Silver Shines more Brilliantly than Gold the Past Twelve Months

By Vincenzo Desroches–Exclusive to Silver Investing News

This year will go down in the history books as one of market turbulence, risk adversity and general uncertainty as recovery measures in developed countries continue to be lackluster. Amid such uncertainty, headlines have been filled with stories about worried investors and where the latest safe haven might present itself for the flight of risk-averse capital. Most have chosen gold and U.S. Treasury Bills to fasten onto, but if the truth be known, silver prices have appreciated more in the past twelve months than those for gold, much to the chagrin of hucksters on the national airwaves.

Talk show pundits have sensationalized the run up in gold prices, but one rarely hears the more stellar version of the story surrounding silver. Perhaps it is because silver was stuck in a sideways ranging trend for the better part of the year.

The angle of its recent steep ascent may cause many technical analysts to gulp hard, and the RSI technical indicator is currently signaling an overbought condition, but after a run such as this, consolidation and profit-taking could be expected, even if the risk of loss also exists. The economic conditions of 2009 has induced many capital flights to “safe havens”, and silver did benefit to a degree from February through June, but the recent turn of events may suggest more than risk-aversion returning to torment investor psychology.

Silver is known for its “intrinsic” value, as is gold, but the returns over the past month are approaching 40 percent, an unusual event in any market. For example, an investor in currency trading would trust his technical indicator, as he learned on his forex demo account, close out his gain or loss, and move on to the next opportunity.

Most analysts attribute the recent appreciation to several causes. Traders have repositioned gold investments to take advantage of both growth trends. The U.S. economy is stalling, and the resultant weakening of the Dollar demands an opposite reaction in precious metal values. As a leading indicator, demand for silver from the manufacturing sector is expected to increase worldwide, another source of upward pressure. And lastly, silver, as with gold, serves as an excellent hedge against inflation that will surely come when stable recoveries are in motion.

Silver’s recent run up has been due to many favorable fundamental winds at its back, but indications are that consolidation and profit-taking are in order.