Thursday, October 08, 2009

Still bullish on silver.

I've been wary of jinxing the metals breakout by posting on it but here it goes. Some chartists are claiming that this week's new high is very significant and a signal for a continued bull move but just as many claim we are well over bought and are still due a significant correction, so what are you to believe?

I believe gold's new high means the next low will be higher than the previous low, all good for the long term. If it keeps running I'm OK with it but if it dips I know it will dip less than last time, so I'm OK with that too. Certainly no one is going to fix the fundamentals of debt, debasement of currency and fraudulent paper any time soon,so why worry? The bull will continue in its own time just be calm and patient.

Since I don't trade my bullion I do have a small gold ETF stake that I intend sell in the $1070-1100 range should it go there too quickly or it trades horizontally for more than a week. I figure fast gains mean fleeting exuberance; probably not the perfect strategy but I such at timing so I'm taking some off the table this leg rather than ride it both ways. If we actually hit $1200 this year as some are predicting I will reenter on in a bear ETF, expecting a $150-200 correction.

Despite the recent run up, silver still gets little mention, little respect and very few comments on the few occasions when a newspaper lowers itself to write on the subject.

It's also disheartening that on this leg up silver is no where near a new high. Obviously the argument that silver is no longer a monetary metal is tainting the "western" market but there are still good reasons to stay bullish on silver such as new mints generating retail sales in China and now the HDFC bank of India (a big retail gold seller) is looking at adding silver bars to its product line.

These are the biggest markets in the world and since both China and India believe gold and silver are monetary assets this can be seen as nothing but mega bullish for long term prices. What the west believes is becoming less and less relevant, if China and India declare Yaks are a form of money, yaks would be a very good investment. You heard it here first, we are going to the Yak standard!

Another bullish point reported by the Financial times is the possibility that new positional limits on futures may drive some institutional investors to physical ownership of commodities instead of paper. This is the kind of action that will help FIX the commodity market and in particular help end the comex fraud.

Things still look very bad for the U.S. economy and good for metals long term, don't be tricked by claims that this is the top and bail on your physical positions, sit tight and save up to accumulate more on the next dip.

Rolfe Winkler at Reuters writes a decent little piece on owning gold as insurance and with the silver market being even smaller, this argument is even more valid for silver investment.

Have a good week, keep watching the spot prices, and keep the cackles and the screams of "I told you so" to a bare minimum. I probably won't ;) but try to be a better person than me!