Keeping Your Head In The Game

So where is Silver and Gold headed over the next few weeks? I have no clue. I reckon we should see a strong rally that has already begun extending into early May. At that point a serious decline may ensue concluding the consolidation stage on the metals. Overall the price for silver should remain above $12 and Gold above $600. Expect to see a general fall in asset prices like we saw last year as the “sell in May and go away” mantra worked well for many. From there your guess is as good as mine, but “Shock and Awe” may be the proper way to describe it.

Enough of the Technical Gibberish here is…

Ten Reasons Why We Remain (Very) Bullish On Silver (and Gold)

  1. As the Credit Crunch becomes more relevant, investors will become eager to embrace tangible commodities and the Precious Metals while fleeing from the risk of financial assets.
  2. The U. S. Dollar remains weak and is getting weaker for the longer term. Metals are bullish in response as they trade inversely and the dollar is a primary gold and silver market mover.
  3. Gold production has hit a 10 year low as producers struggle to fight increasing production costs and declining reserves. Politicians in gold producing nations are pushing for more of the take. Demand is on the rise with increasing amounts of silver applications as an anti-bacterial mineral. Supply and demand factors drive prices higher.
  4. Commodity cycles historically last 13-17 years. This cycle is still young as we move into our seventh year. The best is yet to come.
  5. Based on upon inflation adjustments gold should be over $2,000 per ounce not the current $681. Silver at $13.90 should be adjusted to nearly $24 per ounce. The really big moves in precious metals have not yet arrived. When the real fun begins it will be stunning indeed.
  6. Some central banks have not only stopped selling gold but are buying it. These are not stupid people despite the political pressures. They are doing it quietly.
  7. Asia, specifically China, and Japan followed by India and Korea are moving into new precious metals trading vehicles and formats and are encouraging precious metals purchases for their consumers; so are the Arabs in Dubai.
  8. GFMS has forecast gold de-hedging to increase for 2007. Much of this is history but they report 7.5mm ounces or 233 tons will be de-hedged if the current de-hedging run-rate is maintained. This firms gold prices as they buy back positions.
  9. Professional traders are always seeking moving markets. They cannot make money when a market sector is stuck within a trading range. As precious metals keep moving, prices accelerate living on these rallies propelled with trader price action. The higher gold and silver can rise, the faster and higher the trading volumes.
  10. And probably the most bullish case for silver is that, which has been advocated by Ted Butler although hasn’t gotten much media attention, the amount of silver contracts traded on the Exchanges far exceeds that of the amount of physical metal available. This may inevitably lead to a supply crunch similar to that experienced in Nickel a few months back. Nickel prices jumped almost 250% in a matter of months.
In the Short-term: Stay long the physical metal when the trend is up (with some available cash on the side as you accumulate in case of a rare buying opportunity). When the trend is down, Buy. Exact bottoms are becoming increasingly hard to time these days with the recent wide variations in price.

In the Long-term: Remember… to count your wealth in ounces, not in Dollars.

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