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Silver Bulls and Bears

Written By Brian Hicks

Posted April 17, 2013

The world of precious metals has been somewhat tumultuous in recent months, and especially the last few days. With gold prices plunging, many investors don’t know which route to take at the moment. Now, the same can be said for silver.

silver bars 17According to Value Walk, both gold and silver plunged dramatically on Monday, marking a slump the size of which hasn’t been since in three decades. Worse yet, many believe that the metals will actually fall even further.

The fall comes at an interesting time for investors especially, as many have been bullish on both precious metals since at least October of 2012.

Silver dropped in London to $23.7125 this year, down 22% according to Bloomberg. While gold has fallen as well, the latter metal has suffered by a margin of 17%. 

Platinum and palladium have both stayed marginally higher, as the two metals are used extensively in the production of catalytic converters in cars.

From Bullish to Bearish (and Back Again?)

It hasn’t been all doom and gloom for precious metals in recent years. Both gold and silver have enjoyed improved performances over the course of the past 12 years or so, going from bearish to bullish throughout this period of time. This year, however, both metals seem to be in retreat based upon a variety of factors.

The global economy, for example, has put quite a bit of strain on both gold and silver. With instability riding high not only in the Eurozone but even in America, the lack of a truly strong economic state has put pressure on gold and silver, likely bringing prices down even lower than where they would be otherwise.

Recent negative reports about the Chinese economy have made things worse, as China is a major buyer of the world’s supply of gold. 

As far as silver goes, many hedge funds have the right to brag that they saw this coming. Silver has been predicted time and time again this year to fall further into decline, and it has been shorted by some of the world’s top hedge funds, including Argonaut Capital.

While predictions could have gone either way, it’s safe to say that those who believed silver would continue to fall are grinning ear-to-ear at the moment.

A Bright Future Is Still Possible

Still, it would be unwise to assume that hedge funds who have shorted silver will end up being 100% right on their position. Many analysts believe that silver is likely to rebound, perhaps even within the coming months.

Japan is continuing its fiscal easing program, which has many believing that gold and silver will both be on the increase sooner rather than later. The general improvement of the global economy should also assist in bringing gold and silver back into the limelight, although it’s unclear as to how long it would take for such an improvement to occur.

For many, now is considered the perfect time to look towards silver as an investment. Lower prices in silver can often indicate more dramatic, high percentage spikes, which means that those who are not already heavily invested in the metal may never find a better time than now to jump in.

The same can be said for gold as far as many analysts are concerned, especially considering the fact that it has outperformed silver as a whole, even though it has also continued to fall in recent months. 

Given the lack of stability these metals have shown as of late, however, it’s clear that investors the world over are having difficulty deciding upon the best way to store their wealth. Many have moved towards the decentralized currency Bitcoin, which utilizes an algorithm to properly control inflation over time. 

Bitcoin is not without its issues, something that has turned plenty of individuals away. It’s just one more example, though, of routes investors might choose to take in times of economic uncertainty.

For those who are bent on investing in silver, it’s important to note that the downturn seen in recent months is not likely to continue in the long-term. Many analysts believe that prices will be on a steady rise once again by the end of the year; perhaps even sooner.

As with any other investment, however, the end result is never easy to predict, and it comes down to somewhat of an educated gamble.


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