Proceed With Caution
We are off to the races. Gold just broke the $1,700 ceiling as it prepares to move higher. Silver has settled nicely above $32 where it will probably (or should) pause to catch its breath. Too much too fast is not good for anyone, bulls included.
Bernanke lit off the present rally with his comment that “the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery”. What else is new? Additionally, economic data is weak despite the spin.
And, it’s not just the Fed who is buying more ink and paper. Other central banks will intervene as well. The European Central Bank meets today. Their choice is not ‘if’ but ‘when’.
The Gold:Silver ratio has dropped from 58:1 down to 52:06 indicating silver is strengthening relative to gold. I anticipate the ratio falling to 30:1 and possibly deeper. Continue to overweight in silver at a ratio of 60/40 to 65/35.
All Things Considered – John’s Commentary:
It surprised me to see such a jump given that this “new” news is nothing but old news. Yes, prices have been suppressed for a long time. On the other hand, euphoria in the market is unhealthy. Be cautious.
Action to take: If you were waiting to purchase gold under $1,550 or silver under $28.50, those days are most probably over. The new reality is $30 plus silver and $1,650 plus gold.
Regarding silver, just stop and think. When put into perspective, $32 silver is very inexpensive to $49 silver where it was. Don’t get greedy, $32 is cheap in relation to the prices that lie ahead.
Quote of the day: “With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people.” – F.A. von Hayak
