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Posts Tagged ‘SLV’

Where is the silver lining?

Tuesday, May 17th, 2011

-By Tim Dyer

One year ago today, the popular commodity Silver (as measured by the index fund: SLV) was exchanging hands at $18.50 a share. Fast forward to today and you will see those same shares of SLV trading at a little over $33.  That is a pretty healthy gain of 78% vs the 20% return of domestic stocks over the same period.  What is even more eye popping is not only where SLV sits currently but where it has been. The current price is down 30% from the recent high of  $48 that was achieved on April 28th. The move from $18.50 to $48 was a move of over 150% in less that a year!  Volume on this index traded over 180 million shares at the high as the Federal Reserve issued a statement that interest rates were destined to stay low in the near term. Is that a lot you ask? YES! The most widely traded index is the SPY (S&P500) which had volume of 120 million. SLV had traded 60 million more shares that the SPY index traded for the day! 60 million times $48 a shares is a LOT of money to change hands.

Silver has had a historic run, the chart has gone parabolic ( Wall Street jargon for “looks like a hockey stick curve”).  It is not surprising that investors have been scratching their heads wondering if this is a pullback or the start of a new downtrend.  The risk level is now elevated and investors should use caution if they want to allocate money to this asset.

The silver lining here: “The trend is your friend, till the bend at the end.” The move from here, up or down,  is not for the faint of hearted and protecting profits may result in lost opportunity cost but not loss of capital.