MLR - Silver flirts with $50 premarket

Published : April 25 2011 at 9:12 ET

Silver futures flirted with the $50 level, rising as high as $49.82 in premarket action on news that China may move more of its FX reserves into precious metals, launching commodity and forex funds by tapping into its $3 trillion foreign-exchange reserves stockpile.

While the secular bull market in precious metals remains intact, and silver is still well under its inflation adjusted peak price of $129.59 achieved in 1980 (see chart below, courtesy of, silver is highly volatile, typically moving two to four times the moves of gold, thus it is prudent to keep a close eye on signs of intermediate term tops especially after the huge move we have seen in silver.

Gold, on the other hand, is not overbought thus while silver and gold correlate, a correction in silver would probably result only in a minor pullback in gold. In fact, silver peaked April 20, 2006, then corrected about 20% in two days, but gold held its ground, then proceeded to have its climax top May 12, 2006, 3 weeks after silver had its climax top, as shown in the two charts below:


Finally, in terms of risk management and position sizing, nstead of selling your whole position when your stop is hit, you could also sell in pieces, cutting your position by 1/2 or 1/3 each time silver hits your designated sell stops.


This information is provided by Virtue of Selfish Investing, LLC (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2016 Virtue of Selfish Investing, LLC. All rights reserved.