Time May Be Right for Entering Gold and Silver Positions

I expect that the prices of gold and silver will come under significant selling pressure as long as the stock market continues to post strong gains. Strong corporate earnings and the Dow’s recent rally over 13000 has placed investors' attention on stocks, instead of looking for alternative currency investments or investment risk hedges. The recent rally in gold and silver silver has created a good opportunity for profit taking in the short-term. Gold also failed to cross the key psychological price point of $700.

In the past, I've written that the precious metal markets are relatively small in comparison to other investment choices. A few large hedge funds can exceed the entire gold or silver market. The opportunity for institutional investors to engage in price manipulation may be evident by the increasing volatility in the spot price of the metals. While this is merely speculation, readers can note that the price of gold or silver can swing + or - 5-10% in a week's time.

The fundamentals behind why gold and silver remain strong investment choices haven’t changed. Building a position as institutional traders exit positions is exactly how individual investors can benefit from the increase volatility in the gold and silver market.

I have been watching the spot prices of gold and silver closely and may decide to increase my own portfolio's exposure to a few gold and silver miners. A few stocks that I believe are already trading at attractive entry points are Coeur d’Alene Mines Corporation (CDE), Tanzanian Royalty Exploration Corporation (TRE) and Gold Fields Limited (GFI). I may decide to build a physical position in silver if the spot price reaches under $12.50. A jump up to $15 from $12.50, which I expect by the second half of 2007, will yield a 20% gain.

Over the next 1-3 months, my price target for gold is $650-$660 on the downside, and $720 on the upside. I also see the downside for silver at $12 and the upside at $15 during this same time period. Silver tends to follow the price movements of gold and is shaping up to be a better investment in possible percentage gains if a short-term rally in gold and silver materializes.

Disclosure:The author currently owns 15,000 shares of CDE purchased at an average price of $4.24, 5000 shares of TRE purchased at an average price of $5.50 and 500 shares of GFI purchased at $16.94.

Comments

[KBowen7736:]

I think you are right on this one Andy. If you watch a basketfull of gold stocks that have good fundamentals it becomes fairly clear when the big players are dumping. Set some lowball buys at prices 10-20% below market and sit back and wait. Many times these large players will unload large amounts of stock on low volume and your order will be filled at a nice discount. I might however expand your list of viable juniors to include Miramar and Gammon Lakes as well. Both stocks are poised for huge upswings in the coming months.

2007 Apr 28 09:41 AM

[the.orange....:]

Andy please bury the silver tends to follow gold myth. Go to stockcharts.com load up a perf chart with gold and silver and look at the last couple of years. Gold and Silver may respond to the same stimulus you can't look at that chart and objectively say silver follows gold these days.

2007 Apr 28 09:36 PM

[Steven Johnson:]

Check out Unico and Silverado Gold Mines Inc. at really low prices when you look at potantial for growth. Silverado also has a subsidiary Silverado Green Fuels Inc. Unico is just getting ready to start up with a brand new Mill. Silverado may ride up with fuel prices when they get closer to opening thier new project in Mississippi. Thier Gold mines seem to be doing much better and could show profits next year.Unico is probably a safe bet for near term growth. I would bet the stock will move to 18 cents in the next 6 months. Silverado will probably go to about 40 to 60 cents by December 2007 from its current 13 cents.

2007 Apr 30 10:10 PM

[Steven Johnson:]

Be wary on the Juniors they are over hyping themselves to death !!!!!

2008 Feb 19 10:28 AM

[Steven Johnson:]

Junior Miners are run by the biggest con artists and will continue that road till the Government does something.

2008 Feb 19 10:59 AM