Silver price hits 38-year high at $38.50/oz

The positive momentum of gold and silver continue with both higher in European trade as oil prices have risen due to geopolitical tensions in oil rich nations and the euro has fallen on Eurozone debt concerns.
Focus will be on interest rates this week with the ECB likely to increase interest rates, and renewed speculation as to whether the Federal Reserve will attempt to increase interest rates or embark on QE3.
Contrary to some misinformed analysis, rising interest rates will be bullish for gold and silver as they were in the 1970s.
Silver for immediate delivery has gained another 1.7 percent to $38.50 an ounce, the highest level since February 1980, the year silver reached a record of $50.35/oz. An ounce of gold bought as little as 37.32 ounces of silver in London today, the lowest level since September 1983.
Silver has come out of backwardation and returned to contango with longer dated future prices again higher than nearer month contracts and spot for delivery (see table below). This suggests that default on the COMEX, as warned of by some analysts, is not imminent and the tightness seen in the physical silver market may have abated somewhat.
However, the Dec 12 contract trading at only cents over spot for delivery (less than 10 cents) suggests that tightness remains. Given the degree of tightness in the physical silver market, silver may return to backwardation sooner rather than later.
While silver is overbought in the very short term, its outlook remains bullish.
Momentum remains very strong with a series of higher weekly, monthly, quarterly and annual price gains. Silver remains the preserve of a handful of contrarian and hard money advocates and is only beginning to enter the consciousness of the mainstream. Allocations remain tiny compared to allocations to conventional investments.
Finally, speculative fever is not only missing from the mainstream public (most of whom would not even know the price of an ounce of silver) but it also remains subdued on the COMEX on Wall Street. Little or no irrational exuberance or “piling in” being seen in the trading pits. The latest COT report shows speculative long positions, or bets prices will rise, outnumbered short positions by 37,139 contracts (see chart below). This is a level of net longs by hedge fund managers and other large speculators that was seen as long ago as 2002.

(Source: http://www.commodityonline.com/news/Silver-price-hits-38-year-high-at-$3850oz-37863-3-1.html)