Wednesday, April 17, 2013

Silver hits $22

Silver has quickly moved to $22 which I think is an excellent place to increase exposure to this versatile metal. It has been about 2 years since it peaked at $50, and has had ample time now to correct and shake out weak hands and short term speculators.

While I've marked the $21.30-$24 zone as an excellent area for buying back exposure to silver, now that we are here I have to admit it seems a bit frightening. In spite of that, I'm planning to add exposure. The bottom line is to buy low and sell high, and the fact that many people are negative on silver does not change the validity of this strategy. One should never sell because everybody else is selling nor buy because everybody else is buying but all too often we can let this primal psychological power influence us into making a poor decision.

The main influence on this price of silver is its relationship to gold and quantities of money, and that hasn't changed much in the past few weeks.

Is it possible that silver drops to $15 or even $5? Yes. Is it probable? no, not at all - just as it was possible silver would go straight from $100 from $50 but wasn't probable.

People are spooked because China looks weak and the global economy in general looks like it is slowing down - but is that justification for silver dropping more than 25% in the past 6 weeks or so? Not fact if things are really that bearish, then the place to be negative at this point is the S&P 500 or another American stock index.

More likely in my mind is that this weakness is temporary and that commodities will bounce starting tomorrow or the next few trading days.

Just my opinion...

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