This article will discuss opportunities in the silver market in light of the Fed's recent declaration on interest rates. Silver offers more percentage upside in comparison to gold; however, it must be traded with more caution due to its volatile nature.
The Fed decision on interest rates coupled with excessive US government spending and debt approaching 100% of US GDP will prevent a strong US dollar. A weak US dollar will cause commodities to rise in general to offset this. If you notice on the charts below, the commodity index has risen quite substantially in the last ten years, while the US dollar (as compared to the second largest currency in the world, the euro) has done quite poorly. Commodities are real products that we use and consume on a daily basis. Any type of currency weakness will be offset by the producers requiring more of the weaker currency to purchase these products.
Charts courtesy of Wikipedia. Click to enlarge.
Silver has performed remarkably well since 2002. If we look at the chart above we see that Silver ETF SLV basically flatlined since 1998 only to catch fire in 2004. From 2004 forward the return has been stellar with 600% gains compared with gold's 400% rise. This dovetails nicely with the dollar's weakness versus the euro since 2004.
What worries me about silver is its propensity to correct, sometimes violently, in down markets. As we can see from the charts below, SLV performed remarkably well versus the S&P 500. It sold off in September, though gold hasn't. If you look at the year to date returns, gold has actually outperformed with less volatility.
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