Wednesday, March 3, 2010

Keep an Eye on Gold (GLD) and Silver (SLV) Here

Reader Patrick sent me an email late last week that he thought silver was ready to run.  I wanted to see it jump over $16.50 to become more interested.  It traded over that level Monday intraday, and yesterday put on a nice 3.5% move.

While gold is not jumping quite as much, it is exhibiting some solid relative strength as well....

.... I find this strength in the precious metals especially compelling considering it is happening even as the US dollar rallies. 

Generally this has been an inverse relationship the past few years - but puts more strength behind the argument that precious metals are going to become a proxy versus fiat money, which is being created as if it's going out of style.  This is the main reason I am holding it, as I am unclear in a Western world deflationary environment whether the fears of inflation are (yet) founded.  While money supply is surging the velocity of money still stinks as end user demand for it remains pathetic.

Let's keep an eye on it, if these moves continue I'll most likely be adding to our gold and silver stakes... and unlike many instruments which now trade nowhere near support, both the metals are near support so if this assessment is wrong, we can quickly cut back.

EDIT 9:30 AM - I will be buying some Ultra Silver at the open, about 1% allocation - like that chart.

Long Powershares DB Gold Double Long, Ultra Silver in fund; no personal position

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