(iShares Silver Trust (SLV)) hit the ball out of
the park yesterday as it hit a record high exceeding my late January target
of $40. Silver has doubled in the past seven months alone. Poor man’s
gold is making some poor men rich as the US dollar (PowerShares
DB US Dollar Index Bullish (UUP)) and long term US debt (iShares
Barclays 20+ Year Treas Bond (TLT)) remain under
pressure. Think safe haven, particularly for the middle class citizens who
sense that they are being caught between the rock of an out of control budget
and the hard place of ineffective legislators posturing for the media. Silver
(Proshares Ultra Silver (AGQ)) and gold (Proshares Ultra Gold (UGL)) are taking the reigns as the
supreme safe haven asset.
Investing in silver presents an opportunity for the
beleaguered middle class taxpayer to defend himself, while 50% of the
population pays no taxes (and the same with corporate entities such as
General Motors (GM) and General Electric (GE)). Gold (SPDR Gold Shares (GLD))
and silver provide a safe haven despite high prices because none of the
budgetary, political and monetary concerns await resolution.
We hear of bubbles but gold and silver are still a
small part of global financial assets. The price of gold in 1980 represented
four times what it is today. China may be reentering the metals markets after
taking a brief seventh-inning stretch adding impetus to the upward move in
precious metals. Over 19 central banks were net buyers in the year 2010. This
still leaves plenty of banks waiting in the wings. Gold supplies from scrap
metals fell in 2010, while gold prices were higher, signifying that people
are holding onto their scrap as they feel prices are going higher.
Protection against untenable fiscal imbalances and
currency debasement is one of the few ways the middle class can defend
themselves. Always remember that precious metals are on a long-term rising
cycle and will remain a profitable focus for years to come. Often times the
precious metals cycle moves slowly yet it bends upward. Long term US debt and
the US dollar are in secular downtrends.
I am acutely aware that our valuable service has
protected investors in this climate. Since the depths of the credit crisis, I
have been alerting my readers to protect their assets through movement away
from the US dollar and into the safe harbor of precious metals and natural
There are many concerns about the falling dollar
against the rising euro (CurrencyShares Euro Trust
(FXE)) as this may put pressure on debt-ridden countries such as Greece,
Portugal and Ireland. The question on the table is how should
investors react in such a scenario. As the middle class loses buying
power daily supporting corporate thieves and non-tax-paying entitlement brigands,
we stand ready to monitor this situation on an hourly basis. If economic
weakness occurs in the eurozone due to rapid
currency appreciation you can be sure central banks will continue to ease
liquidity into the system.
For the time being as we approach our measured
targets in gold at $1600, it might be prudent to use this benchmark as a
metric to dictate a commensurate sale. Playing with the house's money is a
conservative position in a highly manipulated market. Remember: The Fed is
answerable to no one, and with one stroke could cause a temporary short-lived
sell-off in precious metals. Notice how Goldman Sachs this week came out with
a bearish report on commodities. In yesteryear’s markets this may have
caused a prolonged decline, yet investors have shrugged off that report.
Commodities have rebounded since that release.
One technique you can use to secure these
hard-earned gains is to follow the 20-day moving average, which has historically
proven to be an excellent short-term indicator as a trailing stop loss. If
gold or silver breaks below the 20-day or short-term trend, then one can
secure profits and not have to sit through a sell-off on the upward secular
I believe we are about halfway from the January buy
signal to our $1600. My time frame is that precious metals should still see strength
into the end of May or early June.
Stay tuned to Gold Stock Trades as these exciting and volatile markets