THREE REASONS SILVER SHOULD HEAD HIGHER THAN $50 NOW / SEEKING ALPHA ( HIGHLY RECOMMENDED READING )

3 Reasons Silver Should Head Higher Than $50 Now
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by: Galileo Russell
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July 28, 2011

Silver is up 20% in the last month alone and looks to be headed for an explosive breakout similar to the one we saw in late April. But this time silver could see prices way higher than the previous $50 an ounce high because of three new factors that weren't in place several months ago.
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European Debt Struggles Have Gotten Worse

Bond yields for Portugal, Italy and Greece have soared through the roof in recent weeks signaling we are closer than ever for at least one country to start defaulting. The 2 year yields on Portuguese, Italian and Greek bonds now are all well above 10%. Rising bond yields give more incentives for investors to switch to concrete assets such as gold and silver. Recently silver has been trading very similarly to gold with the exception of having a significantly higher beta. If any more bad news comes from Europe, gold will surely climb and silver will climb even more.


New Support In The Low 30's


Silver began its first push with an established support level around $16-18 an ounce, then it surged to almost $50. After silver's quick pullback, a new support level has was established in the $32-34 an ounce zone. Silver used that support to trend off of lows and now has climbed to just over $40. With a higher launching pad, the probability of breaking April highs seems very likely. The move from $18 to $50 was 177%, if we can see that again, but this time starting from the low $30's, then silver has the potential to climb near $85 based on technicals alone.
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U.S. Debt Ceiling Problems
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The more the debt ceiling woes in the U.S. can steal headlines, the more fearful the general consensus about the U.S. economy will be. At that point, a move higher for gold will be in the cards. And as mentioned earlier- when gold goes up, silver will follow. If even one ratings agency ends up downgrading the U.S.'s debt, there is no doubt the markets will get hammered, as the debate gets more heated, the likelihood of a negative event occurring increases.


Overall, the financial world is in a state of turmoil at the moment and there are numerous ways in which something new could go wrong. If any European nation defaults, the U.S. can't fix the debt ceiling or any combination of the two then gold and silver should see massive price hikes.