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Richard Russell on Silver

7 January 2010 490 views No CommentEmail This Post Email This Post

10gm-silver-bar-credit-suisseIn the last post, I mentioned Richard Russell’s views on gold.  Recently, he declared that he was extremely bullish on silver as well:

January 6, 2010. They call it “the poor man’s gold.” But don’t turn your nose up at silver. The dollar was originally defined in terms of silver. When precious metals are on the rise (as they are right now), silver tends to be seen as a monetary metal. When times are bad, silver is seen as an industrial metal. Silver has a huge number of industrial uses, silver is the best conductor of electricity. Unlike gold, silver is actually used (and used up) in industry. Thus, a large amount of silver is lost every year. In contrast, 85% of all the gold ever mined in all history is still around; it’s in your teeth or in your sweetie’s bracelet or in that ancient Egyptian ring that you see in your local museum.

Historically, when silver gets going, it tends to make huge percentage moves. I think you can see that from the long-term chart below. For instance, back in November 2008, silver was selling for 8.65 an ounce. Today an ounce of silver is selling for 18.10 an ounce, more than double.

Silver is now climbing back from a drastic correction, as you can see via the chart below. In December silver hit a high of over 19 dollars an ounce. Back in 1980 (and I remember this well) silver climbed wildly (limit up day after day), and it hit $50 dollars an ounce around January of 1980.

Silver is now in a erratic bull market. How high it may go I don’t know, but I would not be shocked to see silver ultimately climb above its 1980 price of $50 bucks an ounce. Historically, once ounce of gold will buy around 15 ounces of silver. Today an ounce of gold will buy 62 ounces of silver. Silver compared with gold is dirt-cheap today.

How to invest in silver? I like the 100 ounce bars if you can find them (they weigh about 8.5 pounds each) [Actually, a 100-oz silver bar weighs 6.86 on a bathroom scale. It appears that in coming up with the 8.5 pounds, Russell divided 100 by 12, the number of ounces in a troy pound. If you have a troy scale, a 100-oz silver bar would weigh 8.33 pounds. However, troy pounds are rarely used. Instead of using "one troy pound," the convention is to go with twelve troy ounces.] Or buy the 10 ounce silver bars. Or you can buy the exchange traded fund SLV which sold for 17.77 today.

Yesterday, both gold and platinum closed at new highs for the move. Silver is lagging behind, but when silver finally catches up, it may be a stunner. Over the last year the price of silver doubled; gold didn’t perform that well.

The white metal is now in a well-established rising trend. Technically, the upside target is the 21. If silver hits the 22 level, that will light the fuse. To put it briefly, I like silver. But gold has one advantage over silver, every central bank owns some gold, and most want more.

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