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Silver has had an interesting week. After the U.S. credit rating
downgrade and subsequent panic, silver rose 1.6% to US$39.86 per ounce on
Monday, while gold added 2.1% relative to Friday’s closing price. However,
on Tuesday silver started dropping as gold continued making nominal records. See
the chart below:
If silver is a safe-haven
investment, why would it move opposite to gold? Because – as
we’ve long pointed out – the two metals are not the same; they
move in different, though related, markets. Unlike gold, silver is largely consumed
as an industrial metal. On Tuesday, fear of dropping industrial demand seems
to have overtaken investment demand for silver as a monetary metal. Silver
and gold exchange-traded funds moved in a similar manner: Shares of SPDR Gold Trust
(NYSE.GLD) added 10.3% since August 1, while those of iShares
Silver Trust (NYSE.SLV) declined by 1%.
At the beginning of the
year, silver was widely talked about as a great investment opportunity. It
certainly performed well last year. In 2010, silver was a great commodity to
be in: It appreciated by 83.7%, from $16.86 on December 31, 2009 up to $30.94
on December 31, 2010. However, the metal’s price is extremely volatile
– more so than gold’s – both on the downside and the
upside. And that can create buying opportunities… such as we believe
may be shaping up right now.
The key thing to
remember, even as silver fluctuates more than gold, is that it eventually has
always followed gold. It is a monetary metal as well as an
industrial one. In fact, the word for money in Spanish, French, and other
languages is “silver.” That means that if blood on the streets
and panic in the broader markets push gold up while pushing silver down,
silver should eventually rocket back with higher percentage gains. This is
what happened after the 2008 crash, when silver corrected harder than gold.
While this is happening,
great silver companies – with strong earnings and growth in production
on tap – can go on sale. That’s just the sort of opportunity we
love to take advantage of.
[Opportunities like this don’t come along regularly; and when
they form, investors need to be ready to act. The analysts at Casey International Speculator can help you pounce
on the right stocks at the right time – and will tell you when to exit,
too. Start a risk-free trial subscription
today.]
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