Silver Takes A Back Seat

February 14, 2010 | By | Reply More

Instead of slavishly following the price of gold in its usual historic way, silver has taken a back seat in the last few weeks.

As has been oft repeated on these pages, the gold/silver ratio has averaged well below 60 in earlier times and, for about the last year or so has wavered around 65 and encouragingly been declining as both metals reached new highs, in silver’s case for the last twenty years and longer.

Now we see the ratio at over seventy despite gold holding its own so what is going on?

We know the market in silver is considerably smaller than that of gold but that link between the two precious metals equates to the long conceived influence that the silver price has on the performance of the yellow metal.

In short it had become a much less capital intensive way of making gold react by manipulating the silver price.

That now seems to have gone `out of the window` as the gold price seems to have overcome its recent setbacks as other sectors in general are looking increasingly vulnerable.

Mean while silver just cannot get out of its corridor of uncertainty and stays moribund in the early to mid $15 spot price after an earlier `nose dive` from over $18 an oz.

Could it be that the conspiracy theorists much publicized belief that the US government attempts, perhaps in concert with other national banks, to hold back gold by manipulating the silver market, have been recognized as fact by gold investors at large?

If so then, sooner rather that later, even the Fed and its friends will recognize that their efforts are to no avail and give up manipulating the silver market.

If and when that happens expect silver to resume its historic ratio with gold and catch up fast.

If, and it is a big if, we are right there is some very big money to be made. With our speculative hat on we will be controlling our gambling instincts by dealing in Silver ETF (SLV) options so we get both the benefits of much higher leverage with our money and ensure that we are in control and know the extent of our losses should silver reverse our expectations in a big way.

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