Look out above! Silver prices are breaking out to the upside. Today, we have an important audio alert about what is unfolding, followed by some great tactical information directly below for anyone who already owns – or is thinking about owning – precious metals.
To listen to the short audio report on this fast-moving situation and its implications, simply click here.
My last precious metals update for readers of Lee Bellinger’s Executive Bulletin appeared on September 26, immediately following a horrific plunge in overseas trading that briefly took silver to as low as $26. I stated that the smash-down presented an “opportunity to buy silver aggressively.“
It was a scary time to be buying silver, I’ll admit. Most professional traders prefer to wait and see confirmation of a trend change before taking a position.
Now we have confirmation of a trend change. Silver broke out of its consolidating wedge pattern to the upside, breaching $35 per ounce on Thursday.
Also on Thursday, Hecla Mining (HL), which recently announced a new dividend policy with payouts to be linked directly to the silver price, surged 8%. (Hecla is featured in the November issue of David Morgan’s Money, Metals, and Mining.)
The current silver move appears to have legs. Commercial traders/hedgers in the futures market recently took their net short positions down to near-record lows. This “smart money” indicator typically flashes extreme readings of this nature at or near major bottoms.
Silver Set to Outperform Gold Once Again
Silver is also starting to outperform gold again – a bullish sign for both metals. The gold:silver ratio just slid back below 50:1.
Top precious metals experts think the ratio is ultimately headed back to where it’s been historically – to 16:1 or perhaps 10:1 – as the “poor man’s gold” gains ground on the pricier metal.
We’ve long urged conservative investors to split their silver and gold holdings 50/50 in dollar terms. And we have long maintained it is prudent to hold AT LEAST 20% of your net worth in precious metals bullion (coins, bars, and rounds) for both protection and profit.
If you held roughly equal amounts of both metals earlier this year, now may be a good time to rebalance, since your gold has likely gained substantial value versus your silver. The best way to rebalance is simply by adding more silver to your holdings. If you don’t have new funds to commit at this time, you might consider trading in some of your gold for silver.
If you’re a more aggressive investor who is able and willing to take more volatility, then you might aim for a bigger silver allocation – 60/40, 70/30, or even 80/20 if you’re a really devoted silver bug. It’s not what I recommend for most people, though, because violent silver corrections like we saw in September and earlier this spring can be tough to take for anyone who is anything less than a firm believer in silver’s long-term story.
Sometimes hedging or trading a large silver position can help mitigate downside risk. Prior to silver’s plunge in early May from the near-$50 level, I had urged even silver bugs to favor gold over silver on a temporary basis due to silver’s dangerously overextended technical readings. But it’s not realistic to expect that you or I or anyone will be able to trade out of silver in advance of every major pullback.
There will be times when you’ll be glad you own some gold. In the end, I suspect you’ll be happier with your silver. Of course, the choice of how much of each metal to own is ultimately yours.