Best Month in 22 Years: Weekly Silver Recap

What a week for the shiny metal, closing its best month in 22 years! Silver ended May at $15.77, up 24.9% from its April close, and up 7.2% for the week. Gold was up 2.4% this last week and 10.9% in May closing $980. As these numbers attest, the Silver:Gold Ratio continued to drop during May and last week, and now stands at 62.1. It was at 80.6 to open 2009. Despite this 22.8% fall, the ratio still greatly exceeds its 2006 through first half of 2008 average of 53.

On a technical basis, the weekly move was not surprising, as late the week before it broke through the overhead resistance in the $14.50 area. There’s really not much resistance until the $16 – 16.50 area. Silver hadn’t been above $15 since Aug 08, when it fell from $17.50 to $13.76, on its way to sub $9 before bottoming out – easily one of the quickest, most vicious bear markets I’ve ever seen.

Reflecting upon the big picture with silver’s performance, it’s not surprising that it has outperformed gold so thoroughly this year. Gold is roughly 15% above its nominal highs of $850 almost 30 years ago, while silver is almost 70% below its 1980 highs. Even if you assume the Hunt’s activities artificially boosted the silver price by 100%, going from $25 to $50, then silver still resides nearly 40% under a $25 high.

This is while industry has continued to find new uses for the miracle metal, above ground stocks have shrunk sharply over the decades, and now new technologies like nanotechnology promise even more uses. Do I even need to mention the U.S.’s and most other governments’ recklessly irresponsible fiscal policies that silver protects against?

In the broader picture, and related to worldwide government policies, silver’s strength was part of a strong week for commodities (oil up over 8%), as more investors are following China’s lead by exchanging fiat currencies for tangible, wealth-protecting assets.

Other Markets of Note:

Govt Bonds – both the 10 year and 30 year were hammered on Wednesday, but staged a baffling rally on Friday (yields dropping roughly 20 basis points), for the week finishing up .02% at 3.47% (10YR) and down .05% at 4.34% (30YR).

$Dollar$ – the dollar index actually rallied from 80 to 80.5 on Wed while bonds were being abused, but fell sharply during the bond rally Fri, from 80.5 to close 79.23. As recently as April the index was 87. Dollar:Euro back over $1.41 now.

Oil – at 66.31 now, almost double its winter 08 lows.

S & P 500 – up 3.6% on the week to 919. GM bankruptcy, North Korea nukes, and continued poor economic numbers don’t scare equities, or is it a reflation (inflation) based rally?

As the son of a stockbroker, I got into stocks during college, ultimately reading Jack Schwager’s ‘Market Wizards’ book senior year, which really opened my eyes to trading and investing in other asset classes. I worked on the Pacific Stock Exchange for most of the 1990’s as an assistant specialist and eventually a specialist. I developed a very contrarian trading style, searching out closed end funds and micro-cap stocks to trade. Trading for almost 20 years now, it wasn’t until Dec 07 that a friend turned me on to silver, after I queried him about gold’s prospects during the early months of the credit bubble bursting. The next month I made my first purchase of silver bullion, and have followed the silver market closely ever since. I am also a huge sports fan, and contribute to the website www.sportscity.com with a general sports blog (Speedburner on Sports), a tennis blog (Todd’s Tennis Takes), and NBA commentary (NBA Daily Awards).