Silver is Climbing and Now at 30 Year Highs
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Silver is Climbing and Now at 30 Year Highs

It has been 30 years in the making, but on February 18, 2011 the shiny metal reached an intra-day high of $32.57 an ounce. Technically speaking there is support at the $30 an ounce level and resistance at $35, which is the range I mentioned in the article Silver´s Strength in 2011, so this is not a three sigma move, but exciting, nonetheless. The metal is up about 2.5% for the day and 5.3% since January 1, 1011.

While some analysts may have predicted this, one reason for the predicated move is the unrest in the Middle East. While trite, precious metals are a flight to security. Yemen faced street protests in January following unrest in Tunisia and on February 2, 2011 President Ali Abdullah Saleh said he would not run for re-election in 2013. He is a great American ally who has been in office for 32 years. Tunisia forced a coup d’état that forced President Zine el-Abidine Ben Ali (president for 23 years) to flee the nation. Egypt’s domestic political situation has reached international media frenzy proportions, with another 30 year president, Hosni Mubarak, demanded to and being removed. Bahrain, the island nation in the Persian Gulf and great ally of the US, is having revolts. Yemen, Bahrain and Libya have been warned by President Obama to “be better to your people.” This is the epitome of unrest and a flight from fear.

Back on silver technicals, the gold:silver ratio is 42.655. This is the lowest since 2006. This further proves silver strength relative to gold. While silver rose 5.3%, gold declined 2.5% YTD. Moreover, the SPDR gold and silver ETFs (NYSE:GLD and NYSE:SLV respectively) highlight silvers move. Holdings for 2011 of gold in the GLD dropped about 49,000 ounce, while SLV’s silver holdings rose about 1.6 million ounces.

Silver’s rise must also be noted because of its use in industrial applications. No one is wiring their house with gold, but silver is integral in electronics and medical supplies. As the economy ‘perks up’ and industries continue to produce goods, silver consumption will continue to grow.

There are so many ways to get exposure to silver. The aforementioned SLV ETF is one that allows as close to physical ownership as one can get without holding a coin. Other companies like Canada’s First Majestic Silver (TSX:FR) has had one great run, but may not be done. This is a silver producing company in Mexico with expected production in 2011 to be aggregately 7.5 Million ounces. Another possibility is Silver Wheaton (NYSE:SLW). The 7 year old company is one of the largest metals streaming company in the world. From its website the company describes itself as “…[having] fourteen silver purchase agreements and two precious metals agreements where, in exchange for an upfront payment, it has the right to purchase all or a portion of the silver production, at a low fixed cost, from high-quality mines located in politically stable regions.”

While gold gets the headlines, its “sidekick” re-making a name of itself again.

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