Red-Hot Resources

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Friday, November 03, 2006

Sizing Up Silver

Since I posted a chart of gold earlier this week, I thought it's time to post silver. As I've written recently in and Dow Jones Marketwatch, I think silver is already lifting off the launch pad.

I'm going to try to use the linkable version of to see if I can show you why... (Click on the chart below to go to the full-sized version)

You can see that ...

1) Silver made a nice double bottom in September and October
2) Silver is now moving higher. I'd expect some consolidation on this rally, but silver might get to 13.25 before it does that.
3) Looking at the momentum oscillators on the bottom of the chart, stochastics are oversold, but they can stay that way for awhile. They are bullish.
4) MACD, a more long-term measure of momentum, looks bullish, keeps rising, and has more upside.

These are strictly technical aspects of silver's move. Fundamentally, the supply-demand squeeze is getting tighter. Industrial use for silver is rising. The SLV, the silver ETF, is a huge source of new demand. Demand for silver jewelry in India -- which is the biggest market in the world for gold -- is rising. And now the Chinese are trading silver futures in Shanghai on a trial basis. That will likely become permanent, and become an investment option for 1.3 billion capitalists.

Tomorrow, I'm flying down to Mexico to check out a silver mine. The kind of stocks I'm interested in Mexico -- well-run Canadian companies who are reopening legacy Mexican silver mines -- are looking as bullish as a day in Pamplona. I think they're going to look even better as time goes on.

I believe silver is going to $20 in the next year -- perhaps sooner than many think!
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