Why Silver’s Breakout Could Bring It Out of Gold’s Shadow

The Sovereign Society submits:

On a percentage basis, the price of silver can easily outpace gold over the next few years as both metals hit record highs after adjusting for inflation since 1980. Silver might achieve that goal far more quickly than gold.

But as gold reaches over $1,145 this week (+10% in November) there’s one missing ingredient required to legitimize this historic bull market; silver must exceed its March 2008 high of $20.78 an ounce. Spot silver trades at $18.71 an ounce this morning in New York.

The failure of silver to confirm new highs in gold prices is the only dangerous signal flashing for gold bugs in late 2009.

However, I do expect silver to breakout shortly and confirm the primary trend in gold. Indeed, this trend may have already started with silver breaking-out sharply over the last several days.

Birds of a feather flock together.

This old adage is especially true in the precious metals arena whereby gold and silver tend to rise or fall in tandem. Silver has lagged gold over the last several weeks as the latter has hit fresh nominal highs this year while silver remains $2.07 an ounce below its highs this decade. Silver hit an all-time high of $50 an ounce in 1980.

Adjusted for inflation since 1980, silver prices should trade north of roughly $128 an ounce now…while gold should fetch at least $2,200 an ounce.

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