“That would worsen the risk/reward profile – it would turn our dollar fund flows signal from green to red – and a more significant correction would be possible,” said UBS in a note to mining and hard commodities investors. Despite the dire warning, the bank remains bullish on the sector as inflation is a positive for raw materials.

If currency debasement concerns are eroded and the US economy does indeed begin to heal, some of the supporting factors for gold and silver prices could dissolve leaving investors looking for the door. The precious metal positions of large hedge funds pose the most serious threat.

In this scenario, silver, being a much smaller market with less liquidity than gold, will suffer more than its yellow compatriot. “Despite the strength of silver’s physical supply/demand fundamentals, the metal is tightly linked to gold and is unlikely to perform well unless the gold market is in a bull run,” warned a global mining report published by BMO Capital Markets last month.

While silver bugs are apt to vociferously reject any talk of seemingly doom and gloom scenarios (no matter how plausible), a little caution goes a long way toward protecting your investments. Many analysts are still favoring an optimistic outlook for the silver market, but due diligence requires that silver investors keep an eye on US bond yield rates, changes in the tone of the Fed toward QE measures, large hedge fund interest in silver ETFs, and the euro/dollar dance.