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Today I am calling for a cautious buy of the Silver ETF
(SLV at $35.50 or lower.
I have
always thought Jim Rogers was a pretty smart guy so I’m not really sure
why he is making the TV rounds or what he’s pitching. I would, however,
ask you to watch two interviews by clicking here and hereto see
him interviewed and tell us why it is a good idea to own silver and gold.
For
those of you that read me you know that last January 26th I called for the
silver ETF (SLV) and
gold ETF (GLD) as a
buy. I recommended SLV at $26.00 and GLD at $128.00. I opened my positions
with a dollar cost average of $26.50 in SLV and $128.50 in GLD.
The GLD
position has played out much slower than the SLV and so far I have sold half
my position @ 150.00. I must tell you that in this week’s
Barron’s there was an interview with Fred Hickey and he
called for a buy of gold but my charts tell me that gold will go to $1600.00
and correct back so I will sit on my remaining position of GLD and wait.
The SLV ride was better than I
expected and I sold half on March 24th at $38.50 and on Friday April 28th I
alerted all of my readers with the shortest blog post I ever wrote and told
all to sell the remaining holdings of SLV and I closed my position at $47.50
because the charts were all flashing sell signals by indicating that silver
was unbelievably overbought. Add to this that the CME raised
its margin requirements that sent the institutional investors fleeing for
greener pastures like pork belly futures or corn and they sold off en masse.
On Monday May 2nd SLV began a collapse and within 5 days it was back to
$32.00. It was truly a sight to behold and a test of the classic story of the
“herd mentality”. [Ed. Note: It made it easier to watch, knowing
I had called the top and bottom within $.65 and was sitting completely out of
the trade. Sometimes it is good to be lucky].
We all
know that hindsight is 20 -20. A
look at the chart below will show that it looks like SLV has formed a strong
support at $35.00 and I opened a small position on May 16th at $33.50 and
last week I doubled that at $35.50. So I have a dollar cost average at $34.50.
As I
have often written silver is a very volatile commodity so I would not bet the
ranch that it may still go back and test the 200 Day Moving Average at around
$30.00. This is why I
have opened this position slowly. I take it as a very bullish indication that
Jim Rogers was calling for a buy in silver last Friday. My charts tell me
that we will see silver at $60.00 by the year’s end and it could be
much higher than that if the Fed’s continue their policy of
quantitative easing. So today I am calling for a cautious buy at $35.50 or
below.
There
are certainly a lot of “Black Swans” swimming around like the
Fed’s raising of the debt ceiling, the weak dollar, tensions in the Middle
East, the debt crisis in Europe and seeing that 2012 is an election year will
there be another round of QE3 just to name a few.
A recent
article in Business Insider discussed
the prospect that large institutional investors, including pension funds and
endowments, have a predisposition for following trend behavior. The
thesis was based on the premise that fund managers are ultimately risk
managers and allocate capital as much with the objective of mitigating
downside volatility as with protecting the principal. Investors might
note that if this proves to be accurate the case remains quite compelling for
a continued strengthening of precious metal prices well above the current
trading range.
In the
past few years, China,
steward of the third largest Sovereign Wealth Fund, has shown a strong
appetite for gold and Rare Earth Elements (REE’S). The Reserve Bank of India has also
exhibited pressure on spot market prices by adding to its impressive rare
metal holdings.
Bloomberg reported
in April, the University of Texas Investment Management Co., the
second-largest U.S. academic endowment, took delivery of almost $1 billion in
gold bullion. The endowment, which oversees funds held by the
University of Texas System and Texas A&M University, has 6,643 bars of
bullion, or 664,300 ounces, in a Comex-registered vault in New York owned by
HSBC. Although the most recent reportfor
Harvard does not contain full financial disclosure, the largest endowment
fund in the United States also demonstrates a similar bullish outlook for
resource investors, “We believe natural
resources is a core strength in our portfolio, offering
inflation protection, cash flow and long-term growth. The (Harvard Management
Company) HMC is well-equipped
to recognize and negotiate good value in the natural resources arena, with an
experienced in-house team, strong relationships with local operating partners
around the world, and a track record of over a decade of transactions. The
long-term return on their natural resources portfolio since inception is 13.3
percent annually.
A recent
White Paper by Barclays Wealth,
‘Investment management for endowments and foundations; balancing impact
and longevity’, indicates that there are no simple solutions for foundations and endowments looking
to support their distribution policy (the proportion of total assets they
choose to give away each year) and continue doing so for a long time. Faced
with the possibility of a prolonged period of low investments returns, the
paper advises that leaders of foundations and endowments will need to assess
their overall investment strategy and articulate contingency plans. As
a result many institutions may be following the Texas and Harvard examples as
a necessity to hedge the overall risk profile and generate increased exposure
to precious metals, including gold silver,platinum and palladium.
All of
this leads me to conclude that the place to be positioned in these most
uncertain times is in precious metals, rare earth stocks, commodities and
long term high yielding stocks.
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