Little bit of caution on silver after the “poor man’s gold” hit a record peak yesterday morning.
Since then, the metal has fallen as much as 9.5% off its peak.
Is this huge move lower in just 24 hours the first sign of a breakdown?
Strategically, if Bernanke gives even a hint of a change in monetary policy this year, silver will hit the skids hard before it becomes a buy again.
This is because the metal has a foot in both philosophical camps right now. On the one hand, it is definitely attractive to those who see an end of fiat currency regimes and a return to hard assets.
But on the other, the silver markets also depends on industrial demand, which means it is linked to economic growth and hot money policy.
This is part of where the “poor” aspect of silver comes into play — unlike gold, which can prosper even when the underlying economy weakens, silver still needs support from industry.
Until we see which way the wind is blowing, the cross-currents may keep the iShares Silver ETF (NYSE:SLV) and the physical metal at the mercy of speculation, and that means more up-and-down grinding.
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.