In 2009, the price of silver/oz was averaging at $12-14 and many think that it was too expensive, considering that the yearly average prior to 2009 was hovering around $7-8 . Except for the exceptional year during the Hunt brothers cornering of the silver market, which saw the price of silver/oz going above $50, it is actually unthinkable for the price to reach the level that high again , or is it ?
Fast forward to 2011, and the price per oz for silver is now $32 . There is a bull run for price of silver from 2009. If one would to invest heavily in silver in 2009, you would have made heaps in today’s market.
Interestingly, are we heading towards a bubble as liken to the dot com days ? Many gurus seem to think that the gold and silver market is heading to a bubble. Like the days of the dot com, will there be a heady bull run follow by a pull back in price ? When prices start to continue to rise further in 2011, those in the retail market, the likes of mom and pop will be enticed to enter the market. This will set an ideal situation for a “bear trap”, and when the prices of silver hit an astronomical value, the “bubble” will then burst. But what would cause the price to drop? In the dot com days, people realised that those high stock prices are unrealistic and cannot translate into earnings, so that is why it burst. For silver, what is the story ?
If one is holding to a promissory note, like a paper silver, such as the ETF etc, but is NOT holding to the physical silver instead, the likely scenario would be that when the “bubble” of physical shortages is felt, would the Paper silver be worth anything at all ? What are all the fine prints in these contracts saying, are they promising that you would get your silver or would they compensate you with fiat paper money instead ?
As more and more people become fearful, they will want to hold on to the physical silver (or gold ) instead to hedge against inflation and also the fiat monetary system. There will then be a mistrust in the promissory notes from those institution selling silver. People will want physical delivery. This will then drive demand for physical and the price will further spike ?
So, is it too late to buy silver , now that it is $32/oz instead of $12/oz in 2009 ? Maybe. But if you are getting nervous over the fractional money system and fiat currencies, maybe silver is a hedging tool even if the price appears high now. If the physical supply becomes tight as indications are showing, will $32/oz be too cheap tomorrow ?
Enjoy
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