Don't Kick Yourself Later for Not Buying Gold and Silver Now

Gold is powering up towards $1,000 an ounce, and while the odd hesitation along the way is possible it will shortly cross this boundary, hit a new all-time high and then head upwards again.

A trend is your friend, especially if you take advantage of it. For gold the question is how best to leverage the up trend.

Gold and silver stocks are the answer. Conveniently precious metal stocks got really thrashed last autumn - along with gold and silver and every other asset class except bonds. So they are dirt cheap.

Rising prices

But will gold and silver equities not fall again if global stock markets tank, as they surely must with profit forecasts for the non-financials still ludicrously optimistic (face facts, for many major companies there will be losses and not profits in 2009)?

No they will not if precious metal prices are rising - and not falling as they did last autumn. And why will gold and silver prices keep on rising this time?

Well, investors are now very worried about bonds and currency rates, and that leaves gold and silver as the last safe haven in the investment universe. If there is only one investment class left to buy that ought to simplify things for investors.

Rising profits

Gold and silver producers are also big beneficiaries of falling energy prices this year, as up to a quarter of production costs go on energy. In addition, most mines are in non-dollar economies, so manufacturers have costs in depreciated currencies and income in the strong dollar.

That means that even if precious metal prices stagnate - and that looks highly unlikely - gold and silver producers are among the only commodity producers that will see profits jump in 2009.

My blog contains many articles on gold and silver which can point you towards some of the better, and riskier equity investments in this sector, and taking a risk in a rising market usually pays off handsomely.

The people who will be kicking themselves later in the year will be those who do not buy gold and silver stocks now.

This reminds me of my warning to those who did not buy Dubai property when they first had the chance, and even after a 50 per cent fall in house prices they are still 300 per cent up on their original investment!

Comments

[Conan the B...:]

With the 12.7% drop in Japan"s GDP, Uncertainty has just kicked back into High Gear. Gold is rising and won't stop until $1,000 is breached again(at the very least), Silver will follow as the "Poor Man's Gold", regardless of Industrial applications.

Feb 17 06:38 AM

[User 300313:]

Get over yourself with your dubai properties comment.... those numbers are highly skewed and innaccurate. Dubai properties will fall further than its initial offering cause the government runs the show and they got enough issues on their plates, not including the inflation, excessive leverage and out of control developers who don't have cash or any access to past profits from black gold. Dubai is a house of cards, from my understanding you couldn't find a buyer for a closet right now in dubai.

You got a point with the original intent of your article.

Feb 17 06:39 AM

[Hmm?!:]

I would have preferred to see some fundamental numbers. Supply, demand, etc..

Feb 17 08:48 AM

[surgcare:]

Where's CLH and his "gold is dead" rant.

Feb 17 09:04 AM

[phdinsuntan...:]

as Dubai property perspectives are,
just sit and wait to get there,
someone is buying anything there?
you can make extensive to the yen
and, eventually to the yellow thing...

Feb 17 09:22 AM

[know nothing:]

Can you say CRASH? Look out below!

Feb 17 09:54 AM

[JBP:]

Anyone heard from CLH? I'm wondering how is DZZ trade is going?

Feb 17 10:12 AM

[ussmls7:]

CLH is busy with the PPT? Anyone that call Gold & Silver money,CLH said they were nuts,now he is to busy trying to save his ass!

Feb 17 11:12 AM

[doubleguns:]

DGP has become a gold mine. If you like gold ride this one up then switch over to GLD (physical holdings) or physical gold later.

If currency crisis hits eastern europe it will quickly spill over to euro zone since so many loans have been taken out in euros in this area. Euro loans will fail causing a lot of pressure on the rest of Europe proper.

Currency crisis means more people into gold. Gold bugs will have a good year as more bugs hatch.

