The “Other” $1,000 Gold

Why Gold’s Overlooked Cousin Will Leap Another 26% This Year

I know gold steals the show in the mainstream media, especially when gold tops $1,000 as it did over Labor Day Weekend.

It’s easy to see why gold gets all the attention. Personally I’ve had my eye on gold ever since I watched gold break out its triangle pattern around $950 an ounce.

Frankly, I’m not even a gold-bug. However, I do believe you should be on board when ANY asset is headed higher. That’s why I’m a gold bull right now.

However, as much as I like gold, there’s one commodity I like even more that just doesn’t get the publicity that gold does. But as far as I’m concerned, this overlooked commodity will actually rocket much higher percentage wise than gold. It also has incredible upside potential right now.

What commodity is that? Silver!

Yeah, gold is up 13% year-to-date but silver is up 55% year-to-date, and up 100% off its lows! Yet, still silver has room to climb even higher.

You can see from the chart below that silver can leap great distances in a relatively short amount of time. These aren’t anomalies either. Silver has managed to jump like this during several metal bull markets.

Gold’s Cousin Leaps Farther and Faster

Now, why in the world would silver spike higher from here? Well, actually there are several reasons.

Why this Overlooked Commodity Will Continue to Rise

1. The Cheap Inflation-Hedge: Silver is an inflation hedge just like gold. Also, silver is still underpriced if you compare gold directly to silver (the gold-to-silver ratio). This means silver is essentially the cheaper inflation hedge right now. In response, the big intuitional investors will start buying up both gold and silver as inflation starts to creep back into the economy.

2. Scared? Run for Silver: Silver is a great place to invest when investors are concerned about the markets. You see, on Tuesday alone, Obama asked Congress to raise the “debt ceiling” once again. China voiced its concerns over the huge debt loads and the Fed’s money-printing. Then the U.N. came out and suggested that there was a need for an “alternative currency” to the dollar. And that was just in one, 24-hour day. So the “fear factor” is definitely alive and well in the markets right now.

Also, if that weren’t enough…many investors feel that this is a “bear market rally” rather than the start of another bull market. Why? There are plenty of indicators right now that say we’re not facing a recovery here.

One of them is watching what happens in the railroad business. When railroad workers are polled and when the number of trains that are running are counted, it doesn’t point to a recovering economy where commerce is picking up and raw materials are being shipped.

3. A Falling Dollar: It’s almost to a yearly low as of this writing. Why? Much of it is due to the U.S.’s ever-increasing debt load. Then there’s President Obama. He keeps pulling rabbits out of his hat to try to fix this economy. Meanwhile, his approval rating just fell to a “52-week-low.” In other words, our government and nation is losing investors’ confidence both inside the U.S. and abroad. That means problems for the currency.

Gold Is Paving the Way for Silver to Follow!

At those times, money runs for “all things defensive.” Now formerly that has been commodities like gold, silver, the U.S. dollar, the Japanese yen and U.S. Treasuries.

However, now with the enormous debt loads out there, that list is shrinking. I think you can drop U.S. Treasuries and the U.S. Dollar from that list. With the new leadership in Japan, you might be able to drop the Japanese yen from the list. That one is debatable.

So where is the first place for “cautious money” to run to? Gold and silver.

If you’d like a “bonus reason” that silver will continue to go up besides inflation, fear, and the falling dollar…here you go.

4. The Working Metal: Silver is also an “industrial metal.” It’s used in many products that we use every day such as: high-tech electronic products, jewelry, fillings, to make money (commemorative coins) and batteries just to name a few!

So the supplies of silver are reduced all the time and used up more and more all the time. The more you diminish the supplies in the earth, and yet increase the demand for it all the time, it has no choice but to rocket up over time.

Silver’s Ascent to $21+ Will Help This Currency Pair!

For all these reasons, I believe silver could hit $21 – $22 by 2010. That’s why I’m holding some right now.

However, the “Forex guy” in me also is watching the currencies that will also do well when silver climbs. Specifically, I’m looking at the currencies that will sink and rise along with commodities.

In this case, it looks like the U.S. dollar will sink and the Aussie dollar will rise.

Australia, being the huge miner and exporter of gold that it is, will be a huge beneficiary. Therefore, buyers of AUD/USD have enjoyed the recent breakout in these metals and they are likely to continue to as long as the “metal rally” continues.

Bottom line: Stay strong the Aussie dollar, and silver.

Happy Trading,
Sean Hyman

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Comments

[Gold n Silver Trading Tips]

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[Patricia]

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Patricia