Gold and silver – overbought or not ?

A look at the relative performance of this year shows that Silver and Gold are outperforming a lot.

Last time I wrote about Gold, I said that we were in a parabolic rise, and that the rise was too steep. I got a comment that Gold, I quite, is not subjust to the same forces of “bubbleness” that other type of products are… im not saying that Gold cant bubble, but as long as the US keeps printing trillions of dollars out of thin air…gold will NOT collapse…its just Econ 101…

  • With QE2 and the fear of inflation, one could argue that gold and silver are a save haven. But I came acros this article, that states that there is no predictable correlation between gold, silver and inflation.
  • But are they rising then because of the increased demand because of economics ? If I look at other, what I call leading indicators for measuring economic activity (transport (IYT), Copper (JJC), FXI (China), Oil), We can see that transport and China is at the same level of Gold. Copper and Oil however are the same level as the S&P 500. So, I would not say that there is a clear link, and it certainly does not explain the rise of Silver.
  • In an article of Smartmoney.com, the performance of Silver vs gold is analysed.
    “Gold, at its recent price of $1,195, has been trading at 66 times silver, versus the 10-year average of 62 times and the longer-term ratio of just 16 times….Says James Turk, founder and chairman of Goldmoney.com, which sells and stores precious metals: “The volatility’s not for everybody, but if you’re a long-term bull on precious metals, I believe the ratio will go back below 20.”

So, the parabolic rise of Silver is “justified”. you could try to ride the train, with stop losses set (24USD at this point)


 

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