Tuesday, May 31, 2011

Miners to rally with metals?

IF there is a counter seasonal precious metals rally this summer, will the miners participate?  They haven't been moving up with the prices of both Gold and Silver... why?

When Silver was moving up over $37 an ounce, the Silver miners ETF, SIL (which will be used as the representative for Silver miners) was not moving up.
Silver will be represented by SLV and is the Blue line, SIL is the Red line.  You can see a fairly similar trend between SIL and Silver up until the first week of March 2011.  The Silver miners (SIL) did not rally with Silver may have been because the 'street' did not accept the Silver price when it started rising above $37 an ounce.  It was starting to get overbought and continued to $49.82 before crashing down to ~32.

The street knew the Silver price was going to drop quickly at some point, so why invest in the miners when they will not be selling their Silver to the refiners at $45+?

Silver has consolidated briefly in the low 30's and now has rallied over the past week.  This is a 'true' Silver price and the Silver miners should start moving up with Silver. It is also possible for SIL to crossover Silver and may outperform for the year.

No comments:

Post a Comment