Tuesday, February 1, 2011

Silver and Gold - Bubble Or Sound Investment Strategy?

My last silver purchase was made right before the recent small correction. So like many investors (bad ones) I freaked and thought "oh great the bull run is over" I should sell.

Luckily I turned off my internal "bad investor" and stayed put. The fundamentals that led me to silver in the first place are still intact.  Actually - I wish I had more dollars free to buy at this dip.

I have included an excerpt of an article that does a great job of discussing the current outlook for gold and silver and discussing some of the fundamentals I referred to previously.

Excerpt from "When and How Gold Will Begin its Bubble?"
By Jordan Roy-Byrne, CMT

Precious metals have been in a steady bull market for almost 11 years. During most of that time, stocks and bonds have performed reasonably well. Thus, mainstream advisers and managers could avoid precious metals and still generate reasonable returns. An example is 2009-2010. We expect this to change within the next 12 months. Stocks are very likely to enter a mild cyclical bear market while bonds are at risk of a new bear market. Certainly, without the massive monetization by the Federal Reserve, bonds would be in a bear market and rates would be higher.

If and when stocks and bonds enter a bear market it will be the first time they are in a bear market simultaneously since the 1970s. As the entire precious metals complex continues its upward climb, mainstream pundits and fund managers will be forced to buy in due to the other asset classes (stocks, bonds, real estate) being in bear markets. With a global allocation to Gold of only 1%, one can see clearly where things are headed. We are years away from a true bubble, but 2011-2012 could serve as the beginnings of a precious metals bubble as 1994 was for the technology sector.

Our charts show that this present correction is very likely a retest of multi-year breakouts. As we showed with the Nasdaq in the 1990s and the DJIA in the 1980s, markets tend to follow a retest with at least several years of acceleration to the upside.

Whether this retest lasts weeks or months isn’t the point. The point is to be ready for the period that follows. For our subscribers we are working on a top 10 juniors report for 2011-2012. Now is the time to find growth and high potential at a discount.

You can read the full article over at the thedailygold.com

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