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By Melissa Pistilli-Exclusive to Silver Investing News

Precious metals prices are on a tear this week with gold reaching over the psychologically important $1,000 an ounce mark, the first time in six months, and silver hitting a 13-month high of $16.80 an ounce on Tuesday.

Both gold and silver are reacting to inflation fears and dollar weakness in the market. “The market thinks inflation is coming,” said Leonard Kaplan, the president of Prospector Asset Management.

The silver spot price is expected to move higher following gold, but “significant and sustained momentum” is needed, says Forex analyst Anna Coulling, if the white metal is to break out above $18.50 and test last year’s high of $21 an ounce.

Many analysts believe gold may climb to $1,200 in the near future, especially if inflation becomes a reality. If gold can maintain its hold on the $1,000 level and advance further, spot silver will power through its own resistance levels.

But, investors would be wise to tread into the market cautiously as many factors indicate that silver may be overbought at these levels and experts are anticipating a downward correction before any more significant gains can be made.

Keep an eye out for this reaction in the next week or so as it presents an awesome buying opportunity for serious investors to get into the precious metals market or to expand their existing exposure ahead of what could possibly be a sizable breakout.

In a bull case scenario, say BMO Capital Markets analysts David Haughton, Andrew Breichmanas and Bart Melek, silver could reach over $22 an ounce next year.

In his most recent Silver Market Update, analyst Clive Maund sees silver breaking out of the $16 resistance area and moving “to challenge its highs in the $21 area” as gold itself makes significant advances.

We’ve been hearing a lot of buzz about these levels from silver and gold buffs for sometime now, but with inflation concerns heating up, recovery in base metals like copper and now China urging its citizens to invest in precious metals, it could soon prove more than just hype.

“For the really brave,” says Arabian Money’s Peter Cooper, “this could be the last big chance to buy junior exploration stocks at bargain levels.”

Junior Resource Stocks Recovery?

Trader, stock analyst and publisher of Zeal Intelligence Scott Wright has recently presented a well-written argument that may help those playing with the idea of re-entering the junior resource sector or those who missed the boat last time around.

While investing in the junior resource sector is inherently risky, Wright points out that the economic upheaval that came to a head last year has really separated the chaff from the wheat as shady shell companies and those found to be putting a hundred on ten when it came to their so-called projects began to drop like flies.

Those junior companies with proven assets and strong management have survived to take another run at the next bull.

However, junior resource stocks are currently “experiencing a serious crisis of confidence” as the Canadian Stock Exchange is still sitting at 2003 levels, says Wright.

For those of you who think the commodities bull is dead, Wright asks us to compare today’s commodities prices with what they were when the CDNX was last trading at the current 1100 level.

“The average prices of gold, silver, oil, copper, uranium, and corn are 153 per cent, 174 per cent, 81 per cent, 152 per cent, 304 per cent, and 58 per cent higher respectively in 2009 versus 2003,” according to Wright. “With commodities prices so much higher today, even after the sharp corrections of 2008, how is it possible that the juniors can be so depressed?”

Although some brave investors have returned, the rate has been at a slow trickle and it’s quite possible that many were so badly “burned” that they may never return, he answers.

What affect will decreasing numbers of junior resource miners and investors have on the sector as a whole? How will this in turn affect the commodities markets?

Junior exploration and development work is “a critical component in growing the supply chains of secular commodities bulls,” says Wright. With fewer juniors to do the preliminary E & D work senior companies rely upon, “future supplies will be tighter, thus causing prices to be even higher.”

In essence, such a problem sets the stage for a future commodities bull. Wright expects “the new generation of junior investors” to experience “legendary gains in the coming years.”

Silver Juniors and the Latest Rally

Several silver junior stocks have reported gains along with the latest rally in silver prices. Below is a list of silver miners along with their share prices two weeks ago and their share prices at the close of trading on September 8.

Company August 25 Price September 8

Abcourt Mines .10 .16

ECU Silver .49 .58

Endeavour Silver 2.19 2.73

First Majestic Silver Corp. 2.23 2.60

Fortuna Silver Mines 1.16 1.46

Great Panther Resources .58 .94

Impact Silver Corp. .75 1.00

Minco Silver 1.80 2.00

Orko Silver Corp. .62 .84

Sabina Silver Corp. .88 1.05

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