The dramatic rise and fall for silver this week has been nothing short of heart stopping. Reaching levels as high as $41.93 and back down to as low as $39.89 in the same trading day on Monday April 11th 2011. These kinds of moves were unheard of for the white metal less than one year ago.
Similar swings were seen in the rest of the precious metals sector as gold flirted with $1,480 during the same surge which took palladium back to $800 plus, and platinum over $1,800. As of this writing, prices closed on the NY spot market on Tuesday April 12th 2011 as follows;
gold – $1,454.70 silver – $40.13 platinum – $1,776 palladium – $765
and are currently trading at;
gold -$1,454 silver – $40.09 platinum -$1,778 palladium -$767
There are many underlying factors that have driven precious metals prices to the current levels that they are trading at. Including, but not limited to the M.E.N.A. effect, Japanese disaster, nuclear catastrophe, weaking dollar,U.S. budget problems, and tightening in the global economy.
Profit taking has been the main driver for the recent pull back that we are currently in the middle of. It seems as though investors are waiting for the dips below forty to buy, as each time it reaches under the big 4-0 mark, it is very short lived and bounces right back up.
From what we are hearing from all the birdies out there, short coverings for silver is what pushed the metal up near $42, and the waters may be choppy from this point on until “futures Friday.
$38 seems to be a magic number to keep this upward momentum going, anything below this could cause silver to head back down to the $35-$37 range and should be taken advantage of as a buying opportunity, if it happens. The dips below forty are not having any problems finding willing buyers to enter the market, or add to current holdings.
As all precious metals have been exciting lately, it really seems as though silver is on a mission to correct the ratio and get back to the norm of 16:1, or as close to that as possible. With the ratio stuck for quite some time around the 50:1 mark, ground has been made rather quickly for the last eight months with it currently around 37:1. With that in mind $1,600 gold would equal to $100 silver! If gold did not move from this point and silver corrected the ratio, we should be at $90.88 silver!
We are not saying that silver will go that high, but it would not be an unbelievable event and is 100% possible. All in all, the fundamentals that are causing the prices of precious metals to increase have not changed, and prices are still poised to go higher. Nothing goes up in a straight line, corrections are needed for price rises to be healthy.