Gold and Silver have once again risen to new highs, with bullion futures soaring close to a record $1,280 an ounce as the dollar fell to a five week low against the euro.
With low interest rates and the looming prospect of more inflationary quantitative easing by the Federal Reserve these commodities are the hottest sectors on the street. There can be no doubt that as the globe’s central banks wildly print more and more money, the non-Fiat standard, has become one of the only ways to preserve wealth.
Gold is up 16 percent this year and is on course for a 10th consecutive year gain, the longest surge the metal has seen for some 90 years.
According to Gerard Adams, CEO and President of Wall Street Grand you should not think twice about adding more gold to your portfolio as it still has the potential to make more huge gains. Remember, today’s prices are still way off all time highs recorded in 1980 of $2,185 an ounce measured in dollars adjusted for inflation.
Silver also rose to its highest price since March 2008, hitting $20.92 in London, only 16 cents less than the metal’s previous three-decade high! Remember, we think silver has even more upside than gold.
Our calls on gold and silver have been unbelievable. Wall Street Grand is a leading financial newsletter reporting economic and overall market trends. Wall Street Grand has been bullish on Gold for several years, take the time to read their gold report and silver report released over one year ago predicting the current rally in both precious metals. In our silver report, we stated we believed we could see SLV, which at the time was only $14, hit $20 this year. Today, SLV hit a high of $19.53 and it's only September 1st. Also, on March 1st we picked a SLV option play, the January 2011 $20 calls at $0.89, that has also been doing phenomenal and closed up to $1.67, up 88%.
Silver looks like it will breakout past the 2008 high of $21.35 any day now like we have stated in our past newsletters. In our opinion, we are about to see the biggest breakout in history for silver going into winter and could head up to $30-$40 an ounce.
Remember, silver follows gold. Back in February 2008 when silver pierced $18 initially in this bull, gold averaged $926. Last month (July 2010) when silver averaged $18, gold averaged $1192 (29% higher). So as I’ll discuss after the next chart, silver’s high basing in the face of strong gold prices makes it look even cheaper today. This high base is the perfect springboard for a major silver rally.
Way back in the heart of the stock panic, we bought silver stocks aggressively and encouraged our subscribers to do the same. Why? Silver was radically undervalued relative to gold. Since then, I’ve advanced this argument several times using the Silver/Gold Ratio. Prior to the panic silver traded in a definite range relative to gold. The panic anomaly blew that apart as risky silver plummeted much faster than much-safer gold. But ever since that panic, silver has been gradually recovering relative to gold.
Right now, the gold to silver ratio (aka SGR) is sitting at 64. For every 64 ounces of silver you can own 1 ounce of gold. Between January 2005 and August 2008, the time of normalcy before all the wild dislocations the panic spawned, the SGR averaged 54.9x. An ounce of silver traded for about 1/55th the price of an ounce of gold. In addition, silver had a correlation r-square with gold of 95% over this span. In other words, 95% of the daily price action in silver was directly explainable statistically by gold’s own price action. This was the normal precious-metals secular-bull environment.
But when highly-speculative silver plunged far faster than gold during the panic, this relationship was blown apart. Between September and December 2008 when the extreme the-sky-is-falling panic psychology reigned, the SGR averaged a dismal 75x. At worst at the panic’s peak, it easily hit its lowest point of the entire secular bull (1/84th the price of gold). And in correlation terms silver started following the US stock markets rather than gold, its r-square with the yellow metal fell to an unbelievable 53%.
It was very clear that this couldn't be sustained and that we would start to see silver become one of the biggest investment opportunities in our lifetimes. When we wrote our silver report over a year ago the silver to gold ratio was at 70. (http://www.wallstreetgrand.com/silver.html) If the gold to silver ratio heads back to historic levels of 15/1 we could see our investment make 4 times more money then investing in gold. We can't stress enough how important it is right now to invest into both gold and silver right now.
The bottom line is silver and gold look very bullish heading into the US autumn 2010. Big seasonal gold-demand spikes are approaching, and rising gold prices get traders excited about silver. After consolidating high and forming a strong base for at least a year, silver has the perfect springboard from which to launch to new bull highs.
Disclaimer:
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