Silver Has Soared Lately
Over the past couple of months, silver has been on a complete tear. In the past month, the SLV is up 28%. Compare that to 7.6% for the S&P and 10.8% for gold.
Needless to say, I’m pretty happy about this. As I wrote earlier, I had been piling into silver due to potential stagflation prospects. But is the rise in silver due to this or other reasons? Honestly, I have no idea.
While silver has been up, treasuries have gone down. Investors now are demanding higher yields from the US government. Some believe this is due to the collapse of fear in the marketplace. In the fall, treasuries had unbelievable demand due to everyone wanting a safe haven, and now that people are feeling more comfortable, treasuries are being bid down. I’m not so sure that is true. Treasuries have been consistently selling off since the year began, even in the face of the 25% drop in the market over the first few months.
The bearish explanation on why treasuries are falling is due to people’s fear about the dollar (another explanation for silver going up) and fears of inflation/debt monetization (another reason for silver to go up).
Those that are bullish on the economy may believe silver had just been oversold and was due for a bounce: the gold-silver ratio was way out of whack earlier this year. Another explanation is that all commodities are up due to prospects of economic growth. The USO is up 27% over the past month as well. Silver has many industrial uses, so it is climbing along with other commodities.
It’s not clear what the reason is, but we’ll likely find out over the next couple of years what truly will be driving the price of silver in the near-term.