High Oil Hurts Silver
Source: Wall Street Pit, Gareth Soloway (2/24/11)
"As oil continues trading around $100/bbl, silver has started to fade."
"As oil continues to trade around $100 per barrel, silver has started to fade. The iShares Silver Trust (NYSE:SLV) is trading $32.26, -0.45 (-1.38%). The key with silver is that it is not just a safety net for inflation fears and global instability, it is a production metal. Being a production metal, silver moves sharply higher when the global economy is strong. That is a major reason silver has been charging higher of late. The higher oil goes, the more pressure it puts on the economies of the world. It is said that for every $10 move higher in oil, GDP will suffer 0.5%. Therefore, it makes sense that silver should sell off and is selling off with oil spiking higher.
Silver should continue to trade lower in the coming days, especially if oil remains around $100/barrel. It is important to remember that gold is more of a pure-inflation safety play. Please note that gold is higher today, while silver is lower. The SPDR Gold Trust (NYSE:GLD) is trading at $137.75, +0.24 (+0.17%). With silver down, it clearly shows that silver is influenced by growth while gold is all about inflation and safety."