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Gold and silver reversed all last week’s losses by the end of trading yesterday.

January 4, 2012 – Gold and silver reversed all last week’s losses by the end of trading yesterday. Gold, which has recently experienced a correction beginning in the month of December, was already up on the month before it gained $40 on Tuesday, ending trading above the psychologically important $1,600 level. This could turn out to be a strong support level for gold going forward as the gold bull market resumes. Gold also gained $20 in a period of twenty minutes in trading on Wednesday, highlighting the heat of the market in the New Year.

The biggest news, however, came from the silver market, which showed a 6.6 percent increase, the biggest single day increase in three years. Such a significant increase in the price of silver very nearly negates the possibility of the bottom falling out of the market absent intervention and very nearly ensures the upward trend will resume.

Differences in supply and recent heightened demand, both on the physical market and the move from paper to physical market, have made such wild cards as the bottom falling out a possibility. We have seen such corrections and decouplings several times since 2008, and since that market change the possibility cannot be ruled out. However, with yesterday’s action in the silver market little concern remains.

It is more likely, for the purposes of argument anyway, that the banker’s bonuses, which are dispensed at midnight on December 31st, went straight to silver on Tuesday as they have been doing for the previous few years. While it is only conjecture, it is said that these bankers only take physical silver and they only take delivery.

If that was their bet last December 31st, those bankers made a startlingly good investment for the year. Aside from gold, silver was the single best investment of the year before the correction, which brought the price from nearly $50 an ounce in late August-September to $27 an ounce prior to the trading session on Tuesday. Buying now at $27 an ounce will be a startlingly good investment come New Year’s Eve.

It is unclear at this juncture whether the New Year’s pop will last for a few more trading sessions or become the basis for the New Year of precious metals. We will see that dynamic work itself through over the next week. However, silver is a great buy in this market, especially at these prices. Gold and silver will end 2012 significantly more valuable at market than for what they can currently be bought.

Shannon King

Senior Staff Writer – GoldSilver.org

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