With gold rising above 25 percent and silver over 64 percent year-on-year, many investors are wondering if they have missed the bullion bull market. Even if you already had significant resources for precious metals, it's easy to kick yourself to buy no more. Silver tripled from its lowest levels in 2008, and some stocks like SLW have increased 10x in the short two years.
While smart money and early investors have enjoyed big profits in the decade's bull market for precious metals, big money and craze money are yet to be made. The bull market is already in an institutional phase, also known as phase two, where hedge funds, banks and pension funds are bidding on metals and miners. As the bull market grows, investment strategies need to be modified to accommodate the second bull market, with a three-phase hanging phase.
Phase Two and Phase Three bull markets are driven by increasing volumes of inflow capital flows. This can be seen in the growing trend of open interest as well as stronger correction offers. The upward movement in prices will increase and adjustments will become shallower in duration, as seen in the October correction of precious metals. This presents challenges for both new and veteran investors.
Investors already in the market will tend to want to take profits, but they have to resist the temptation to sell everything. As Jesse Livermore once said, "Throughout my years of investing, I have found that big money has never been made in buying or selling. Big money is made in anticipation. " The fundamentals are still in favor of much higher gold and silver prices and as long as this changes, the long-term trend will remain upward. Real interest rates are in double-digit negative territory, and money supply growth is still in double-digit positive territory.
While it may be possible to wake up tomorrow to find that silver has doubled or gold is over $ 200, investors new to precious metals would be prudent to avoid buying a lump sum. Both gold and silver are technically overpriced and can be drastically adjusted. This way, the best strategy supported by professionals is to accumulate using small orders over a period of time and continue to buy where cash flow allows. If the prices are correct, then increase the amount of the planned purchase through pyramid orders based on the price.
Investors should also consider diversifying the type of investment in precious metals they own. While physical metal has outperformed gold stocks in recent years, this is expected to change. The financial collapse in 2008 left many companies unprofitable and without credit to continue operating. PAAS, SSRI, AUY and others are still well below their 2008 highs, despite gold prices of $ 1,400 and silver prices of $ 28. Price premiums have shifted from researchers and young producers to large, well-capitalized, mining miners. Now that credit is more affordable and metal prices are much higher, capital has just begun to flow into younger teens and researchers as investors realize they are holding onto future supply.
While the easy money in gold and silver is made, the biggest gains are yet to come. Long-term investors need to stand tight and keep piling up, and those who consider gold and silver insurance should not even consider selling, as the global decline in fiat currencies is just beginning.