Silver Prices Rise to 31 Year High on Weak Dollar and Hyperinflation Fears
Commodity prices continue to soar with seemingly no reflection of the risk that the Japanese Tsunmai and Earthquake and Middle East unrest do to demand and confidence. Greed has gripped the speculator and fear has gripped those looking for a safe haven. This combination has helped send silver prices to their highest level in 31 years at $38.40 with $40 an ounce in sight. Silver is a much cheaper option than gold or platinum for gold bugs.
Silver prices are correlated 85 percent positively for the past thirty days. So clearly the price is dependent to the broader precious metals trade.
There are reasons to justify the flock to silver but at these bubble like prices the risk is immense. The POMO money pumping in the US, the Fiat currency and tumbling USD dollar has heightened risk aversion sending everyone from the paranoid conspiracy theorist to the commodity investor into precious metals. This means any pull back in gold prices will see exponential moves down in silver. This has been a pattern in all gold pullback in this mega rally.
For mine the silver upside looks vulnerable given the herd mentality. The silver ETF volumes underscore how deep the herd is in. With such concentration one has to be wary of the possibility of sharp price falls with enforced or herd liquidation. This extreme volatility has scared aware many short sellers and thus removing short covering as a major bullish reason.
Manipulation of silver prices saw JPM and HSBC charged in 2010 in a civil suit with the charge that they artificially held silver prices down. One would have to say they haven;t done a very good job. Just be sure if you trade silver it is within your margin comfort zone. Silver is one volatile commodity.