In our “HOT” stock article today, Michael Gable, Managing Director of Fairmont Equities, says that although the price of gold has been rallying for over a year now and has further to run, silver now appears to be poised to make a run of its own. Michael says that an ETF available to Australian investors wanting to invest in silver is ETPMAG.
“Silver,” Michael said, “is often referred to as gold’s poor cousin because it attracts a lower price and its price movements can often underperform gold. For example, in the past 12 months, in US dollars, the price of gold has increased about 44% yet silver has only returned about 23%.
“However, in previous bull markets, it has been observed that the price of silver tends to catch up towards the end.
“Although the price of gold has been rallying for over a year now and has further to run, silver now appears to be poised to make a run of its own.
“The chart I have included has been converted to a logarithmic scale where equal movements higher in price represents equal percentage units.
“Price action for the past 45 years resembles that of a large cup and handle formation.
“This can be seen by the large, curved shape from about the years 1980 to 2011, followed by a smaller curved shape.
“It means that silver is now testing a well-established resistance line.
“This pattern is very bullish.
“When prices move above this line, it means that the underlying, in this case silver, has little selling pressure and it can rally quite a bit higher.
“The size of the rally tends to be a function of how long this pattern has been in place and how far the price has already moved from top to bottom.
“Because this pattern has been in place for so long and the movement in silver from trough to peak has been so large, it means that if we get an upside break, we could end up with a substantial multi-year move.
“That is, a monthly close above US$37.50 could be the start of a big rally in the price of silver where it could go up multiple times in value.
“Silver therefore is a buy on any dips.
“Alternatively, wait for a monthly close above US$37.50 for the next major buy signal.
“An ETF available to Australian investors wanting to invest in silver is ETPMAG.” Michael said.
