Should I Sell My Silver?

[bobbyw24]

Silver's rise (in US$ terms, at least) over the past several weeks has been nothing short of phenomenal. The chart has effectively "gone parabolic," and people I've never met have started to e-mail me (in my capacity as a registered investment advisor) for advice on silver.

It doesn't matter whether it's silver, tech stocks, emerging markets currencies, or pork belly futures... any time these two events coincide (a parabolic chart pattern, and strangers asking me for advice), it sets off ALARM BELLS in my head.

I'm going to go out on a limb and say that right now, the fundamentals for silver DON'T matter. Many of the latest crop of silver "investors" have no clue about the fundamentals.

http://www.silverbearcafe.com/private/04.11/sell-silver.html

 

[cubical]

Like I have said before I would be more comfortable buying gold here, rather than sliver. the silver chart is asking for a 20 or 30% pullback. But I think in a few years silver will be much higher.

 

[Seraphim]

How's this for an answer?



http://research.stlouisfed.org/fred2/series/BASE

 

[Bossobass]

FWIW, some stats:

If you had a chart 45 feet long where every foot represented one century of history, the ratio of gold to silver (for most of human history, a band from 8:1 to 12:1 ) would never rise above 16 to one until the last fifteen inches. According to AGI "Abundance of Elements," silver occurs at 0.07 ppm and gold at 0.004 ppm in the earth's crust with a naturally occurring ratio is 17.5:1. Interesting - that's not far from the last monetary ratio 16:1 set when both gold and silver were still universal money in the last century

US Coinage Act of 1873 gold/silver price ratio of 1 to 16.00
US 1876 gold/silver price ratio of 1 to 18
US 1886 gold/silver price ratio of 1 to 20
US 1900 gold/silver price ratio of 1 to 33
US 1910 gold/silver price ratio of 1 to 38
1930s Roosevelt forced China off the silver standard. Removing all that monetary demand for silver made it lose value against gold, industrial demand could not soak up the excess supply
US 1941 for the first time in history, the ratio hit 1 to 100.
US 1980 gold/silver price ratio of 1 to 16.00
Late 2003 gold/silver price ratio of 1 to 75
Mid 2004 gold/silver price ratio of 1 to 50 to 1 to 70
January 2006 gold/silver price ratio is about 1 to 60
June 2007 gold/silver price ratio is about 1 to 49

The current price of gold suggests that the dollar has been devalued to around 1.35 cents. If true, that would mean that silver is today worth around $95/Oz, which works with a ratio of 16:1 with gold.

Of course, supply and demand affect the prices and that's impossible to nail down since we don't have exact dollar devaluation numbers, so I throw in oil as an averaging aid. From 1900-1913 Pennsylvania sweet crude averaged $2/bbl. Against today's price, the dollar is worth just under 2 cents.

That would make gold worth $1150 and silver worth $71.70. So, even if you believe gold is in a bubble, silver is still undervalued.

Sell gold and buy silver. That's my take and it's worked nicely so far. I'm holding and buying. We'll see what shakes out.

Bosso

 

[TrentEmberson]

David Morgan of silver-investor.com said he recently sold some of his trading position (25% of his entire physical position.) My own answer hasn't changed over the past 6 months, when someone else on RPF asked the same question. Hope that guy didn't sell, or he's going to have to buy back at double the price, just like I told him he would.

 

[nobody's_hero]

If you wake up tomorrow and find that every branch of the Federal Reserve Bank has been shut down, that their printers are out of ink, that their computers are frozen, that it shall be a crime punishable by banishment into outer space to so much as suggest that another U.S. dollar be created so long as the world exists, I'd say it would be safe to sell your silver.

But since the Federal Reserve is here to stay . . .

 

[devil21]

Im still not understanding why everyone is worried. Silver is still way below the historical 16-1 ratio with gold. It's going to be nearly $100/oz to catch up to that ratio.

 

[Bruno]

Three years ago when I joined RPF, many said silver was far more undervalued, and to put more money in silver rather than gold. It was good advice. Silver dropped to $7 at one point, and held under $15 for quite some time. And now it has more quadrupled from those lows. Gold has only slightly more than doubled from its lows during the same period.

 

[jclay2]

If you are an investor: NO! Silver is still well below historical levels. Not to mention, the above ground silver stocks have continually been destroyed making the natural ratio lower than 16:1.

If you are a trader: Possibly, but wait for some confirmation. You do not want to be steamrolled on this and I would suggest waiting for silver to close negative $ 3-4 over a day or two before hitting the sell button.

 

[Seraphim]

The first paragraph is dead on.

The second one, I challenge a bit: It seems that the pressure for higher prices is relentless. I don't think traders should sell until about 53-55$. I don't think this rally will hit resistance until the fact that silver is above all time nominal highs has sunk in. Then a correction back to the mid to high 40's to consolidate a new price level.

Just a thought.

If you are an investor: NO! Silver is still well below historical levels. Not to mention, the above ground silver stocks have continually been destroyed making the natural ratio lower than 16:1.

If you are a trader: Possibly, but wait for some confirmation. You do not want to be steamrolled on this and I would suggest waiting for silver to close negative $ 3-4 over a day or two before hitting the sell button.

 

[Seraphim]

Good article about the likely coming correction:

http://www.kitco.com/ind/Trendsman/apr272011.html

 

[llepard]

No.

 

[pmbug]

Bullion dealers are running out of physical inventory. If you own physical silver and sell it because you are worried about a "top", you might not get a chance to get it back.

Paper silver is another story entirely. It may become completely worthless in the next few months. Convert it to physical if you can IMO.

 

[YumYum]

No.

Do you see a correction? If so, where do you think it will pullback to?

 

[Cowlesy]

I just dumped the rest of my AGQ. May buy it back later today. Never hurts to clip some gains.

 

[bobbyw24]

Silver DOWN 7% today

Bid|Ask 42.87 42.90
Low|High 42.44 45.57
Change -3.32 -7.18%

 

[Michael P]

I hope you sold your silver bro, haha. That article has silver bottoming at 33ish?

 

[Cowlesy]

I just dumped the rest of my AGQ. May buy it back later today. Never hurts to clip some gains.

AGQ is down $100 per share since this post. Whew!!!!!!!!! That, is volatility.

 

[rholl]