going to have to scramble to cover their losses now.
Investment in silver is never boring but you do need a very strong stomach for the big price swings. Could silver again challenge its all-time high again this autumn?
Stranger things have been known. Anybody waiting for a stock market crash for an opportunity to buy silver might be hung out to dry. The buy and hold strategy works best with volatile commodities like silver because you cannot time the swings. If only you could!
The next ArabianMoney investment newsletter will be advising on how best to gear up in silver for the autumn (subscribe here). We do not give these investment ideas out for free on this website.
Peter Cooper is the editor and publisher of the ArabianMoney investment newsletter and the popular financial comment website www.arabianmoney.net