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Silver (NYSE:SLV) gained 1.2 percent to last trade at about $38.34 an ounce, after hitting a session high of $38.99, the highest since the Hunt Brothers cornered the market in the early 1980s, when prices briefly hit a record of just below $50 an ounce. Silver has outperformed gold in recent months, rising 22 percent in the first quarter compared with gold’s 0.7 percent. The gold:silver ratio, which shows how many silver ounces are needed to buy an ounce of gold, fell to a 28-year low at 37.3.

On Monday, Bernanke said an increase in U.S. inflation has been driven primarily by rising commodity prices globally, and was unlikely to persist. His comments contrasted with those of other U.S. central bank officials, some of whom called for tighter monetary policy.

Rising oil and grain prices boosted gold’s inflation hedge appeal. Brent crude rose to a 2-1/2-year highs on geopolitical risks to supply from the Middle East, while corn futures hit a record high as worries over tight supplies persisted.

Investors have a round of central bank meetings and economic data to digest this week, and likewise, trading will be heavily influenced by forward looking commentary regarding interest rates, inflation, and growth. To kick the week off, the Reserve Bank of Australia announced their interest rate decision last night, and this looks to be followed up by the FOMC Minutes during the day today, and lastly back-to-back interest rate decisions from the Bank of England and the European Central Bank early Thursday morning. Gross domestic product data is also slated to come out of the Eurozone and England on Wednesday, while Canadian unemployment is the last major event for the week on Friday.

As investors wait for central bank decision to hit the wire, equities and consumers around the world will likely continue to feel the pressure of rising oil, especially as WTI crude futures pushed past $108 a barrel on Monday. Likewise, precious metals are gaining momentum on continuing fears of rising inflation and general economic uncertainty.

SLV opened above $37 a share for the first time on Monday, and the fund will likely continue higher in the coming weeks given the longer-term strength of its uptrend and supporting fundamental factors. The next likely level of resistance is the $40 mark, while support comes in at the 20 day moving average, right above $35 a share. Any brief correction may be used as an entry point, while a close below its 20 day moving average should be treated as an alert, since the fund may then quickly fall to its 50 day moving average or even lower.

Technically speaking, SLV remains in a strong uptrend, and from a long-term perspective investors can use dips/corrections as great opportunities to establish long positions. When taking into account fundamental factors, the case for SLV remains bullish. This precious metal not only mimics the safe haven traits of gold, in serving as a hedge against inflation, market volatility, and geopolitical tensions,  its demand is actually primarily driven by industry. In fact, GFMS forecasts that industrial silver demand will rise by one-third in the coming years, up from 15,000 tonnes in 2010 to over 20,000 tonnes in 2015. Economic momentum in emerging markets is also picking up, and likewise the price of silver is increasing thanks to rising incomes and growing demand.

Tags: bernanke, brent crude, gold:silver ratio, inflation, new silver high, silver, Silver Bullion, Silver prices, US Inflation

This entry was posted on Tuesday, April 5th, 2011 at 9:34 pm and is filed under Commodities, Contributors. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.