-- Posted 21 February, 2011 | | Discuss This Article - Comments:

A week ago and you could have made a good argument for the silver price being at a double top. And typically after confirming a previous high, a downturn would be in prospect.

But not after prices jumped to $32.60 by the end of the week, comfortably placing silver in a fresh stage of upward momentum.

It is not hard to reason why. There is the weakening dollar. Geopolitical upsets like the Arab World’s revolution in Egypt and its knock-on impact on Bahrain. Or the US budget deficit.

Hard assets

The rush to hard assets continues. Some observers will not be convinced of the silver price break out until it is confirmed by gold which has been a laggard in this rally and still not above its recent high of $1,430.

That confirmation should not be long in coming. UAE gold sellers report shortages of gold in January as canny local investors bought at lower prices. Mints around the world are having to ration coins.

Metal analysts see silver now heading to $36 before any further correction. But silver has always been volatile. It does, however, almost always outperform gold on the upside as well as on the downside.

Gold prices do not seem very vulnerable to anything except a major correction in global stock markets. That could jump out of the woodwork at any moment. Stocks have not risen this far, this fast since the mid-30s and that was followed by a massive plunge.

Goldman selling or buying?

Goldman Sachs was on Bloomberg Europe last week telling viewers to buy, while the previous week it emerged that its own house position is that there is nothing worth buying anymore (click here).

But any stock market downturn (if they actually happen these days) would test precious metals and rally the dollar. For those daring enough to short equities at this time this would be a great buying opportunity for gold and silver.

These are the kind of strategies that we follow up with actionable investment ideas in the ArabianMoney newsletter, and no prizes for guessing that the next issue will be about what revolution means for investors (click here to sign-up ready for a landmark edition).

In the meantime, if you are a gold bug, should you not now also be thinking about silver (click here)?