The long-term picture

After hitting a multi-year low of approximately USD 4 / oz. in November 2001, the silver price moved into an up-trend, much in sympathy with the gold price. Unlike the price of gold, the price of silver fell from its up-trend last summer. It did however find support above the previous November's low of USD 4.25, confirming that the down-trend had indeed ended.

The silver price has in fact established a double-bottom from which it is tending upwards, signaling that a major turn-around has been established.

As long has the silver price does not close below the low of last October, we can safely suppose that the up-trend is intact, indicating an excellent buying opportunity.

2003 may well be the watershed year for silver!

The medium-term picture

The silver price is usually more volatile than the gold price. Yet interestingly, while the gold price fell 14% from its February high, the silver price has fallen less than 5%, denoting relative strength.

It also shows that the support above $ 4 is very strong and likely is capable of absorbing any selling.

Investors are nevertheless very nervous at this stage, as the prospect of war leaves people guessing as to the consequences to the world economy.

Should there even be a quick military victory for the US, it would hardly mean the beginning of a period of peace and prosperity in the Middle East.

The American and British troops will not be seen as friends but rather as an occupying force one has to get rid off as quickly as possible.

Few have any doubts that the Iraqi President is an evil person. UN sanctions have led to a scarce supply of clean water for the Iraqi people. Can those who cause untold suffering amongst innocent civilian Iraqis be any better than the man they seek to punish?

The short-term picture

In the short-term, it is mainly a question of whether the support at $ 4 and above will be capable of absorbing any selling pressure should it develop as a result of a quick US victory in Iraq. As nobody has the answer to this question, one may be well advised to wait with further commitments, at the risk of missing out on a powerful rally in the silver share prices.

HOW TO PARTICIPATE IN THE UNFOLDING BULL-MARKET IN SILVER:

Due to the fact that silver demand has surpassed supply for many years, "Implied Net Disinvestment" has fallen over the years - a trend which, if it continues, will inevitably lead to higher silver prices.

Investment demand will of course play an important role and the bull trend in gold may well spread to other precious metals.

Mankind's timeless fascination with silver stretches back 6,000 years. As early as 700 B. C., the Mesopotamian merchants used silver as a form of exchange. Later, many other civilizations came to recognize the inherent value of silver as a trading metal.

The ancient Greeks minted the drachma, which contained 1/8 th ounce of silver; and in Rome, the basic coin was the denarius, weighing 1/7 th ounce. And let's not forget the English shilling "sterling," originally denoting a specific weight of silver, which has come to mean excellence.

Today, millions of people throughout the world recognize silver's intrinsic value and have made it popular as an affordable investment.

Peter Zihlmann

March 24, 2003