Silver and Gold have had quite a rough and tumble year. There are short term and long term trades that can be considered for Silver ETF SLV. We would like to look at some possibilities. First, let's look long term at silver's potential growth.
Why gold & silver will increasing in value--
Gold and Silver will continue to increase in value as long as we are in this mode of printing paper money to solve our financial problems. Follow my logic here...
If you increase the paper money supply, does it suffice to say that we also stand a good chance of reducing the value of that money? More paper money floating through the economy with the same number of goods leads to increased pricing and inflation. As devaluation occurs in our paper money, won't investors seek a safe haven against it? Their answer is gold (GLD) and silver (SLV). While we move through this world economic phase, gold and silver prices should push upward faster than inflation.
Within the last couple weeks, the Bank of England gave us another $110 billion in quantitative easing. I cannot wait to see what the Euro bailout will do. Until there is a serious reduction in the money supply from the central banking system, there is a high possibility we are going to see silver and gold continue to increase. Yes, we will have corrections. Rarely does anything move in a straight line. Will the fear of deflation cause more and more money to be printed? If this happens, will people flock to gold and silver as safe havens for their money? It seems like a likely probability.
Silver's Potential for increase---
Lately, silver has been hard to find on the open market for one to buy as an investment. One element of this is the quick drop we saw. Silver went from $40 clear down to $28 in a very short period of time. Dealers who bought silver at $40 are not going to unload it at current prices. Free market common sense would tell you that if something is in short supply, it would go up in price. But, silver prices are being artificially deflated by the bullion banks.
Silver reserves are not nearly the capacity of gold because it is not just saved like gold, but has industrial uses. It would make sense that we have dwindling reserves. The only answer that makes sense for lower prices in silver (if it is so scarce on the open market) is price manipulation. Did the central banks suppress gold and silver prices as part of their fight on inflation way back in the late 70's? Yes! Silver is again suppressed, but eventually will spike. Some economists have written that it will rocket to and past the $50 level.
SLV Short term outlooks--
Compared to gold, one of the sentiments against price increase for silver is its usage. Whereas gold is bought and saved, almost half of the silver mined has industrial uses. If the economy continues to languish, silver prices will suffer. At the same time, if we continue to have an increase in the value of the dollar, there is a good chance precious metal prices will suffer. This means a downturn in gold and possibly even more in silver. But, as the economy increases, silver has shown good performance over the last 20 years. We do not expect SLV to increase dramatically in the short term. But long term investing may be worth the time to look.
Trading SLV short term--
As we do not expect SLV to rise significantly soon, we would look at selling call options at about 45 for November. This can give a nice income for a short term trade. Considering the highs in April were just touched, we do not expect SLV to move that high in October.
Long term, SLV may be a good investment to buy and hold soon.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
