Even though silver prices today (Friday) are down a relatively flat 0.59%, they're up more than 10% so far in February, and the rally won't end here.
This is where silver prices are heading in early 2014 – and how they're getting there…
Silver Prices Rally in February
On Feb. 24, more than 101,000 contracts were traded on iShares Silver Trust's options, marking nearly an 80% increase of the typical intraday amount. The same day, both gold and silver prices ended the trading session at four-month highs.
A day later on Feb. 25, the exchange-traded fund (ETF) experienced a $48.8 million inflow – a 0.7% increase week over week in outstanding units. In fact, iShares Silver Trust ETF has significantly improved in recent months, outperforming the S&P 500 Index by 11.6% during the last 40 trading days.
All silver ETF holdings increased in total ounces, up about 0.5% as of Feb. 26, according to ETF Securities U.S. director of research Mike McGlone for Marketwatch.
"Total silver ETF holdings are only about 3% below the all-time peak from October of 2013," McGlone said.
Even silver bullion coins are surging. Sales of the U.S. Mint's Silver Eagles, a popular silver bullion coin, are the fourth highest in history over the first two months of 2014.
The movement indicates speculators believe silver prices will rise, and so do we.
Here are the driving forces that will move silver prices up over the next few months…
What Will Keep Silver Prices Surging in 2014
Silver prices were frightful in 2013. The precious metal started out the year at $31, and ended at $19.50, continuing an overall slump dating back roughly to mid-2011. The iShares Silver Trust ETF struggled in kind, shedding over one-fifth of its value through 2013.
Remember, though, that silver embarked on an epic run in 2001 when it was near $4, eventually topping out around $49 in April 2011. At its peak it generated a return of 1,091%.
"Heading into 2014, I've pinpointed a number of key drivers – some often missed – that say silver may be poised for another spectacular run," Money Morning Resource Specialist Peter Krauth said at the start of the year.
Note: The Fed's 2014 taper means volatility lies ahead. But there's still a way to find profits in a volatile market – just start with this strategy…
First, look back to December, when silver-futures short positions of all speculators (in the Commitment of Traders COT report from the US Commodity Futures Trading Commission) hit a current bull-market high of 54,000 contracts.
"This kind of extreme often signals a strong performance in the silver price over the next 1 to 3 months," Money Morning Resource Specialist Peter Krauth said.
Second, look to the recent COT reports.
"They show speculators have already pared back their short bets considerably, so this reversing trend is playing out in textbook fashion," Krauth said. "We saw this happen in each of the past three years, and conditions look ripe for a repeat."
And third, ETF managers are drastically increasing their holdings.
"Their physical holdings bifurcated during 2013, saying a lot about investors' mindset," Krauth said.
Today (Friday), iShares Silver Trust is presently down a relatively flat 0.59%. So far in 2014, it's seen an 8.66% gain.
- Schaeffer's Investment Research:
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