The Devil's Metal Redux... Is Silver Above $40 Just Another Death Trap? (SLV, SIVR, PSLV, ZSL, SIL, SLW, PAAS)

Commodities & Metals

Published: July 18, 2011 1:39 pm

As the politicians in America play chicken with our prized Triple-A debt rating and as Europe is succumbing to its PIIGS, gold has eclipsed $1600 per ounce and now it has helped to pull silver back above that magical $40.00 mark. Maybe this time is different, but the massive run the last time felt like it took mere days (or hours) for silver to run up to $48 from under $35… That was from mid-March to late-April. Then the bubble popped and all the silver bugs were handed their costly bill for dabbling in the market at the peak. Silver’s rise above $40 again begs us to ask, “Is the Devil’s metal just bringing a new chance for investors to get burned?”

Maybe this time is different. Here’s a look at iShares Silver Trust (NYSE: SLV), ETFS Physical Silver Shares (NYSE: SIVR), Sprott Physical Silver Trust ET (NYSE: PSLV), ProShares UltraShort Silver (NYSE: ZSL), Global X Silver Miners ETF (NYSE: SIL), Silver Wheaton Corporation (NYSE: SLW), and Pan American Silver Corporation (NASDAQ: PAAS).

iShares Silver Trust (NYSE: SLV) closed $38.24 on Friday and shares are up at $39.32 after a gain of almost 3% today. Early last week the trust was under $35.00 and the 52-week range is $17.06 to $48.35.

ETFS Physical Silver Shares (NYSE: SIVR) is another physical holder of silver and its shares are back up at $40.09 on a 2.8% gain after Friday’s close of $39.01. This was also under $35.00 early last week and the 52-week range is $17.37 to $49.28.

Sprott Physical Silver Trust ET (NYSE: PSLV), technically a closed-end fund, peaked at $23.00 before the bottom fell out of silver. After a 3.5% gain today, shares are up at $18.87. Not bad for what barely a $16.00 price early last week.

ProShares UltraShort Silver (NYSE: ZSL) is getting crushed as it is the double-short play for silver. Its 6.4% drop today to $13.31 compares to a price of nearly $18.00 early last week. To show just how volatile, and deadly, this one is… Its 52-week high is $145.68. If silver rallies again through the roof and stays there, a reverse split of this exchange-traded product is likely.

Global X Silver Miners ETF (NYSE: SIL) tracks the miners rather than the metal, Its shares are up 2.6% at $27.75 today and it was close to $24.00 early last week. The 52-week range is $13.80 to $31.34.

Silver Wheaton Corporation (NYSE: SLW) is one the top silver mining stocks and its shares are up only 2% at $39.59 today. Only, well that is the bear market in stocks for you whether the Devil’s metal is in favor again or not. This was near $34.00 early last week and the 52-week range is $17.64 to $47.60.

Pan American Silver Corporation (NASDAQ: PAAS) is up only 0.3% today at $33.51, perhaps because the Canadian company’s operations are in Mexico, Peru, Argentina, and Bolivia. This was just under $32.50 a week ago and the 52-week trading range is $22.21 to $43.06.

Again, maybe this time really is different. Things are definitely more tense today than they were from March to the end of April. The problem is that we have been here before with prices rising rapidly in gold and in silver. We have also seen this game played out in the energy patch from 2007 to 2008 when the price rose every day for effectively the same reasoning. If silver takes on the extreme portion of gold’s rise and takes out new highs, then it may be the public’s last real asset grab for items that can be easily used for money and hold its value better than paper money.

Anything is possible, but it is at least worth asking just how different this time is for the Devil’s metal. Silver is a very small market for the amount of dollars that can be steered its way in a hurry. If you walk in one day soon and find that the margin for buying silver or gold has been raised again, don’t be shocked.

JON C. OGG

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