Silver Producers Spend a Day in the Sun
Commodities / Gold & Silver Stocks Nov 29, 2011 - 03:35 AMBy: Bob_Kirtley
Silver producers enjoyed solid gains today with Endeavour Silver Corporation (EXK) up 8.22% followed by Mag Silver Corporation (MVG) up 7.41% and Great Panther Silver Limited (GPL) up 5.99%. Silver prices showed gains of 1.85% to close at $31.85/oz and gold prices also posted impressive gains of 1.53% to close at $1708.70/oz in today's trading session in New York.
Investors eyes however remain focused on the haze that hangs over the European union, especially Italy, where the rumours abound regarding a bailout in the order of 600-800 billion euros from the IMF. Such rumours have an intoxicating effect on the financial markets propelling them higher, along with the mantra that happy days are here again. The markets also have a remarkable ability to ignore the other sovereign states in the eurozone who are also laboring under a tremendous mountain of debt. Its a case of one problem at a time please, that’s all we can handle at the moment. The issuance of more debt is not the cure for debt, but that appears to elude our political masters as they hope to get into the next safe harbor before their cover is blown and they fail to get re-elected. Talking of re-election, that now appears to be a thing of the past in the eurozone as both Greece and Italy have new unelected leaders at the helm. Democracy is no longer fashionable then! Actually its a tad scarey to have 'power by appointment' and we hope that it isn't contagious.
Across the pond there is also an expectation that the United States will follow suit with an 'easing' of some description, especially if the unemployment figures worsen.
Uncertainty and/or the creation of new paper money are good for both gold and silver as this debasement of the major currencies reduces their value as a store of wealth and increases the demand for the precious metals.
Anyway, our strategy remains the same in that we have no intention of investing any of our hard earned cash outwith this market sector. Having physical and gold and silver in ones very own hands is still the best action we can take in these very uncertain times. Secondly, owning some of the quality producers has been a good investment for the initial part of this bull market, however, we are reluctant to increase our exposure to the producers until we get some indication that they can and indeed will rally to higher ground.
At this point we will take a quick look at The Gold Bugs Index, the HUI, as shown below, which also put in a good performance today gaining 2.44% to close at 541.28. We are now looking for the STO to turn and head north as a first indication of a rally in these stocks. The RSI has just turned upwards and has the room to move higher. Overall though, range trading between the '500' level and the '600' level appears to be the order of the day. From this point we still need to see the HUI break through the top of its current range and make new all time highs in order to be convinced that both the gold and silver producers are intent on a rally to much higher ground.
The third part of our strategy is to trade options as they have provided us with good returns when compared to other investment vehicles. As always its your choice and only you know what you are comfortable with, your aversion to risk, your financial targets, etc. So take your time and do as much due diligence as you possibly can in order to establish a tailored strategy that fits your purposes. A word of warning, if we may, don't leave it too long before getting into position as things don't look like improving any time soon.
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