De oktobercorrectie van zilver........
With less than three months left until the end of the year, let’s do a quick recap. Silver may not be as shiny as gold, but it has been no pushover to the yellow metal. So far in 2012, silver has been the top performing precious metal with a gain of nearly 24 percent. The gold/silver ratio, the number of ounces of silver needed to buy one ounce of gold, fell below 52.0, from closer to 52.5 earlier this week, reflecting silver's outperformance relative to gold.
The silver market is often volatile catapulting higher or fainting in a swoon with little volume. This scares a lot of investors away. But here are a few things to consider. The makers of solar panels consume about 11 percent of the world’s supply of silver, the material in solar cells that conducts electricity. It seems easy to make the argument that global demand for solar panels will rise along with concern for the environment and demand for green energy. This need alone could sustain much higher prices. The output capacity of the metal is hardly keeping pace with the industrial demands for silver that also includes batteries, cameras and medical equipment. Many investors scared away by the volatility of the silver market may miss the boat.
The second runner up in the precious metals hit parade is platinum. The price of platinum rose by 20 percent in the space of two months after a series of violent strikes in South Africa shut down much of the country's production and left about 50 people dead. Almost 80 percent of the world's platinum comes from South African mines. Even with the fragile supply line, analysts are less optimistic about the price prospects for platinum this year and next, according to a Reuter’s poll this week. Platinum is used in the automotive industry, which has been hard hit by the economic downturn. This poses enough of a threat that analysts expect a median platinum price of $1,559.50 in 2012, compared with forecasts three months ago for an average price of $1,572, according to the survey.
Much has been written about platinum’s decreased potential due to the 2011 tsunami and earthquake in Japan, but we believe that this metal will be able to move up strongly in the following years, once again exceeding the price of gold.
With much focus of today’s essay on silver, let’s see how the white metal may fare in the coming weeks. We turn to the technical part starting with analysis of silver itself (charts courtesy by http://stockcharts.com.)
In the long-term chart for silver this week, no conclusive outcomes are provided. Silver has corrected somewhat, but this could simply be part of a sideways trading pattern similar to what was seen at the end of 2009. Short-term declines do not say anything about whether additional moves to the downside are coming or not (like in the final months of 2009).
In the short-term SLV ETF chart, we have a rather negative picture this week. Prices have moved below the 20-day moving average and since this has provided support and resistance several times in the past, such a breakdown is a clear negative factor.
The white metal is tricky from a technical perspective. If the rest of the metals rally, then silver could move higher as well, similar to what we saw in February 2012. We cannot rule out this type of performance once again in the weeks ahead.
The points made above are largely consistent with what we wrote on silver in our essay on the possible correction in silver on October 2, 2012:
(…) silver looks like it’s about to correct, and this correction may or may not be seen immediately. A few days of consolidation is possible before a price correction, and it seems best to wait before entering any speculative long positions at this time. Also, when the rally resumes, the white metal may yield better returns than the yellow one.
All in all, based on the current technical picture for silver, we can infer that the white metal is likely to correct significantly in the following weeks, but we are not that certain about the following days.
By Przemyslaw Radomski