Three investing strategies have proven successful for buying gold, silver, and other commodities.
The first is to buy when the long-term price trend is up. If the price stays above the 200-day moving average, the long-term trend is up. This has been true about 55% of the time, according to stansberryresearch.com. Returns average 32% annualized in a double-long gold ETF such as DGP.
The second is to buy when the price of gold rose in the last 30 days against four major currencies: the U.S. dollar, the euro, the Japanese yen, and the British pound. When this happens there is a true bull market in gold, not just one weak currency. Buy, and then test again at the end of the next 30 days. This condition has been met about 32% of the time. Returns average 42% annualized in a double-long gold ETF such as DGP.
The third strategy is to buy when both of the first two strategies apply - when the price of gold is above its 200-day moving average, and it has also risen in the last 30 days against the U.S. dollar, the euro, the Japanese Yen, and the British Pound. This applies about 26% of the time. Returns average 50% annualized in a double-long gold ETF such as DGP.
Right now - early August, 2011 - all conditions are met. It's an ideal time to buy gold by any historical measure.
Silver looks similar. It is trading above its 200-day moving average. It rose against the four major currencies in the last 30 days. These same tests can be applied against most commodities, although average returns may differ.
Investors seeking safety can also look at the "Commitments of Traders" reports on the website of the Commodity Futures Trading Commission (cftc.gov). The CFTC is the Federal agency regulating trades in commodity futures. The Commitments of Traders reports appear every week. They show you the number of long, short, and spread positions in futures for each traded commodity such as gold or silver. You can track weekly changes, and see whether long or short positions predominate. Results are broken down by "reportable" (big) and "non-reportable" (small) positions. You can even see what "managed money" (hedge funds) is doing. This is a true crystal ball letting you look inside the commodity market.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.