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*****Editor’s note: My wife and I just had our
first child- an 8 lb 13 oz baby boy named Beckett Stephen McElroy. I’m
taking some time off to spend with my wife and Beckett. Today, I’ve asked
my boss, Ian Wyatt, to step in and write this issue of the Resource
Prospector. Yesterday Ian presented his thoughts on gold – today he’ll
discuss the other precious metal; silver. -Kevin
Ian here. It has been quite a story with silver
prices lately. The metal entered the year around $30 an ounce having
climbed sharply in 2010. After a brief pause in January, it resumed its
upward trajectory – then really started to take off following the
Fukushima nuclear disaster.
That accident bolstered the case for solar power,
which requires a great deal of silver. Add in growing investment demand
with governments around the world debasing their currencies and stagnant
mine production growth and it’s easy to see how silver was able to ramp
up to close to $50 before halting.
***Two weekends ago the Chicago Mercantile
Exchange hiked its margin requirements on silver futures for the third
time in a week, putting the brakes on the rally. But don’t think for a
second the bull market in silver is over. Far from it.
Recently, Wyatt Investment Research’s small cap
analyst Tyler Laundon commented on silver’s retreat in a letter to
subscribers of the Small Cap Investor PRO service as follows:
“Whoosh. That’s the sound of the silver trade
unwinding over the past couple of days. The precious metal seems less
precious after plummeting from an all time high near $50 to around $34.
Not surprisingly, this crowded trade unraveled quickly after silver
traded well above its moving averages. Look at this one year chart of
silver that shows the violent four day retreat {Editor’s note: chart
updated after market close on May 17th}.