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Last time the US Mint ran out of American eagles the silver price jumped from $34 to $49 an ounce

January 21, 2013 - 11:19am

History does not necessarily repeat itself but when the US Mint last ran out of silver American eagle coins within a couple of weeks the price of silver sprinted from $34 to $49 in a mini-spike that quickly proved unsustainable.

It never quite broke through the all-time high of $50 and change that silver hit in 1980 when our old friend Gerhard Schubert, now head of precious metals at Emirates NBD made that trade. Thirty-two years later we are all a lot older but the silver price has never been that high since then. Last week the US Mint again ran out of silver eagles.

Top asset class

You certainly needed to be a patient investor if you made that last trade in 1980. However, silver has risen more than ten-fold from its lows in the early 2000s and has doubled in the past five years alone. Its actually been the best performing major asset class or commodity, outperforming its sister currency metal gold in all the upswings.

The silver price was well overdue for another increase at the start of the year. ArabianMoney and other commentators correctly called the bottom of the sell-off (click here). We would be more enthusiastic about the outlook for big gains next week if we did not fear an imminent global financial market correction.

Only a few of our more contrarian friends like Ricks Picks have put their reputations on the line with this prediction. To us the New Year rally looks ripe for a reversal and totally unjustified by the global economic outlook.

Falling prices?

Could we see silver prices dashed back to lower levels in a big sell-off? That would be very likely if it happens. Otherwise we reckon history will repeat itself and the silver price will again try to break through its 1980-high of $50 an ounce, and this time succeed before falling back again.

Sorry not to be able to offer a more clear-cut trading opportunity. It’s a high risk, high reward speculation with a significant downside, not a no brainer.

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About Peter Cooper / Commentary Author

Peter Cooper is the editor and publisher of the ArabianMoney investment newsletter and the popular financial comment website www.arabianmoney.net.

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