Silver Profits: USD Fry Pan vs The Golden Jumping Bean!
Apr 12, 2011
1. Most investors get involved in the market to book profits on trades and to build wealth on core positions. A focus on both cash and physical gold is the best way to achieve your goal. Click here now to view the GDX daily chart.
2. The price congestion blob between approx. $52 and $64 is still in play, and what might be occurring now is a simple pull-back before price blasts up and out of that price box, like a golden jumping bean!
3. There are some sell signals being generated on the oscillators, but if you look at those signals in isolation and ignore the 6 months of price congestion you could find yourself sitting holding the US dollar bag, while price blasts higher.
4. GDX trades in dollars. If GDX rises when the dollar is stable, you build real wealth. When the dollar is fundamentally weak, as it is now, it is less clear as to whether a rise in GDX is a rise in your wealth, or just more failure of the dollar.
5. Click here now to view the GDX weekly chart. Some technicians may tell you there is a double top on the weekly chart. I’ve highlighted their substantial fears with green circles. I don’t see that as a true double top because the length of time between the tops is too long, and some oscillators are flashing buy signals rather than sells. Still, if you are concerned that a fall in GDX price could trigger fears in yourself, or fears in those whose monies you manage, my suggestion is, “go to gold bullion, not to cash!”.
6. GDX could move more against the dollar than gold bullion could if we blast higher, but if a panic in the dollar were to develop, it is unknown what effect that could have on the GDX price. As the crisis accelerates, so does the resiliency of gold bullion during any market panic.
7. We are near the point where market panics will drive gold higher, not lower.
8. This strategy of going to bullion should be applied to all sectors of the gold market. Silver is gold’s “wild little brother”. Silver/gold ratio traders may not fare so well in this bull market. A quadrillion dollars of marked to model OTC derivatives makes this crisis different from all others.
9. Ratios that worked in past crises may not apply this time because so many facts are marked to lies. My suggestion, from the beginning of the bull market, has been to utilize a silver to gold transition strategy aiming for a final 70% gold to 30% silver holding.
10. Use the gold/silver price ratio to buy and sell around those weighting boundary lines, working to build more ounces of both gold and silver.
11. The 70-30 weighting gives you a balance of risk management and reward action that is almost impossible to beat, regardless of any up or down movements in the gold to silver ratio.
12. The simplest answer to your current “problem” of huge profits in silver is to book your profits in gold bullion currency, not dollar currency. When silver is “too high” in your mind, buy gold, not dollars. As the crisis intensifies, so does the payoff of going to gold instead of dollars, in any market crash situation.
13. As always, all I tell you to do, is all I do myself. Go for the gold bullion, not the photocopier machine. If you want to get richer!
14. Click here now to view gold’s little brother in action. You are looking at this morning’s silver market. Silver has rallied almost a full dollar from last night’s lows.
15. Take a look at this long term monthly silver chart. How can any rational investor buy silver now into any price weakness against the dollar, looking at the overbought situation on the chart?
16. The overbought situation is extreme in terms of the level of the indicators, but not in terms of the time the indicators have spent in the overbought zone.
17. Major assets can stay overbought on monthly charts for many years. Only by buying some gold with profits from some silver can an investor remain exposed to the metals bull, while professionally booking profits on silver.
18. With any major asset, never go to a position of 100% hedged. Buy put options for insurance. Going to 100% cash is a strategy best equated with going to 100% insanity, in a quadrillion dollar OTC derivatives crisis.
19. Click here now to view the daily silver chart.
20. Notice the one-day reversal that occurred yesterday, along with a huge array of massively overbought technical oscillators. Silver traders are faced with the choice of moving to dollars or moving some to gold.
21. As always, the course of moderation is the most rational, and generally the one that builds the most consistent long term wealth.
22. There is a real possibility that silver traders could panic if silver began to decline against the dollar, but find themselves jumping from the frying pan into the fire, as the US dollar goes into a crisis.
23. Can you seriously imagine being all in cash as a global institutional dollar panic occurred? It would make the day of the Dow lows at 6500 look like child’s play.
24. There is also the “risk” that silver does not fall, but instead works off the overbought situation in a series of small corrections or a consolidation. No matter which way you turn, you are faced with the fact that if you are either afraid for silver or simply want to book profits, the choice of champions is to book those profits in gold bullion currency!
April 12, 2011
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