Gold has shined lately, aided by near-record weakness in the U.S. dollar, strength in commodities like oil and grains, and safe haven buying amid turmoil in credit markets.
Since the low point in mid-August, the yellow metal -- which has an equivalent exchange-traded fund, the streetTRACKS Gold Trust (NYSE: GLD) -- has gained nearly 10% and is fast approaching the highs seen in May 2006.
Interestingly, strength in gold has not quite spilled over into silver -- which has an equivalent exchange-traded fund, the iShares Silver Trust (AMEX: SLV). Silver is up a little more than 9% over the one-month span and remains below its 2006 and February 2007 peaks.
There are any number of reasons why the two metals might not trade in sync, including the fact that silver has more industrial uses than gold and the latter has long been a core portfolio holding of numerous central banks. Regardless, up until last month at least, the two have closely tracked one another.
While it's possible the recent divergence signals a secular change in the relationship, the history over the past three years suggests it could also represent a decent short-term trading opportunity.
For those who are already long gold, it might make sense to switch some of that holding into silver. Selling gold short and going long silver could be another way to play it for those who have the appropriate risk profile and level of sophistication.
Either way, it's worth remembering that there's no such thing as a sure thing.
Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.
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Reader Comments (Page 1 of 1)
9-14-2007 @ 3:03PM
Michael Schneider said...
I just wrote something on this in a draft of the Barrel View e-mailing which comes out weekly. Not only has gold moved up more than silver in this rush to gold and gold stocks, but also coin dealer sources have been telling me that the gold/ silver ratio is historically way "out of whack" as you put it-- I recently picked up silver coins instead of gold as gold has moved up. Of course, a major drop in oil prices or choppiness in response to a less than desired Fed rate cut could make this all a mute issue-- there is a lot of speculation in gold and commodities are volatile so, near term, there are risks but silver should play some catch up- other things being equal and assuming no recession.
There are many items on the current gold rally and on metals generally in the new Gold Channel at http://www.Barreloworld.com. Those interested in receiving the free Barrel View e-mailings are welcome to sign our Private Guestbook at http://www.Barrelomoney.com and start receiving the most recent issue this weekend.
9-17-2007 @ 1:24PM
Harvey Goolsby said...
I have a private opportunity to buy some antique sterling silverware--rather cheaply. Discounting beauty/utility etc., what is the relatiuonship between "investment/protection" silver that is traded, and sterling silver used in dinner flatware?
Answer(s) or cautions to: hgoolsby@mtamaryland.com or hwgthrice@aol.com
10-01-2007 @ 8:11PM
jay luttes said...
If you are the sort that likes to play the odds in Vegas than gold is for you. Personally I don't know any successful gamblers. The house always wins so if you want to pan for gold then my bet is on you.