Silver underperforms on trend


1 post / 0 new
Anonymous (not verified)
Silver underperforms on trend

Silver trading really has been the poorest of the major PM-PGM sector over the last 12 months. There were two events that appeared to trigger this in 2011: first, the April FOMC meeting resulted in the severe decline in May; second, the August unscheduled 'Crisis' FOMC meeting resulted in the September decline.

Looking at a chart comparing Au-Ag-Pt-Pd: over the last 6 months silver has taken the hardest hits and has declined comparatively further. The only exception to that was when it led the group right at the outset of 2012. Nevertheless, it has been setback again by the hard-hitting hammer with declines on every Fed statement and again a decline preceding last weeks FOMC meeting. A 60-day comparative chart really demonstrates the poor performance against other metals in the sector. However, pull up the big picture and a different story is told.

A 5-year chart shows silver just under-performing gold; with both sitting marginally under 150% gains. A comparative chart from 2000 displays silver right on 500% gains with gold sitting marginally under that performance level. With the parabolic 'silver-bubble' of 2011 now thoroughly purged and an indication that the 'weak-hands' are now shaken out - the big-question is if silver can get back on trend and follow more closely or even become the trendsetter. The spring off the last FOMC meeting, which failed to announce QE3, did not cause silver sentiment to tumble this time. This possibly does indicate that the weakness is being shaken out from the metal. On that basis alone we might be quietly confident that a resurgence may follow sooner rather than later.

This is difficult to predict but having looked at the charts this week, I think it is highly likely that when (not if) the dollar declines from the strength it is showing, silver is likely to see marked gains and again become the trendsetter. The stock-market resurgence has diverted speculative monies to other sectors so the poor recent performance for silver was expected.

Other factors that might support a move are that: the Euro-zone is still in crisis and expected to deepen; the lackluster 'recovery' reports coming out of the US may cause investors in bullion to increase purchases in physical; industrial demand is expected to be steady on the back of developing market demands; 'scrap' silver is becoming more or less exhausted along with gold; these and other fundamentals have caused silver to weather the storm and still be holding its' own above 30 USD. Even last weeks' FOMC meeting could not shake the levels below 30 USD so it appears we may see a stronger showing and steady increases throughout May, into June, and consolidate to be well and truly stronger by years end.

The above views are my own; whether sentimental or unfounded will yet to be seen. But here is a link that I uncovered this morning which might suggest a possible support to this scenario.

The article states: '...a major support line is in play and the suggestion is that a move to the upside (silver) here is very likely. The chart tells us that silver is likely to outperform gold in the months ahead ...'

http://www.kitco.com/ind/Radomski/20120425.html


JOIN: WALLSTREETWINDOW FREE MEMBERSHIP

* Join and receive the Two Fold Formula guide to picking stocks and combine tested fundamental valuation metrics with technical analysis.

*Align yourself with the big trends of the stock market and be alerted when these trends change.

*Receive free updates when we see an investment opportunity in an emerging sector before the crowd gets in.

CLICK HERE: JOIN WALLSTREETWINDOW FOR FREE