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What About Silver?


Gold has been on a tear, but so has this metal. What's next?

"People want to own precious metals because they lack confidence in paper money," says Fleckenstein, who also serves as a director for Pan American Silver. "They buy them because they have no confidence in the purchasing power of the currency."

Treasury Secretary Tim Geithner said recently that it is "very important" for the US to have a strong dollar and promised to preserve its role as world currency. Of course, Tiny Tim reports to Team Obama and it's hard to imagine the crew at 1600 Pennsylvania Avenue working overtime to restore King Dollar.

Quite the opposite, in fact: the greenback will be allowed to depreciate in coming quarters as Obama's crew does whatever it can to goose GDP growth ahead of the critical mid-term elections, say economists.

Fleckenstein, for one, has little use for the sloganeering of Geithner.

"Who cares what he says? It's like Ben Bernanke saying he is going to tighten some day. So what? Let's see what they do, not what they say. Talk is cheap."

Where does silver go from here?

Charles Nedoss, senior account manager and metals analyst with Peak Trading Group, says he thinks we could see profit-taking in the near term.

"I think we could see this thing pulling back $0.90," he tells Minyanville. "We have basically gone straight up from $16 to $18 so I wouldn't be surprised to see us test the $17 area over the course of next week."

Nedoss adds, "Now, I am still bullish. I think we will come up and test at least the $20 area on the back of a weak dollar."

Bart Melek, global commodity strategist at BMO Capital Markets, thinks there could be a correction in the near term. "We are in fact calling that for gold as well," he says.

Still, Melek says he expects gold to be a strong performer for at least the next three years, with silver following suit.

"The supply is relatively tight," he says. "Historically, silver outperforms gold in an up cycle for precious metals. We suspect this will be the case for silver this time as well."

Says Fleckenstein: "Silver is going higher. Now, is silver going to make you money without testing your patience i.e. dipping first? Probably not, because it just had a big run. But should I sell my silver and run for the hills? I don't think so."

The hedge fund manager concludes: "The green piece of paper we call the dollar is a basket-case. And so are the other colored pieces of paper, for the most part. So I see no alternative but to own precious metals."

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