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Silver Price Outlook

From a high around $37 per ounce in early March, the price of spot silver has been on what looks like a decent downtrend that has seen the price retreat to around $31.25 per ounce a few days ago.

This is well below the record high of almost $49 per ounce from late April and early May of 2011.

Being that this record all-time high for the silver price occurred fairly recently, less than a year ago, the question naturally arises: Is this a good time to buy silver, or is it a good time to sell it?

Historically, precious metals have always been a fairly safe investment that is popular during times of economic turmoil, especially economic turmoil that is caused by political events that can have profound effects on the currency of the country affected by such events.

From a historical perspective, the price of spot silver remained at a fairly consistent level of around $5 per ounce throughout most of the 90s and well into the 2000s, until it went on a pronounced uptrend in 2006 that saw the spot silver price basically quadruple to just over $20 per ounce.


The silver price then did something interesting. Over a short period of time, it retraced from the $20 per ounce level between early and late 2008 to almost exactly $10 per ounce. In trading circles, this tendency of a price to retreat by almost half is called a 50 percent retracement.

This is the point at which silver speculators would have considered it a worthwhile risk to purchase silver, even though a $10 per ounce silver price was double the price that held for the previous 15 years.

Fifty percent retracements are significant in many markets, and the spot silver price is no exception. Fifty percent retracements are not a guaranteed trade, nor will they frequently be exactly 50 percent, but they do make a logical place for prices to reverse, as has been conclusively demonstrated historically.

The price of silver did make almost a perfect 50 percent retracement from the all-time high in early 2011, down to around $27 per ounce in early 2012.

With demand for silver at an all-time high, it would seem to be a savvy tactic to purchase silver now, risking a drop to no lower than $25 per ounce, on the expectation that spot silver prices will test the high from almost exactly a year ago in the next month or two. If instead of rising, the price declines, keep enough trading equity available to purchase additional silver as it drifts toward the 50 percent retracement level between $30 and $25 per ounce.

Remember, however, that trading silver is risky because the market is small, meaning that prices can be manipulated by large traders or heavily influenced by some fundamental event. Also remember that you and you alone are responsible for any decisions to trade silver based on this or any other analysis. Make sure you understand these risks thoroughly and never forget that there is no guarantee that what happened in the past will repeat in the future.