Should I buy Silver or Gold ?

Should I buy Silver or Gold if I want to invest in precious Metals or hedge against inflation ? It is an excellent question and one that is often asked.Gold usually always seem to  hog the limelight when it comes to investing in precious metals but does it deserve the accolade. Over the last few years both metals have performed very well with Silver being down near the $5 mark not many years ago and Gold was down to around $250 when famously Gordon Brown the UK prime minister sold a large portion of the UK's Gold reserves in one of his early acts as Chancellor. Between 1999 and 2002 he sold around 400 tons of the UK reserves and lost the UK around  £2 billion pounds in the process-"Way to go Gordy!!!  Anyone living in the UK or following his progress  since will I am sure be well aware that it has been all downhill from that master stroke of financial genius-however this is not a political blog so back to the matter in hand.

Since these lows Gold has outperformed Silver  and the ratio of the price of Gold to Silver has historically always tended to revert back to an average of around 16:1. Sure there have been historical extremes with the ratio being as low as 6:1 back in 1551 and as high as 100:1 in the 1940's and  in 1991. Historically though it has hovered for a lot of the time between 14 and 16:1. Currently the ratio is around 50:1 which is still at the high end and would indicate that Silver is undervalued in comparison to Gold. At the current price of approx. $1000 per ounce for Gold at a 16:1 ratio silver would be priced at $62.5 per ounce over 300% higher than its current price of $20.

 

My own personal perspective is that Silver is likely to catch up Gold, maybe not to the 16:1 ration but I think it may have further to run than gold will in the short term. MY favourite way to invest in Silver is the Silver ETF (SLV). In the short term I think we could see resistance at the $25-$26 mark but if we break through that level we may see it taking off.

 

 

Best Wishes

 

 

Alan

 

Technorati Tags: Silver,Gold,Silver ETF

Bear Stearns- Bailed out by JP Morgan and NY Fed-Is there more to come ??

 

After looking like opening to the upside the markets took a nosedive this morning on the news that Bear Stearns is being given 28 days financing from JP Morgan and the NY Fed, there has been rumours for a while in the market about Bear Stearns having liquidity problems and this confirms them to be true.They are looking to put in place some permanent financing to help them with liquidity. If companies the size of Bear Stearns can get in to trouble then we should really start to be concerned about the impact of the Credit Crunch. I have said before that I am steering clear of Financial's and this further keeps me away from them for the time being.The only way to play theses is the same as Jim Rogers, short them or buy puts on any rallies.

 

This news and the drop in the Dow has pushed April Gold Futures up over $1000 currently they are trading at $1003, having hit a high of $1007.There are also rumours(unsubstantiated ) of a possible emergency Rate cut by the Fed-when will they learn !!

 

 

Today 09:13am

Bear Stearns Companies Inc JPMorgan Chase and NY Federal Reserve Bank providing financing for 28 days, working on permanent financing

- JP Morgan in conjunction with the Federal Reserve Bank of New York, has agreed to provide secured funding to the Company for an initial period of up to 28 days. Through its Discount Window, the Fed will provide non-recourse, back-to-back financing to JPMorgan Chase. JPMorgan Chase is working closely with the Company on securing permanent financing or other alternatives for the company.

Trade The News - Live Audio Breaking News Analysis and Futures Calls

 

 

Best Wishes

 

 

Alan

 

Technorati Tags: Fed,Gold,Gold Futures,Bear Stearns,JP Morgan,Credit Crunch

Gold hits $1000, Retail Sales Decline-Paulson says a Strong Dollar is very much in the US interest-yea right !!

 

Well it happened even quicker than I thought but Gold hit the $1000 mark earlier today although it has since backed off slightly, Retail sales numbers disappointed again ,dropping 0.6% versus expectations of a rise of 0.2-0.3%.This has had an impact on the major Indices with the DJI down 185 points at the moment just off the days lows.

 

Hank Paulson is currently speaking and saying the same old mantra of how a Strong Dollar is in the US interests, only a couple of days after "helicopter Ben" scatted another $200 Billion dollars in to the markets like confetti, not quite sure how that will help a strong dollar.but hey how would I know. It looks like the engine of US growth the consumer may be finally drawing in its horns amongst the pressures form the Credit Crunch and Housing.If they continue to spend less and less this will really start to create big problems. With oil hovering around $110 and gas prices going through the roof, who can blame folks for not getting in their car and driving to the mall to send more ?

 

I am staying long and strong Precious Metals and Commodities, my position in PHPM (Precious Metals ETF) is up 51% on an annualised basis, DBA (Agriculture ETF) is up 186.9% annualised and the cotton ETF is up 235% annualised. Now is not the time to be buying stocks especially in Retail, or Financial's.

 

Best Wishes

 

 

Alan

Technorati Tags: Dollar,Gold,Commodities,ETF,Cotton,Agricultural Commodities,Precious Metals ETF

Stocks decline after record Rise yesterday-Gold moving towards $1000

As I mentioned in my earlier post, I really don't feel that yesterdays rise was anything other than a massage upwards based on the Fed's announcement of a $200 Billion injection to improve liquidity.Today after rising at the open we worked our way back to end up with declines across the board.

The Dow Jones industrial average (INDU) lost 0.4%, the broader Standard & Poor's 500 (SPX) index lost 0.9% and the Nasdaq composite (COMP) lost 0.5%.

 

The announcement of the injection of capital from the Fed sparked a short covering rally but today we returned to concerns about what the economy is doing .The Retail Sales numbers are due out on Thursday and they will be closely watched to see what consumers are doing, if we see further declines in retails sales then it will likely spark another moving lower of the indices.

 

Oil hit an all time high above $110 a barrel before closing just below that, I can well remember the raised eyebrows when Goldman Sachs forecast $100 by 2009 in July 2007. looks like they were dead wrong and we got there a lot sooner !!

 

For me Commodities are still the place to be at least in the medium term, sure we will see pullbacks, some of them vicious but I do not see them being a bad investment over a 2-3 yr horizon.Gold was up again at $985 and I don't think it will take much for us to see $1000 in the next couple of weeks.

 

Best Wishes

 

 

Alan

 

 

Technorati Tags: $100 Oil,$1000 Gold,Gold,Fed,INDU,SPX,COMP,Nasdaq,Trading