All major currencies are higher against gold today including the US dollar, despite the dollar falling on international markets.
Gold reached new record nominal highs at $1,913.50/oz overnight and profit taking and traders nervous about potential margin increases have led to a 1% fall in dollar terms today. Gold has fallen by more in euro and sterling.
Cross Currency Table
Silver has also fallen after yesterdays and last week’s sharp rise. However smart, risk averse money sees silver bullion as a buying opportunity at these levels after the recent period of consolidation between $33/oz and $42/oz.
Silver – 1 Year (Daily)
UBS have raised their 3 month forecast for silver sharply from $30/oz to $50/oz. They suggest that investors are too nervous to short gold and may prefer to buy silver instead.
Silver remains more than 16% below the record nominal high seen in late April 2011, and in January 1980. While gold at $1,888 is now 120% above its nominal 1980 high of $850/oz.
The inflation adjusted high for silver is over $130/oz and those who understand the fundamentals of the silver market are positioning themselves for the possibility of a move to these levels in the coming months.
Silver Adjusted for Inflation – Monthly (40 Years) – Bloomberg CPURNSA
The autumn months are traditionally the best months to own gold and silver.
Speculative fever in the silver futures market remains muted with COT data showing net longs well below the records seen in April.
Silver is volatile but in the current climate what isn’t? Recently, there has been huge volatility in currency and bond markets and entire equity indices have been as volatile as silver.
While silver is volatile, what makes silver valuable is the fact that like gold it has no counterparty liability or risk (with silver coins, bars or allocated storage) and therefore cannot go bankrupt unlike banks and sovereign governments.
Media coverage of silver remains minimal with big brother gold getting some of the limelight recently.
From a contrarian perspective silver remains massively under owned by investors and not known about – this is bullish.
Leveraged speculation of silver (futures, spread betting, CFDs) should be avoided in favour of physical bullion as volatility is likely to increase and even experienced speculators could incur brutal losses speculating with silver.