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Published: June 24, 2010
Since reaching a low of just under $9 per
ounce in November 2008, silver has more than doubled in price….
and it's now closing in on its highest point in more than a
decade.
This price strength from the "poor man's gold" has spilled over
into tremendous investment demand – especially so for silver
coins.
The U.S. Mint sold more Silver Eagles in the first quarter of
this year – just over nine million – than any prior quarter in
its history. The Royal Canadian Mint produced 9.7 million silver
maple leafs in 2009, also a record.
Take a look at the jump in U.S. Mint coin sales since 2007:
Silver bullion ETFs are growing, too, experiencing a
five-fold increase in metal holdings since 2006.
I'm a huge long-term bull on silver and gold. The only way the
Western world can pay for its huge unfunded liabilities is to
print more money… which is very bullish for precious metals.
But… I'm also a contrarian. With so much investment demand
toward silver right now, the hard question is, "Should I be
buying silver right now?"
Let's first look at the big picture. The following chart shows
how far silver is below its inflation-adjusted peak reached in
1980.
As you can see, from a big picture point of view, silver hasn't
run up all that much in the past decade.
So, my advice to anyone who does not own silver, and wants the
long-term wealth protection precious metals offer, go ahead and
buy. The risk of buying silver at current prices is lower than
owning none at all.
If you do own some silver but want to add to your holdings, I'd
wait for a drop in price, in part because silver could fall more
easily than gold when the economy is found to be more fragile
than what many believe. Approximately half of silver's demand
comes from industrial uses, so it's more susceptible to selloffs
than gold if the global economy gets weaker (we at Casey
Research believe it will).
Further, summer usually brings pullbacks in precious metal
prices. This is the tendency, though we can't guarantee this
summer will follow past trends. Still, our best guess is to
anticipate another leg down sometime this year, perhaps this
summer. If you already own silver, look for a correction before
adding to your holdings.
To summarize, if you don't own silver yet, go ahead and buy some
now. It's enjoyed a considerable run recently, but is still well
below its previous highs when viewed over the long term. If you
simply want to add to your silver holdings, take advantage of
its volatility and wait until prices fall at least 10%.
-- Jeff Clark
Editor
Casey's Gold & Resource Report
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