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Silver: Is The Breakout Entering The Next Phase?

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The fundamental case for owning silver remains as strong as ever. The white metal is a hard asset alternative to fiat currencies, and the demand for silver should continue to receive support from aggressive monetary stimulus from global central banks along with ongoing competitive currency debasement across the world. And if a sustained economic recovery were to actually take hold, silver would also stand to benefit from its cyclical characteristics due to its industrial uses.

Yet despite the fundamental support behind silver, the underlying price has been choppy at best since going parabolic early last year. But after bottoming at the very end of 2011, a new sustained rise in silver is now picking up steam.

For the purposes of this analysis, I will be focusing on the iShares Silver Trust (SLV). However, the same price principles outlined in this article also apply to the ETFS Physical Silver Shares (SIVR) and the PowerShares DB Silver ETF (DBS).

Back on January 21, I posted an article focusing on the fact that silver was finally making its move to the upside. At that time, it had broken above its 50-day moving average. This was a critical first step in the upside move for silver, as it had been trapped below this resistance since mid-September.

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