I’ve heard many people on Wall Street state that silver IS the market right now.
The metal entered the year around $30 an ounce having climbed sharply in 2010. The surge in silver prices continued through the first four months of the year, only to fall off a cliff after the first trading day of May.
Recently, Wyatt Investment Research's small cap analyst Tyler Laundon commented on silver's retreat in a letter to subscribers of the Small Cap Investor PRO service as follows:
***Silver has fallen from a high of around $50 to $34 - that's a 30 percent correction. This is not too surprising given that the metal had already soared 60 percent in just over 5 months. It was due to pull back to a level where it wasn't so overbought.
The relative strength indicator (RSI) is showing that silver is an attractive buy right here. An RSI above 70 generally indicates an overbought condition, while an RSI below 30 is oversold...Some technical analysts will say that silver is likely to test its 200-day moving average, which is around $28, before it will establish a new trend.
I think that level would be a gift for silver investors who have been patient and know that averaging into positions is the best way to generate investment returns over the long-term.
I believe that we'll see silver's volatility mellow out in the coming sessions, and that it will begin to consolidate after a heck of a run. Even if that is around $33, it would still be a 10 percent gain in 2010 - very respectable."
Currently the price of silver is roughly $35 and it seems as though Tyler projections are correct. The precious metal seems to be consolidating.
As a result, I want to take another look at a small silver mining company that I mentioned a few months ago.
Back in March MAG Silver released exciting news about one of its projects that could go into production soon. If it does, and silver prices remain reasonably strong, investors that purchase shares ahead of production will be well positioned as the company brings a new revenue stream online.
The stock has become volatile, as have most silver stocks, in the last couple of weeks as the market digests earnings and recovers from the recent slide in commodities.
MAG is headquartered in Vancouver, British Columbia, the company's mines are in Mexico. MAG wholly owns over 100 square miles of prospective ground throughout that country. The company has nine primary mining projects in progress, but it just released a report on the Juanicipio mine that could be a game-changer.
At the Juanicipio mine, in the prized Fresnillo Silver Trend region northwest of Mexico City, the company stated in a "prefeasibility study" that drilling has encountered a high-grade vein. Indications are that this Juanicipio Vein has 46.5 ounces of silver per ton of ore, about four times the density of the company's nearby Valdecañas Vein.
Juanicipio is a joint venture with Fresnillo PLC, who is the project manager and holds 56 percent of the project. MAG Silver is the junior partner and holds the remaining 44 percent.
The property is a rich, yet undeveloped asset. In September MAG released a study that indicated Juanicipio contains 110.8 million ounces of silver - about 27 million ounces more than a previous study. In a February 2011 presentation, MAG Silver executives also pointed out that there's "strong upside for the discovery of more veins."
Along with silver, Juanicipio also contains gold, and zinc which would be mined and accounted for as 'silver credits', an industry standard which helps consolidate reporting.
The upside from this new operation is significant, and investors that are looking for exposure to a developing silver company should put MAG Silver on their watch list.
For diverse exposure to silver opportunities in Mexico, Tyler suggests that investors have exposure to companies that span the range from explorers up to producers. MAG Silver, as a developer/producer, fits in the middle of this range.
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