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Could it be time for silver to shine?

Technically, it's looking interesting again. Spot silver prices bottomed out at $26.72 (U.S.) an ounce on June 22 after a steady decline from above $37 that began in late February.

Since that low was reached more than 40 days ago, silver has been attempting a recovery. As Dundee Securities analyst Dale Mah points out in a research note today, it has closed above the 50-day moving average on six of the past 14 days. (See infographic to the left) It's also been establishing a series of higher lows, another positive technical indicator.

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Technicals, of course, are only one indicator to look at, and silver can be an especially finicky metal to pin down because it can move on a variety of factors beyond supply and demand. Gold prices, for instance, can exert a great deal of influence, as can holdings by exchange traded funds.

But some market observers think the fundamental picture is starting to look rather interesting as well.

HSBC, in a report in July, made clear it's also in the bull camp, predicting silver to hit $33 an ounce by the end of the year. It expects a surge in mine supply through 2013, but thinks ongoing growth in silver ETFs and strong investor appetite for hard assets at a time of economic uncertainty will keep the demand side of the equation looking healthy.

Another positive signal is the silver/gold ratio. As the website Money Morning Australia points out, the gold/silver ratio was around 50 before the financial crisis, meaning at the time an ounce of gold would buy you 50 ounces of silver. In late April of last year, as silver saw a powerful speculative rally to near $50 an ounce, the ratio dropped to below 30. Today? It's sitting at 60, suggesting silver is looking cheap relative to gold.

Dundee Securities' Mr. Mah is bullish on commodity prices in the long term, and with market conditions the way they are right now, is urging his clients to buy shares of silver miners.

Silver equities have seen a corresponding bump in price of late. But they are still at depressed values from a historical perspective.

"We believe there may be some signs that indicate silver equities are on the move upwards, which represents a good entry point," Mr. Mah concludes.

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He particularly likes the low-cost producers and ones with the best operating margins: First Majestic (which he has a $19.70 price target on); Endeavour Silver (a $9.70 target); Fortuna Silver (a $5 target); SilverCrest Mines (no target.)

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