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Monday, July 18, 2011

Silver is Once Again on a Tear

Similar to gold (see a past post On the Value of Gold) silver has been on a tear due to low interest rates, fear of inflation, and a declining dollar (actually not similar to gold, but more like in multiples greater than gold). While the price of gold or silver is already a reflection of a weak dollar (i.e. if silver increases in price, it is outperforming the dollar), the relationship between the dollar index (relative to other currencies) and silver since the beginning of the year has been rather striking.

The warning note to the above is that while this relationship is not new, the scale of the relationship of ~10x since last summer, is (from 2007-mid 2010 it was closer to 2x).

Perhaps this time is different and we should simply be Ready to Ride the Golden Silver Bubble.

Source: Yahoo Finance