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IS IT TIME TO BUY A SILVER ETF

At the end of August, this year, the price of silver decisively pulled above its 50 day moving average.

From 6/28/2012 to 9/14, price of the ETFS Physical Silver Shares (NYSEARCA:SIVR) increased from $26.21 to $34.38, an increase of about 31%. This calendar year the price is up about 25%. Yet even the current price, which seems a little high, is still about 30% below the (SIVR) high of $49.28 which was set on 4/25/2011. Based only on price action, one would think that it has some room to grow.

With violence in the Middle East possibly spreading to other regions, some investors may be seeking safety in silver. On the other hand, if economic conditions deteriorate, industrial and other commercial use of silver could decline, causing the price to drop. If conditions in Europe deteriorate putting the Euro at risk, it will clearly affect the price of silver. I would like to know what others think!

Here is some historical perspective: Fifty years ago silver quarters (1964 and earlier) were pegged at exactly $0.25. Recently I saw rolls of 40 silver quarters selling for more than $200.00, or more than $5.00 each (The price may be more now.) That is an increase of 20 times (or more) over fifty years. If I remember correctly, in 1962 I could still buy dinner at a Howard Johnson's restaurant for about $1.75. A similar meal at a typical family restaurant today would probably cost a little over $20.00, about 12 times what it cost fifty years ago. Gas, in the Midwest, in 1962, was still selling for about $0.35 per gallon, compared to about $3.80 today, an increase of about 11 times. So it would appear that over the long term, silver has been a pretty good inflation hedge. Short term, or even over the next year, who knows?

In addition to the ETFS Physical Silver Shares, other ETFs tracking silver prices include iShares Silver Trust (NYSEARCA:SLV) and Powershares DB Silver Fund (NYSEARCA:DBS). Seeking Alpha article "ETF Spotlight on ETFS Physical Silver Shares (SIVR)", by Tom Lydon, July 15, 2011, has some good and relevant information.

Disclaimer: The information above is accurate to the best of my knowledge, but is not guaranteed.

Disclosure: I am long SIVR.