Silver Investing: Catch The Silver Rocket Ship

| February 23, 2011 | 0 Comments

Remember the Lone Ranger?

You know, the famous cowboy who went galloping across Texas capturing the bad guys? I loved watching the masked hero and his trusty companion Tonto on TV as a kid.

The trusted steed came running whenever his master whistled.  The famous white stallion is known for his blazing speed and uncanny wits. Good ole silver saved the day many a time.

And now, some investors feel Silver is going to lead their portfolios to riches.

But not the horse… the metal.

Yes silver, the precious metal, is on the move again.

We’ve talked about the promise of silver many times in the past.  I showed you a great low-risk buying opportunity for silver here.  I went into the idea of silver as a hyper-inflation hedge here.  And I even went over some of the conspiracy theories behind silver’s exploding price here.

Clearly, there’s more than one reason to be bullish on silver.

But over the last few months, silver’s been taking a break…

While stocks and other commodities have been roaring higher, silver has been lounging by the watering hole.  Some investors even said silver had seen its best days.  In their minds, silver was getting turned out to pasture and wasn’t going any higher.

Uhhh… they couldn’t be more wrong.

Over the last few weeks, silver has been galloping past just about everything.  The metal is currently pushing to new 30-year highs.  Even silver’s big brother, gold, is getting left in the dust.

Silver is up 20% in the last month while gold is up a meager 4%.

Why are investors so gung ho on silver?

Well, a number of factors have investors pushing silver to multi-decade highs.  We talked about them in past articles… inflation hedging, industrial use, and silver coin investing.

But you can roll all those factors into one… its simple supply and demand.

Silver supply is dwindling…

Accurate figures for above ground silver stockpiles are hard to come by.  There are a few estimates, but most vary wildly.

However, experts agree above ground silver inventories are extremely low.  The majority of silver is already used up or still sitting in the ground waiting to be mined.

Of course, miners are ramping up production to take advantage of high silver prices.  And they’ll likely be able to slowly increase supply in coming years.  But right now, demand is far outpacing supply for the illustrious metal.

In fact, the market is so tight that silver futures are in “backwardation”.

This unusual word essentially means the market is worried about near term supply.  Near term futures contracts are priced higher than outlying contracts.  Backwardation is a rare occurrence, but it’s happening right now in silver.

Silver is already pushing above its 2010 highs.

As you can see, silver is breaking above the highs of late December.  Since silver has broken this important technical area, it can now use it as support.  In other words, whenever silver pulls back to $30, use it as a buying opportunity!

Gold, on the other hand, is rising but still below its 2010 highs.

What’s my ultimate price target for silver?

Putting a price tag on future silver prices is pretty challenging.  Some estimate $70-$100 an ounce, while others have grandiose ideas of $1,000 for an ounce of silver.  While I think $1,000 is out of the question, $50 to $70 is very possible.

How long will it take it to get there?

Well, if recent price movement is any indication, we may hit $50 by the end of this year.

Hi-Yo Silver… Away!

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Category: Commodities

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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