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Why You Need to Get Long Silver ImmediatelyBy
Thursday, December 2, 2010
If you haven't taken our repeated advice to buy silver, the market just gave you an extraordinary reason to take action... right now.
In mid-October, I wrote on our sister site, Growth Stock Wire, about a coming rally in the U.S. dollar. Bearish bets against the currency were near record levels... and Ben Bernanke was telling the world he was ready to print money to prop up the economy. When a trade gets extremely popular, it's like a boat's passengers crowding themselves on one side of the ship. It's natural for the ship to tip over and throw them all into the water, then lurch in the opposite direction.
As you can see from the chart below, that rally has come... and the dollar is screaming higher...
.gif) Nowadays, stocks, precious metals, and commodities all tend to trade inversely with the U.S. dollar. When the dollar sinks, those three typically soar. When the dollar rises, those three typically decline. That's exactly what has happened with stocks and commodities lately...
Since the dollar is rallying, the rallies in stocks and commodities (which we predicted in September) have sputtered.
This is what makes the recent action in silver all the more impressive. You see, while silver was "supposed" to decline like stocks and commodities did, it actually soared to its highest price all year.
 There's something important we need to take away from this situation...
When an asset doesn't decline when it is "supposed to" – if a company jumps 5% after it releases terrible earnings... or if a commodity shoots 10% higher after a major consumer says it won't use much of it in the coming year – it's a big bullish signal for that asset.
It tells you what you hear in the press or see at first glance isn't the whole picture. It tells you the fundamentals driving the asset are strengthening...
This is what just happened in the silver market.
More people are waking up to the fact that governments around the world have wrecked their finances... and that they plan to print money in order to pay for bailouts, entitlements, and welfare programs.
Now that folks are watching whole countries go bankrupt on the nightly news and reading how U.S. government spending is exploding, they are waking up to the idea of owning gold and silver as a "real money" way to protect themselves from these disasters.
Indians, Chinese, Europeans, Americans... you name it. They're buying gold and silver. They're buying these metals in such volume, you get situations in silver like we're seeing... It won't decline even when it is "supposed to."
This isn't to say that silver can't suffer a correction. Silver is a volatile asset. It's in its nature to go through booms and busts. But the long-term outlook is solid. I don't see any political will to stop the big spending and bailouts you hear about every day.
So if you haven't bought silver, go ahead and buy. Sure, it's climbed a lot in the past few months. But as we've seen in the past few weeks, there are incredible forces driving the metal up. As more people flock to "real money," silver is going to go higher.
Good investing,
Brian Hunt
Further Reading:
The last time silver was this bullish was during the 1970s, when the precious metal rose 3,600%. Chris Weber notes so far, we're "only" up 518% this time. "My old forecast of $187 per ounce may start to not look so wild," he says. Read more here: If You Haven't Bought Silver Yet, Read This.
Market NotesOUR COAL IDEA IS OFF TO THE RACES If our November 2 chart noted the coal train was "leaving the station," today's chart shows that train is now headed up the hill...
Back in October, our colleague Porter Stansberry wrote bullishly on coal as a "hard asset" way to hedge against a dollar crisis. And Steve has noted when coal stocks enter uptrends, the gains are often gigantic.
One was to track this trend is with shares of America's largest coal company, Peabody Energy (BTU). Our November 2 chart noted how this huge coal producer staged a major upside breakout around $50 per share.
As you can see below, BTU's upside breakout is turning into something bigger. Just yesterday, the stock climbed 3% to reach a 52-week high above $60 per share. Many of its coal sector cousins are doing the same... and the trend is now UP.
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