Gold and silver prices outlook May 2011 – what’s next for gold & silver?

April was a very “uplifting” month for precious metals including gold and silver. Will the rapid increase in gold and silver prices during April 2011 continue in May? Let’s analyze the gold and silver market during April and try and provide and outlook for gold and silver prices for May 2011.

Gold and silver prices April 2011

As seen in the chart below, both precious metals rose very precipitately: during the month of April, gold rose by 8.9%, while silver increased by a whopping 28.8%.


normalized Gold and Silver prices April 2011 outlook

From a wider scale perspective, notice in the chart below the normalized prices of gold and silver to January 3rd 2011; the chart shows the change in gold and silver prices during 2011.


Gold and Silver prices normalized 2011

The chart shows that silver and gold were more of less at a similar level up to the middle of March and since then silver price started to pick up and outperformed gold prices by a landslide.

Despite the hike in silver price during the last month and a half the correlation between gold and silver was still high as seen below:


Correlations Gold & Silver Prices Dec 2010- April 2011

There are a couple of factors that might explain the rise in silver over gold during that time and both relate to the Japan’s tsunami which happened at the mid of March:


  1. The turmoil that followed the tsunami attack on Japan might have also changed the dynamics regarding gold and silver, seeing that Japan is among the world’s leading consumers of gold – its demand might have fallen and slowed down the rise in gold prices compared to silver prices.
  2. On the one hand and Bank of Japan “print” 15 trillion yen (about 183 billion US dollar), in order to finance the tsunami disaster. There wasn’t a strong correlation between the Yen and gold and silver prices (as seen below) but it doesn’t mean there isn’t an indirect connection.


Correlations Gold & Silver Prices and YEN usd Dec 2010- April 2011

Gold demand/Supply dynamics

The gold supply remained high compared to its demand during 2010 ad this trend is likely to continue towards 2011.

In such as case, this implies that the forces of supply and demand have little to do with the current gold prices in 2011.

It’s well known that gold and silver are used to hedge against the depreciation of the US dollar and the inflation. As such, it puts gold and silver in a very unstable position that when the fear of inflation and US dollar depreciation against major currencies will drop down the gold and silver prices are likely to tumble right after. When such a scenario will take place? That’s the million dollar question…

Gold silver and major currencies

The correlation of gold and silver prices shifted in the last couple of months as the AUD/USD that used to be very highly correlated with these metals, declined. Australia is among the leading exporter of gold and therefore it makes sense it will be correlated.


Correlations Gold & Silver Prices and AUD usd Dec 2010- April 2011

This finding might suggest that again the rise in recent month of gold and silver isn’t related to the supply and demand dynamics.


On the other hand, there was a rise in HK/USD correlation (in absolute terms). Hong Kong is a major importer of gold and it might be that its role in the rise in gold and silver prices during 2011.


Correlations Gold & Silver Prices and HK usd Dec 2010- April 2011

For the Yuan there is also a rise in correlation between silver prices daily percent change in Yuan during April. This might also be an indication for the out performance of silver over gold.


Correlations Gold & Silver Prices and YUAN usd Dec 2010- April 2011

Outlook for silver and gold prices – May 2011

The current prices of silver are freefalling probably due to the increase in margin requirement as I have reported yesterday, May 3rd. This change might attribute to the slowdown in silver prices; I think that the hike in silver prices during April was a bit over the top and therefore I speculate silver will come down from its record high rate.

Gold prices are also at an all time high and are likely to follow silver and drop but if so at a very moderate rate and by the end of the month it might even make a come back to its high level it was at by the end of April.

Since major economies including US, Euro zone and Japan are still trying to recover from their economic slowdown, their condition including the rising inflation and weakness of major currencies are likely to keep gold and silver prices at a high rate in the short to mid term, even if they won’t increase much further during May.

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8 comments for “Gold and silver prices outlook May 2011 – what’s next for gold & silver?

  1. Brad Nakayama
    May 8, 2011 at 10:29 pm

    When will it be best to buy silver? It seems to have bottomed out at $35 per oz. I hear that there may be a panic to send silver down to $20 … What is your opinion?

    • May 9, 2011 at 10:03 am

      Hi Brad,
      Silver was over priced in the last couple of months, as we saw the declines in its price very rapidly. I do think that eventually it will come down even below the current rate, but the million dollar question is when this occurrence will happen…as long gold is strong, silver is likely to follow, so it may take some time before silver will come down any further…

      (P.S. this is by no means a financial advice)

    • amitava
      May 20, 2011 at 9:28 pm


  2. Bill Waldron
    May 10, 2011 at 1:40 am

    I have owned a large international construction company for many years and have always had to maintain balanced books and positive cash flow. The business side of our country is not being run like a business. It would not equal a lemonade stand run by kids. They know when they are making a profit and how to control their expenditures. I have been to DC a lot. Our representatives as a whole are completely detached from the rest of us. The massive debt is unrecoverable, like a huge runaway credit card with big interest payments. Nothing now can turn the tide, short of a devaluation of the currency, defaulting on our international debts, or economic collapse. I am not a doomsayer…….merely a realist. The world has to have a means of trading and buying goods…gold has filled that role thru all the centuries as dynasties and countries have come and gone. With regrets I invested in gold very heavily and am staying for the long run for protection. It is not the greatest is long term protection….it is not appreciating……its price is going up in US Dollars because the dollar is sliding, increasing the price of gold. I purchase on very small commissions from a family owned company, Colorado Gold.

    • May 10, 2011 at 1:49 am

      Hi Bill,

      Thanks for your insight.

      • Joy
        May 26, 2011 at 5:46 pm

        I agree with you Bill…gold and silver are just for protection with the dollar collapsing…and that is the plan of the government…to introduce the Amero…and New World Order. It is a plan Bill by the elite globalist, and many of our government officials are a part of this plan, and as you say disconnected. They are not serving Americans, but their own interest. Bill Gates…wants us all to take the government vaccines to help depopulate America! Don’t take them! A friend of mine took the H1N1 vaccine, and it paralyzed her! I am praying for a hero to lead the country…Lt. Colonel Allen West…Congressman from Florida. He is brilliant, and truly cares about America. I urge you to join his Website. There are many people trying to talk him into running for the President in 2012. He will lead America for the people, and by the people, and uphold the laws of the Constitution.
        GOD bless you,

  3. suniti wadhwa
    June 2, 2011 at 1:46 pm

    is this the right time to buy silvet around 37$ or should i wait for the prices to go down around 30 – 32?

    • June 3, 2011 at 8:36 am

      Hi Suniti,

      Thanks for your question; unfortunately I don’t provide financial advice only general analysis of the market.

Comments are closed.