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Silver Pushes to $21!!!

Silver hit $21/oz in Fri morning trading in Asia & Europe, before finally closing at $20.77 for the week.  These are 30 month highs, last seen the Fri before Bear Stearns went under in Mar ’08, which prompted a MAJOR correction in silver that eventually saw lows under $9/oz by that same winter.

Predictably, silver has come back to these old highs as the artificial paper short contracts cannot overcome the increasing investor demand for the physical metal.  Testimony from a gold bullion bank insider on Mar 25th 2010 confirmed the huge disparity between actual physical silver available for investment and the amount of silver ‘owned’ through futures and options contracts. Since that date, both silver and gold have shot up in the latest move of this now 10 yr old bull market – silver up over 23%, gold 16.6%.

I’ve been following silver very closely since Dec 2007, and this move since silver hit $19 in late Aug feels very different to me. The selloffs are very short and shallow, unlike the big hits that usually occur. It has also traded more indepedently of gold, and is stronger, the Ratio having shrunk from 64.9 to 61.3 since Aug 27th.

Bottom line…I sense that physical demand from investors is stressing silver supplies and deliveries. The hard data on daily deliveries and notices confirms this idea here. This is resulting in a steady price rise, overcoming COMEX short selling by a couple large bullion banks. When $21 is significantly penetrated, we still lie at under half the $50 highs from 30 years ago, with a lot of wide open space between here and there.

Oh…and at its peak in 1980, silver traded at 1/16th the price of gold. Since then, millions of ounces of silver have been used up by industry and lost forever while virtually all gold ever mined remains in someone’s possession in one form or another. So it would be reasonable to expect the ratio to gradually decline over the years, not rise dramatically.

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