We believe silver offers an excellent way to combat money prinitng and the risks associated with paper currencies. However, the near vertical rise in precious metals is raising some concerns. From a MarketWatch article:
“We remain skeptical concerning precious metals’ ability to rise indefinitely, and we expect a turning point to be reached sooner than the consensus in the market,” Nic Brown wrote in the Natixis Commodity Markets’ Fourth-Quarter Metals Review report.
With the odds of a countertrend rally in the U.S. dollar increasing, “weak dollar” assets such as silver may be setting themselves up for a correction. The four technical indicators shown below are fairly reliable in terms of identifying a weakening trend. With the Fed due to announce the second round of quantitative easing on November 3rd, silver may be able to push to new highs, especially if the silver ETF can hold above the $22.78 to $22.00 range, but the risk-reward ratio is questionable in the short-term.
Click on chart to enlarge
If you own Silver Wheaton (SLW), Silver Standard Resources (SSRI), Silvercorp Metals (SVM), Hecla Mining (HL), Endeavour Silver (EXK), Coeur d'Alene Mines (CDE), or Global X Silver Miners ETF (SIL), you may want to consider if you are comfortable with the size of your position relative to the market's short-term risk-reward profile. We own a small amount of SLW. We have owned the iShares SLV during the entire rally off the summer lows - we cut back on SLV this week.
Disclosure: Long SLV, SLW
Disclaimer: This article contains the current opinions of the author. The opinions are subject to change without notice. This article is for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.