The boring old cliche goes, “beauty lies in the eyes of the beholder.” Cliches may be boring but they hold true, at least for gold and silver.
So if you are debating whether to play gold or silver, look into your heart and find your true intentions. Know if you plan to marry or just have an affair.
To view swing trade picks on gold, silver and other commodities read this report: Swing trades of commodity futures & ETFs
There is often a debate among people whether to invest in gold or silver. It’s said gold and silver move in tandem, which is true, and treat both investments the same. However, the precious metals act differently on several important factors and we will go into that shortly. But before getting into the details, let us just say that if you plan to marry go for gold and silver is great for an affair.
The chart of gold and silver (Click here for the chart) provides an excellent guide to the characteristics of the metals. The chart shows the gold futures contract on the top half and the silver futures contract on the bottom half. These contracts traded on the Chicago Mercantile Exchange attract investors across the globe and are hence the best benchmarks to track the two metals.
Let us look at both the metals from August 2007, the month where they began a rally. The white vertical lines show the dates to the peaks and valleys of the two metals. The charts clearly show that silver moves more wildly–like a passionate short term affair–than gold. For instance between August 2007 and March 2008 silver rallied 80 percent but gold rose only 52 percent. Then from March 2008 to October 2008 gold fell 34 percent and silver crashed 60 percent.
In the next rally from October 2008 to December 2009 silver zoomed 122 percent but gold rallied 76 percent. Finally, in the correction between December 2009 and February 2010, silver retreated by 24 percent but gold only fell 15 percent.
It is well known fact that traders are flirts and investors seek long term commitments. So if you are a trader, silver would have provided great returns on the roller coaster ride up and down. It is clear from the charts that there was more money to be made both on the long and short side of silver. Whenever silver was down in the dumps, you could have picked her up and held her close. The fond affection of traders makes silver dance and rally in joy. Then when she acts pricey you could have dumped her and picked her up again when she was down and low.
Now if you are seeking a long term commitment, silver would have taken you up and down with lesser growth and maturity in the relationship than gold. Let us explain. There are two yellow horizontal lines on each of the charts. The lower yellow line shows the base of the rally that began in August 2007 and upper line shows the high of that rally.
Now look at blue vertical lines on both charts, which begin from the lower horizontal lines to the latest prices. A long term investor who entered the two metals in August 2007 would have only made a 40 percent gain in silver as against a 60 percent gain in gold.
But that is only part of the story. Notice that silver made a lower low in October 2008, when it broke below lower horizontal line. Gold on the other hand bounced off its lower yellow line. Additionally, gold broke above its previous high, shown by the upper horizontal line, but silver did not. This shows that over the long term, gold is relatively stronger than silver. The implication is that in a bull market for precious metals, gold will rise higher than silver, and in a bear market silver will fall lower than gold.
Hence, it’s clear that a long term investor should focus on gold and a trader would be better off playing with silver. In personal matters, Capturetrends strongly advices that you either seek a long term relationship or have an affair. But in the financial markets you are free to indulge in both.
