Silver is up 20% in the last week – a feat it has accomplished twice in the last three weeks and only twice more in the last three decades. This precious metal often plays second fiddle to gold in people’s minds, but it has shown truly captivating price action compared to most other markets in recent trade. Having tacked on its third and fourth +20% weeks out of more than 1,500 weeks, silver is in the midst of a true outlier move.
The First Two Outliers
The first time silver jumped by more than 20% in a week (2/5/98), it saw a 4% decrease in the following week and a 17% decline in the following month. Its second 20% weekly appreciation (9/23/08) was met with moves lower by 7% and 29% in its next week and month, respectively. While this historical context could be used to support bearish opinions, the third such move being followed almost immediately by the fourth shows that there are no guarantees of a reversal.
All Paths That Lead to Silver
Traditional silver futures (/SI) have appreciated more than $40,000 since mid June, and the smaller version of those futures (/SIL) have still moved higher by a whopping $8,000 in the same three-week period. While there seems to be plenty of opportunity here, few individual traders looking to try their hand at metals can withstand such fluctuations.
Using the silver ETF (SLV) can be a nice compromise having moved only $8.50 per share in the same amount of time, but the efficiency of futures is also compromised when using this product. Capital requirements that range from 50% to 100% for ETFs can cost traders up to ten times the amount of futures per unit of exposure
Small Precious Metals (/SPRE) offer the cost-effective attributes of futures at a size that sits between ETFs and traditional futures. Since the silver rally commenced, /SPRE is up a little over $1,000; and capital requirements only demand a few hundred dollars, while equivalent exposure in SLV shares would call for $4,000-$8,000