Silver’s rise (in US$ terms, at least) over the past several weeks has been nothing short of phenomenal. The chart has effectively “gone parabolic,” and people I’ve never met have started to e-mail me (in my capacity as a registered investment advisor) for advice on silver.
It doesn’t matter whether it’s silver, tech stocks, emerging markets currencies, or pork belly futures… any time these two events coincide (a parabolic chart pattern, and strangers asking me for advice), it sets off ALARM BELLS in my head.
I’m going to go out on a limb and say that right now, the fundamentals for silver DON’T matter. Many of the latest crop of silver “investors” have no clue about the fundamentals.
To try and divine what comes next, it’s more useful to use a general framework for understanding financial markets than to look at the supply and demand characteristics of silver. Because, right now, the market is being driven chiefly by investor psychology.
It’s a cliché to say it, but ultimately all financial markets are driven by fear and greed. Actually, I’d argue that they’re driven almost exclusively by fear. Let me explain…