Thursday, October 2, 2014

Update on Silver - 10/2/14

As was discussed in my previous blog post, silver is still in the downward trend and is most likely to stay on this course. The price of silver has fallen to $17.01 per troy ounce, which is more than $1 drop comparing to the prior 2 weeks. The price of gold continues to trade sideways, but has more hopes of returning to the new highs.

Historically speaking the health of the economy is directly correlated with the price of gold and silver. The downward trend of these commodities is indicative of improving economic times.

The positive reports on the improving US economy, including a 0.5% increase in consumer spending, will continue to drive down the prices of precious metals. Consequently, the Fed might increase the interest rates next year to offset the inflation and provide stability to the macroeconomic climate. There are many other signs in the economy that signal positive trends.

Due to the continuing downward trend of silver, my recommendation is to hold off of any purchases and continue to wait until silver hits mid-teens or gets close to that mark. At that point, it is advisable to start slowly accumulating silver at relatively low prices. The next phase of the business cycle will be shaped by a downward curve, and coupled with the increased federal interest rate, the price of silver might go up in the 2nd half of the year 2015.

Unfortunately, the price of commodities is difficult to predict. Don’t fall for the hype or doom and gloom scenarios, which are broadcasted to get you to buy their silver and gold products. Unless you are looking for a long-term hold of commodities, gold and silver can be profitably traded only during the times of high volatility, akin to what was happening during the Great Recession of 2007-2009. At that time, the prices of silver and gold were fluctuating every day and gains were made in a matter of weeks. Due to the sideways trading, silver and gold remain a long-term solution at this point.  

**Please note that all referenced articles are embedded in the blog post and can be accessed by clicking on the blue colored text.**

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