The Precious Metals Bull Charges Onward

Instability in Pakistan, $100 per barrel crude oil, declining US manufacturing, and shaky Asian markets have all worked together to push the US dollar down, and precious metals upward. You may have noticed that the intra-day spot price of gold set an all time high on Wednesday, spiking briefly to $861 per ounce. Meanwhile, spot silver spiked to $15.27 per ounce. Although there may be some profit-taking in the next few weeks, I stand by my assertion that the precious metals are in a primary bull market that will carry on for several more years.

Amid all this good news for those of us that are metals investors, I wish to modify one of my predictions. I had previously stated that I thought that in terms of percentage gains, silver would out-perform gold. However, since the global economy now appears to be sliding into a deep recession triggered by an unprecedented credit collapse and since silver is more of an industrial metal than gold, I think that gold might do better than silver in the next 12 to 18 months. For those of you that have invested in a mixed portfolio, I recommend that you closely watch the ratio of the price of gold to silver. If and when silver takes a short term jump in relation to gold, then you might want to capitalize on that and ratio trade into a portfolio that is heavier on gold than silver. (Keeping in mind, of course, your trading costs.) Regardless of your readjustments in your speculative portfolio, you should hang on to your core holding in silver coins for barter in the event of TEOTWAWKI. Think of that core holding as a multi-generational investment.

As the metals bull continues his charge, you should consider your exit strategy. Do not attempt to “time” the absolute top of the market. The chances of doing that successfully are slim. Instead, I recommend that you gradually liquidate your speculative precious metals holdings, in logical increments. You might want to sell 20% of your speculative metals holdings each time that there is sustentative advance in spot prices. For example, selling 20% of your holdings when gold reaches $900 per ounce, another 20% when gold reaches $1,100, and so on. What should you do with the proceeds? Do not leave them in dollars or any dollar-denominated investment, since those will be eroded by inflation. You should immediately invest your capital in other tangibles. I predict that the metals will peak just about the same time that real estate will bottom. Talk about a “win-win”! This could be your chance to buy productive rural land that could be used as a survival retreat at effectively just 25 cents on the dollar. (Assuming that you bought your metals low, you sell them high, and then you buy land at or near its next low.) But in the near term, as you begin to liquidate your metals holdings, you can’t go wrong investing in high quality practical guns, full capacity magazines, and common caliber ammunition. The latter is what the late Col. Jeff Cooper called “ballistic wampum.”