Gold vs Silver: Who's Outperforming Who?

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...And not only has silver outperformed gold over this recent 3-month upleg, but the outperformance appears to be accelerating. During September, silver’s performance beat gold by just 1 point. During October, gold outperformed. But during the first week of November, silver is up nearly twice as much as gold (9.7% vs. 5.1%).

There are some great articles comparing gold versus silver as investments. One of the best is Adam Hamilton’s recent article entitled Silver Lagging Gold.

...On Tuesday, silver broke resistance, and powered through the $15 mark. At the time of this writing, silver was trading at $15.75 in Hong Kong, with the trend line pointing straight up. Gold was also parabolic in early HK trade, and added $7 in the last ten minutes! These are good times for precious metals investors, especially those who kept positions instead of selling when several “experts” were calling gold overbought around $760. Back on October 23rd, our technical analysis concluded that the upleg had plenty of room left to run and we wrote: As quick and steep as the latest run in gold has been, there is no indication that a correction is coming. A short consolidation might ensue, but if history is any indication, this upleg will take gold to $850 and then towards $1,000 in the coming months. The upside potential significantly outweighs the downside risk at this moment. Those trying to time the market might want to wait for gold to dip back to the $730’s, but they risk missing out on a run towards $850. Our strategy will be to maintain our core positions and look to add on a breakout above $790 or dip to $730...

But getting back to the gold versus silver debate, Mr. Hamilton’s article left me with the impression that silver has been lagging gold. This may be true over the long-term, but looking at the performance of each metal since the breakout in mid-August, we can see that silver has outperformed during 2 of the 3 months and overall, is up 34%, while gold is only up 26%. That 8-point difference is worth your attention. Where is the lag?

And not only has silver outperformed gold over this recent 3-month upleg, but the outperformance appears to be accelerating. During September, silver’s performance beat gold by just 1 point. During October, gold outperformed. But during the first week of November, silver is up nearly twice as much as gold (9.7% vs. 5.1%). We expect silver to continue outperforming gold throughout the remainder of this upleg and throughout the remainder of the bull market. Our favorite silver play is Silver Wheaton (SLW), a company we have covered in detail here. But another silver stock that has lagged in the recent upleg, and looks undervalued at the moment is Coeur d’Alene Mines (CDE ). The stock,br>Speaking of which, we view silver’s recent awakening as a sign that the current upleg is tiring, and is well past the halfway point. Having lasted approximately 10 weeks thus far, we are anticipating another 2-3 weeks of strong upward price movement before any correction/consolidation begins. We have calculated a price target of $865 for gold, and $17.50 for silver before the market takes a significant breather. Sound overly optimistic? Well, gold added another $3 to reach $830 since I started the last paragraph. The trend is your friend.

In conclusion, silver has outperformed gold during the latest upleg, and can be expected to outperform gold during the overall bull market in commodities. Silver stocks should be a part of the portfolio of any serious precious metals investor. However, as Mr. Hamilton pointed out in his article, silver is much more volatile than gold and as fast and furious as it may shoot past gold, it has a history of coming crashing back down just as fast. You have to be ready to cash out and leave less savvy investors, late to the show as always, holding the bag. Jason Hamlin, www.GoldStockBull.com

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