Gold and Silver: Dealing With Hated Metals

 | Jul 13, 2015 | 3:00 PM EDT
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From a contrarian standpoint, I'm not sure I can remember gold and silver being this widely hated, feared and shorted.

Take a look, for example, at this chart of silver right now that shows how real-life professional money managers are shorting more silver ounces than ever:

For a year or more, I've not mentioned precious metals, gold and silver, except to answer questions from you dear subscribers. Such questions and my answers have typically gone something like this, as I've been waiting patiently for better pitches:

Having a few gold coins hidden somewhere, maybe having 5% to 10% of your long-term money in some gold coins and bullion and precious metals is probably a good idea in a world of unethical, corrupt and greedy politicians, bureaucrats and other scammers who have access to borrowing trillions in your name.

Count me in right now as a precious-metals bull. To be sure, I've never been a permabull on $gold -- in fact, here's me getting short gold and silver back in 2011 when gold was at $1,700 an ounce and $silver was in the $40s in an article headlined "Time to Short Gold and Silver." Here's how I explained it at the time:

"I've been waiting patiently for gold and silver to start their ugly topping process on what I believe could be a blow-off top for their prices that is exhausting itself before our eyes. Here's a five-year chart of silver:

"Blow-off top, anybody? Here's a long term chart of gold:

"It seems like I've seen a 10-year chart like that somewhere before ... hmm, let's see what the Nasdaq looked like as it headed into its blow-off top in the year 2000:

"How did the Nasdaq perform over the subsequent couple of years from that top, say from 2000 to 2003?

"Everywhere I went in the late 1990s, people would ask me about tech stocks. Nowadays, whether I'm on a panel or whether I'm talking to the lady at the local print shop who's helping me design my new business cards, or whether I'm at lunch with my 72-year old retired high school senior English teacher, the first question out of anybody's mouth when we talk investments is: 'What do you think of gold?'" 

Fast-forward to last week, and I've gotten several emails and Scuttle questions that totally underscore the widespread fear in the silver and gold markets right now. Here's one from last weekend:

"I am stuck holding silver, and wonder would selling at a loss and getting in something that could make it back quickly be advisable? I am a Ruidoso native, small-town guy, not a very sophisticated investor. Can you help?" 

So we've just about come full circle now, as people in my hometown are asking me about how to sell their silver and gold. Not to mention that silver's chart for the last four years since I recommended getting short silver did just about exactly follow the Nasdaq dot-com bubble crash:

I think silver and gold, silver more so than gold, are set up to go really higher for the short and long terms. If you're a trader, I might look at buying some iShares Silver Trust (SLV) call options dated out for the next two to three months. And if you're a long-term investor, I'd suggest nibbling on some silver coins and bullion that you can keep forever.

And as Michael Haynes points out on Scutify: "The ETFs in these precious metals paint the picture as free-market money takes a position. Physical silver in the current market is trading at premiums over spot that are at or over yearly highs. The U.S. Mint has stopped delivery of the Silver American Eagle due to supply chain issues."

We're supposed to buy fear, right? We're supposed to scale into assets that are hated when they are hated, right? I'm doing so personally today, with silver trading below $15 per ounce.

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