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Silver ETF Pullback Could Be "Harsh and Swift"

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Silver prices surged above $40 an ounce Friday and theiShares Silver Trust (NYSE: SLV  ) closed with a nearly 3% gain. However, some analysts are cautioning investors not to jump in blindly.

Bullion holdings in the silver exchange-traded fund (ETF) rose to a record this week of nearly 360 million ounces amid the rally.

Despite the silver ETF's "seemingly relentless rise, conditions are not overbought, the ETF Review newsletter from Investors Intelligence said Friday.

"However, trading is very overextended relative to the moving averages, so a reversion to the mean will occur eventually," the newsletter stated. "When that pullback comes it is likely to be harsh and swift. As such we are reluctant to chase this momentum trade. It's too late in the game and we would only now buy on a pullback to moving average support."

The rally marked the ninth day this year in which the silver price reached a new 31-year high. The only record remaining now for the silver price is its all-time high above $50 per ounce, set in 1980 as the Hunt brothers attempted to corner the market.

With today's advance, silver extended its year-to-date gain to about 30%, far surpassing that of almost any other commodity. Moreover, the price of silver has now doubled since September 2010.

ETFS Physical Silver Shares (NYSE: SIVR  ) is another ETF that holds silver.

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Read/Post Comments (12) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 09, 2011, at 2:20 PM, popof8 wrote:

    The Motley Fools are providing evidence of their name. They completely overlook the gigantic short position of JPMorgan in the silver market, where they hold contracts for more than a quarter of annual world silver production, with no silver to back up their shorts. You guys would be well served to check the Investment Rarities Inc. website and read the work of Ted Butler, who has exposed massive manipulation in the silver market over the past 30 or so years. Fortunately, CFTC chief Gensler is making the right moves to rectify the situation. I see a parity between gold and silver once this is completed.

  • Report this Comment On April 10, 2011, at 12:15 AM, cincyrichierich wrote:


    14.2T debt

    1.7T deficit

    Unemployment =all persons over age say, 19 minus those employed

    Groceries skyrocketing

    Gas and oil skyrocketing

    Bernake printing greenback toilet paper

    No drilling off our coast unless you are China, Cuba or Brazil

    Dollar plummeting

    So these Fools think silver will drop? Huh?

  • Report this Comment On April 10, 2011, at 8:14 AM, Ryszard56 wrote:

    Agreed this is not the time to climb aboard the fast moving silver train.

    Every day the price breaks a new high. Everyone is piling in.

    I have invested in and out of physical silver and silver equity markets and learned one most be very cautious as corrections will eventually occur. Previous silver market corrections were very swift and deep. One just entering the silver market could lose big if silver corrected now.

    As of recently I am out of the silver market and its very lonely on this side at this time.

    I have enjoyed the benefits of trading the silver markets especially this year.

    If a correction does occur and it looks like that will not happen in the near future, how deep will it be at these record high silver prices?

    Let sees how this one plays out.

  • Report this Comment On April 10, 2011, at 2:15 PM, popof8 wrote:

    All those things are valid, but the elephant in the room is JPMorgan's huge naked short position, one that cannot be cleared without major bullish consequences for the price of silver.

  • Report this Comment On April 10, 2011, at 8:18 PM, misterwax wrote:

    I had read from a close source that the 10% correction in three weeks of January reflected much of those shorts...maybe the source was wrong..but SLV is up almost 50% since January 22 or so...

  • Report this Comment On April 10, 2011, at 8:42 PM, buffalonate wrote:

    Gold and Silver won't go down until at least late 2012. Then the U.S. budget will be much lower and lower unemployment will significantly increase govt revenue. When the budget deficit gets under control gold and silver will crash. I think by 2013 tax revenue will be way up, spending way down and we will be totally out of Iraq and mostly out of Afghanistan. I would take my profits well before 2013 because the inflation fear will be mostly gone by then.

  • Report this Comment On April 11, 2011, at 11:45 AM, rfaramir wrote:

    I appreciate buffalonate's optimism, but it's pretty extreme to think that by 2013 America will have a handle on her debt or unemployment situation.

    As QE(n)s continue to bring more dollars into existence, PMs will continue to soar.

    There may be another correction of 3-10% soonish. Who can tell. There may be two of them before we break $50/oz. But the overall trend is up. So only those who are shaken by the corrections and get out prematurely will be hurt. The rest of us will view our paper losses as temporary, which they will be.

    If after 2012 we have fiscal conservatives in control of all 3 major political powers (House, Senate, President), we could possibly see a return to a balanced budget, a lowering of the tax burden, elimination of the minimum wage, elimination of special privileges for unions and banks, and reversals in warfare and welfare spending. But how likely is that? And every bit of that is necessary. So we will NOT be out of the woods soon.

  • Report this Comment On April 11, 2011, at 11:53 AM, caltex1nomad wrote:

    Watch out if the the U.S. decides to start dumping Gold to pay down debt !

  • Report this Comment On May 05, 2011, at 12:42 PM, fxsrider wrote:


  • Report this Comment On January 31, 2012, at 4:42 PM, john6257 wrote:

    i believe in the short 4 to 6 months we will see a run on the silver and gold market , silver will likely top out around 39 to maybe 42 before a correction of around 10 to 12 percent, i believe gold will top out at 1,850.00 to maybe 1,900.00, now if you listen to the great silver debate, this year, then the guy who was on there was saying basically gold is at its high for the year, well i watched it after the debate was atleast a week to 2 weeks old, i will make a prediction for silver to make a short 1 week run this year ( by april- 15th ish ) to a high of 43 to 46 per oz, there will be at least two corrections in the silver market this year of 10 to 13 percent at there respective times and i believe silver avg, wil be 34.50 to 35 per oz, this year, if you are like me and only own a minimal amount of physical silver then i would watch the market very closely and sell off at any price 38 to 40 per, people who are in it for the long haul should lay off watching the market and judging every small correction throught each week ,,, it will drive you nuts, silver is getting ready for a break out run very shortly, all the indicators are there, and it is getting resistance at just around or above 34 and support at 33.40 and the bands are tightning, i will sell my silve in the weeks comming between the end of feb- to to mid march ( give or take ), good luck everyone and keep you ass---etts out of paper for a while

  • Report this Comment On April 01, 2012, at 4:55 PM, john6257 wrote:

    well just as i said at the end of feb silver was on a huge run and then wham bernanke gave us the high hard one , which i fully anticipated, i sold my silver on feb -29th, ha ha ha bernanke you sob

  • Report this Comment On April 01, 2012, at 5:02 PM, john6257 wrote:

    now if anyone would liek some good advice, buy up silver again right now as much as you can afford, it will rise to aprox- 40 - 45 by the end of the third quarter , looks like bernanke and his buddies china and obama are going to debase our paper till it is worthless then borrow more to repay china with more devauled dollars which dont be fooled will drive silver higher i dont care what the so called experts say, just watch, so, i sold off 247 ounces on feb 29 th now i am buying up 350 ounces at this price 32.28 as of fri which was the end of the first quarter, when the second quarter comes closer to an end and if there is a feel of q3 by then it will go to atleast 42 an ounce, , i personally will ride till around 41 to 42.50 then im out again, i do this often and usually on these little purchases i make around 10 thousand a year just steering around the feds bull and the speculators grip. look for silver to fall off in late sept i now doubt we will see any thing above 43 an ounce if we even get there, but second quarter next year will be the next big time to buy

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