Wednesday, May 25, 2011

Gold & Silver heading up for the summer?

The World Silver Index on May 25th, 2010.  A fibonacci retracement is drawn from the start of the fall rally in 2010 (late August) to the recent high of $49.82.

Silver pulled back about 50% of the rally to a low of $32 and based for a week.  It is now on a trend up and may hit the $40 level.  Fundamentals are still the same for Silver, there is still high demand around the world with central banks and the federal reserve increasing the money supply / debasing the fiat currency.  The manipulators can only do so much when they have to fight the worldwide market and investors.  There may be a day when both Gold and Silver may be scarce because there will not be any sellers, only hoarders due to the devaluation of the fiat currency system.

The 'street' seems to believe that the Silver price is 'real' this time around as the Silver miners are rallying with the Silver price.  (Check SIL, the Silver miners index)  This was NOT the case when Silver ran from $40 to $49 a few weeks ago.  The market knew Silver was overbought and would eventually break to the downside, so no major money went into the Silver miners.  (In general, the savvy Hedge funds and money managers know what they are doing).

Rob McEwen the former CEO of Goldcorp mentioned that he will be rolling out of his Gold position when the Dow / Gold ratio is between 2:1 and 1:1.  He mentioned that he will take the money and invest in undervalued assets at the time which may be Real Estate.

I think we are a few years away from the Dow / Gold ratio of 1:1, maybe by 2015... ?   Here is a long term Dow/Gold ratio chart from Fred's Intelligent Bear site:

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