February 2012 Silver Price Forecast

January 2012 saw the price of Silver surge almost 8% as the market made an aggressive rally to the upside. This is a huge positive for silver as the precious metal has seen incredible volatility in the past 12 months.

Silver will be volatile again in 2012

2012 will mark one of the most critical years for the markets. And it may even be more critical than 2008. The Eurozone may collapse in this coming year. That will mean a huge influx of investment in the dollar as well as silver and gold. However, that does not mean that the precious metal is completely safe.

If the stock markets crash because of the Eurozone, Silver may go down with the market since it has industrial uses as well as a store of value. That means that people will place their wealth in the U.S. Dollar and Gold before they put their wealth in Silver.

Seasonal Late January and Early February Weakness

Be aware that late January and early February are typically weak times for the market. That is because markets tend to rise in the beginning of the year and people tend to take profits at the end of the month. Therefore, it should not be surprising if silver falls in late January/early February.

February should see stabilizing silver prices

The price of silver will need to take a much needed rest after the major surge in January. For short term investors, this would be a good opportunity to sell at-the-money calls on the Silver ETF (SLV) as well as major pure silver mining stocks such as Silver Wheaton Corp. (SLW).

Set up for March

As the silver prices stabilize in February, they will set up another run higher in March. In fact, March and April tend to be a strong time for the markets, usually lead by the energy sector. That means that February will be a good entry point for silver investors looking to profit from a late spring market rally.

February 2011 Silver Forecast

Look for the price of silver to hover around the $33 to $34 range. $35 is an important resistance point. If silver can break through $35 in March, then the precious metal should have a clear sailing to the $40 by the end of April.

Summary

February will be a time for silver to have a "breather" after the massive January rally. Those looking to generate income should consider selling at-the-money February or March calls. This should set up a continued move higher at the beginning of March.