Saturday, June 02, 2007

Why Silver And Not Gold?

As you know I've been long silver as of Tuesday and you can read about the reasons why I am bullish by clicking here.

Since Tuesday silver has rallied sharply and I am still holding onto my long position.

I've received a few emails asking why I seem to be more bullish on silver than on gold. Well first of all let me say that I think both gold and silver will rally but I think silver will be the metal that rallies the most.

If you look at the above chart you will see a 4 year weekly chart of the silver/gold ratio. A rising ratio line means silver is outperforming gold while a falling ratio line means silver is under performing gold.

In the lower pane is the stochastic oscillator. Every time this oscillator has moved below the buy line and turned up, silver has outperformed gold. This indicator has been 100% correct over the last 4 years on it's buy signals which I think is amazing.

Right now the stochastic oscillator has crossed upwards confirming yet another buy signal. So as you can see, the above chart is the reason why I am more bullish on silver than on gold. I'm looking for this ratio to make new highs. I hope this clears things up..We'll see in the weeks to come if this analysis is indeed correct.


Sandro said...

I have no clue but I can guess that gold is depressed by some central banks dumping gold. With euro getting stronger they feel that they need less gold

BAB said...

what stocks (with options) would you buy to participate in the silver rally?


AJ said...

PAAS perhaps ..

Dave said...

how would you handle your stops on silver futures as the price increases. Just curious as I am a rookie vestor.

Kevin said...

I'm long SLV...I think that's your best bet...The two silver stocks I like are SSRI and PAAS but they may or may not rally that's why SLV is what I am long. This is a pure play on silver.

Kevin said...

Hi Dave,

I'll use a trailing stop and place my stop below the swing lows...Right now my stop is below the low from 5 days ago.

gregck3 said...

Nice chart but silver outperforming gold does not necessarily mean a good buying opportunity. You could have scenario where silver declines and gold falls more than silver. Right? Surely, you must use some other confirming indicators to trigger a long position in silver.

Kevin said...

Hi Greg,

You must have missed my post from the other day which explains why I am bullish on Silver..

chronictown said...

Kevin, I thought you quit blogging? Glad to see you are still kickin! Im long slw calls. Ihope the silver keeps runnin! good luck all!

Kevin said...

I did quit but I received so many emails from people asking me to come back that I decided to blog again but not every day.


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