Feb 17 12:45 PM

[Mad Hedge F...:]

Gold continues to move from strength to strength, hitting a new high for the year of $972 today. In January, gold ETF’s bought a record 104 tonnes of the yellow metal. Last week alone, purchases soared to an astonishing 110 tonnes. There has also been huge buying of December, 2009 1,000 calls, suggesting that some players are hoping for a melt up if we break the old highs at $1,050. Looks like we have found our new bubble. Let the games begin! If you have been regularly reading my letter you should by now have sacks of gold American Eagles stacked up against the walls, your portfolio is brimming with gold mining stocks like Barrick (ABX), Freeport McMoran (FCX), and Rangold Resources (GOLD), and your safety deposit box is groaning from the weight of the gold bars it is holding. Gold has since become the trade of the first quarter, with the open interest on call options on the Street Tracks Gold Shares ETF (GLD) exploding from 445,000 to 1.1 million in just the past few weeks. Options implied volatilities are suggesting that gold could hit $1,115/ounce by June. Oops, you forgot to buy the yellow metal? Use $50 pullbacks to get long. Investors will continue to pour into the sector, since it is one of the few things the government can’t create more of with a printing press.

Feb 17 01:28 PM

[Mark Anthony:]

Peter:

Every one talks about gold and silver, but no one talks about palladium. Palladium is the one precious metal that will explode in price like a supernova, due to events in Russia. Read this:

seekingalpha.com/artic...

Feb 17 01:29 PM

[CLH:]

CLH back. Sold gold in March of 2008 and rode it down with DZZ until Fall. As the double top forms I will ride it down again. Gold is now topping again. No inflation and dollar still strong so gold makes no sense.

Feb 17 03:05 PM

[doubleguns:]

mark; The last time gold was at these levels pal was near 350.00. Does seem like a good buy since the auto market scared everyone out of platinum and paladium in a panic, could be over sold but I would take it is small bites for now or you could own this a long time if it goes the other way.

Feb 17 04:53 PM

[Maximus:]

CLH,

I empathize with you and definitely see your point. But I think the inflation issue is a medium-term one. If it doesn't show up in 1-2 years and deflation is pronounced then people might sell in a hurry.

Right now, people are buying gold out of fear (and greed) and this could continue for some time.

In the short run, I agree with the bugs although the one thing that could precipitate an immediate gold price decline is Central Bank selling in concert with other large banks shorting.

I'm an American that lives in Spain and people are getting really worried about the banking system and the euro. I plan on getting my savings out of euros and into bullion very soon.

I don't think Spain is solvent and I don't think the euro is sustainable. And I certainly don't want to hold pesetas.




On Feb 17 03:05 PM CLH wrote:

> CLH back. Sold gold in March of 2008 and rode it down with DZZ until
> Fall. As the double top forms I will ride it down again. Gold is
> now topping again. No inflation and dollar still strong so gold
> makes no sense.

Feb 17 05:40 PM

[PROXIMO:]

Hard to argue with the uptrend.


On Feb 17 01:28 PM The Mad Hedge Fund Trader wrote:

> Gold continues to move from strength to strength, hitting a new high
> for the year of $972 today. In January, gold ETF’s bought a record
> 104 tonnes of the yellow metal. Last week alone, purchases soared
> to an astonishing 110 tonnes. There has also been huge buying of
> December, 2009 1,000 calls, suggesting that some players are hoping
> for a melt up if we break the old highs at $1,050. Looks like we
> have found our new bubble. Let the games begin! If you have been
> regularly reading my letter you should by now have sacks of gold
> American Eagles stacked up against the walls, your portfolio is brimming
> with gold mining stocks like Barrick (seekingalpha.com/symbo...),
> Freeport McMoran (seekingalpha.com/symbo...), and Rangold
> Resources (seekingalpha.com/symbo...), and your safety
> deposit box is groaning from the weight of the gold bars it is holding.
> Gold has since become the trade of the first quarter, with the open
> interest on call options on the Street Tracks Gold Shares ETF (seekingalpha.com/symbo...)
> exploding from 445,000 to 1.1 million in just the past few weeks.
> Options implied volatilities are suggesting that gold could hit $1,115/ounce
> by June. Oops, you forgot to buy the yellow metal? Use $50 pullbacks
> to get long. Investors will continue to pour into the sector, since
> it is one of the few things the government can’t create more of with
> a printing press.

Feb 17 05:44 PM

[5142152-337:]

Posters, don't fall for that CLH trash. I think CLH and paultaut have morphed. Get it? Yeah, me too.

Goldbugs, just keep watching the decoupling that's slowly, but surely taking place between gold and USD and oil. Remember when I was preaching my decoupling sermon a couple months ago. Its baaaaaaack!

