Option Play: Is silver stronger than gold?

Silver fundamentals (COMEX:SIN14)

From a fundamental standpoint, Comex silver futures have been considered everything from a safe-haven, a flight to quality, a hedge against inflation, a counter trade to the U.S. Dollar Index (NYBOT:DXU14), even a riskier asset at times, and an industrial metal. So it can be difficult to determine what will make this market move fundamentally. I embrace the challenge and I am constantly trying to determine what "fundamental mood" silver will be in on any given day.

I read a great article on June 27 on Marketwatch titled, Why silver's outperforming gold and isn't done yet and I found this article extremely useful in determining the "fundamental mood" of silver for now at least. The first sentence read, "Silver has quietly scored double the percentage gains of gold this month, and prices for silver probably haven't topped out for the year."

Certainly that is a bullish statement and I agree because the quote, unquote move it has already made has been relatively quiet to this point. The "move" I speak of started back on June 5 when July silver bottomed out at about $18.67/ounce to a high on June 24 of about $21.17/ounce. That's about a $2.50/ounce move in roughly 19 days.....wow!

This Marketwatch article offered some great statistics as well, "Tracking the most-active futures contracts, silvers prices...have gained roughly 13% month to date, compared with gold's.....6% climb." Further on, "Silver is priced as if it's much more common than gold, but it may be much rarer than the price suggests....silver may also become even more important  as an industrial metal, causing a supply shortage." Well there you have it, if there is a shortage of supply due to manufacturing increases and silver's uses as an energy and heat conductor, fundamentally that could be very bullish.

 

Silver, Daily (Chart by eSIGNAL)

 
Next page: Silver technicals and Option play
 

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