At a time when gold and silver continue to languish, when they cannot seem to rally in response to news that would normally send them substantially higher (geopolitical unrest just being one example) and when a lot of people have walked away from this market to chase anything else higher, it is important to learn the habits of successful investors, who do actually buy low and sell high.
The 27 million ounce sales figure year to date for American silver eagles, while down from last year’s torrid pace, is still impressive when set against earlier years. This sales figure should also been seen in context with news out of Shanghai that inventories at their silver bullion exchange are in dire need of refreshing. Meanwhile, I don’t see the same ability on the part of speculative shorts to knock the stuffing out of paper silver this year– in stark contrast to last year.
Rather than give in to the prevailing despair among many former bulls in this space, it simply looks to me that silver is continuing in its large basing, or coiling pattern from earlier in the year. Yes, the mining stocks are enduring a correction as we speak, but many of them were also up nearly 50% in six months– a correction is a natural and necessary process. To some, the fact that the stocks have been leading the bullion over the course of this year is actually a sign of encouragement.
Remember that August is a weak month for metals like silver, but that by September a big change could be in the offing (you should review what happened in 2010, as just one example of several.) It has rarely been as difficult as today to buy at the bottom- but to me this is a great contrarian indicator for silver and the precious metals in general.
Finally, and as I’ve said all year long, you have a clear choice between buying into a conventional stock market near all time highs, or an asset like silver that has been left for dead. This should not be a difficult choice except for the fact that most investors try to buy high to sell higher, chasing the newest, hottest investment trend. Rarely has their been such a large divergence in three and five year performance between the precious metals and the S&P 500. The fact that most people can’t see this for the opportunity that it is simply demonstrates how strong– and unprofitable– the human herd instinct is.