Feb 17 05:55 PM

[yellowhoard:]

To say that the dollar is still strong is like admiring the leper with the most fingers. Right now, the dollar is the smartest kid on the short bus.

The situation in Europe will stimulate huge global demand for gold. I am no longer looking for an orderly ascent to new highs. This thing could be going parabolic.

Feb 17 06:02 PM

[the ilster:]

based on what?


On Feb 17 09:54 AM know nothing wrote:

> Can you say CRASH? Look out below!

Feb 17 06:45 PM

[ROLEXDAYTONA:]

I was buying mining/oil/gold/silver stocks in 1998 till 2005, I missed the biggest move but I am not sorry, today most of this stocks are only slightly higher from 5-10 years back.
The Gold is up but not investor's account who bought this stocks.

Feb 17 08:54 PM

[T.Stamps:]

I just got through reading an article(can't remember which fox etc)
about dubai. Investors flying out leaving there autos in the airport
parking lots. Anyhow, still a good article. Buy GLD and hold physical
gold for insurance.

Feb 17 10:46 PM

[mr freddo:]

I agree. Gold is headed higher. It is a safe haven in a hurricane.

Feb 18 12:28 AM

[Gob:]

Forget gold. I'm investing in Alpaca farms.

Feb 18 02:07 AM

[DannyBoy29:]

The hype alone will cause it to hit $1,000.

I have been long gold via GLD and EGO for 3 weeks now and short the euro via DRR in a pairs trade. It's nice to finally have something work.


The way I see it if gold were to fall the dollar would have to strengthen so my DRR would hedge losses. If we keep seeing the dollar go up and gold rise as well then I am just going to sit back and make some cash.

Feb 18 02:38 PM

[brain:]

pick your poison: depression hits, currencies & markets fall, & folks pour into precious metals for security; or inflation from hell hits, currencies collapse & folks stampede into the precious stuff. the next two years will be incredible for gold & silver. maybe not momentous, as some suggest, but a guaranteed 25% to 50% haven.

Feb 18 05:00 PM

[Top Gun:]

With so much US debt being issued, I wonder if gold will rise quickly, or if we will suck all the cash from the world. It's a strange world out there

Feb 18 07:54 PM

[Roman_Fiddler:]

Curious about the alpaca farms...

But yes, I would love some gold. Yes please.

Sad to say, I think the US dollar is only strong because other currencies look even worse in comparison.

Feb 18 08:42 PM

[mac.barron:]

The writing is on the wall: we are in for a long, deep recession. Citi, JP Morgan and Bank of America are all mired in toxic debt. Poor corporate earnings will plague our markets for some time to come. Worst of all there is a persistent U.S. Dollar as a safe haven will stop making sense to our foreign creditors. There are "experts" who claim that fears of major creditors streaming out of Treasuries are unfounded but how many of those people are on the public record as seeing foreseen the credit meltdown?

For all of those reasons the future is uncertain and in uncertain times gold has always been a sound bet. I hope that things turn around quickly. My strong preference is to try to invest in domestic small cap hidden gems and overlooked, dull U.S. companies with strong balance sheets and wide moats but those kinds of opportunities are eclipsed by the risk of inflation and bad government policies (bailouts and hyperinflation of the money supply).

My best advice to those who listen is hold some physical gold and get your dividends in solid foreign markets run with sound fiscal policies (no ADRs).

Feb 18 09:04 PM

[mac.barron:]

sorry, the sentence should read:

"Worst of all there is a persistent RISK U.S. Dollar as a safe haven will stop making sense to our foreign creditors"

mea culpa.

Feb 18 09:06 PM

[Alan Skoreyko:]

Anyone attempting to guarantee anything in todays market is going to be made a fool by himself.


On Feb 18 05:00 PM brain wrote:

> pick your poison: depression hits, currencies & markets fall,
> & folks pour into precious metals for security; or inflation
> from hell hits, currencies collapse & folks stampede into the
> precious stuff. the next two years will be incredible for gold &
> silver. maybe not momentous, as some suggest, but a guaranteed 25%
> to 50% haven.

Feb 18 10:52 PM

[Sandy Sachdeva:]

25% to 50% return on gold is definately possible if we move into depression next year.... otherwise I think gold should move within 900 - 1000 $/Oz

Feb 19 02:08 AM