Silver bullion

Keep buying silver; just be careful how you buy it.

As a precious metals optimist, it probably won’t surprise you to learn that I recommend that you buy silver bullion whenever you reasonably can. This news is certainly no shock to anyone who’s read more than a few of the articles that I’ve posted here!

I’m of the firm belief that silver and gold are far too commercially valuable for the price to drop terribly or for long. Add the vast and growing markets in India and China, and bullion is looking more promising than it has in decades — maybe ever.

However…

That said, there’s no reason to waste money, and there are certainly better times to buy than others. It would have been great, for example, if you’d stocked up on silver before late 2010, when it broke $20 and began its recent meteoric rise.

Some people look at the current price of silver and refuse to consider buying at all. They reason that they missed out on the getting when the getting was good, and it’s too late to do anything about it.

That’s a mistake. Even at these relatively high prices, you can buy silver and still make money.

Ups and Downs

Silver has been on a roller coaster ride lately. In April 2011, the price broke $40 per ounce and continued to inch higher, peaking at $48.70 on April 28. Then it began a rapid decline as investors started taking profits.

The price fell to $34.20 by May 5, a 30% drop from its peak. But those who purchased silver before early March were still in the money, and there was an expectation that silver would rise again — which it immediately did.

It got to $39.65 before a strengthening dollar and volatile energy futures trading spooked my fellow bulls on May 11 and 12, slamming the price down to the $32 range… whereupon it began rising again.

A Little Common Sense

Yes, silver is expensive now. But I firmly believe that the price is unlikely to go down much more than it has, given the general state of the American dollar and the sheer commercial need for the metal. Market corrections aside, it’s essential in too many industries, including electronics.

So you need to keep buying silver; just be careful how you buy it. It’s all about scheduling. If the price seems excessive, wait for the next dip; it may take a while in coming, but price drops are inevitable.

In the past two months (as of this writing), the best times to buy have been May 11-12 and May 16, when the price dropped to $33.60.

A Few Signs

It’s hard to say what might trigger a sell-off; but one thing that did on May 5 was the earlier prognostication by influential observers that the magical number of $50 would cause a flurry of sales. A number of major investors announced that they would take profits at that point… and then everyone did.

The smart people then started buying up more silver, and the price rose again.

Rising oil prices also seem to drag up precious metal prices (gold more than silver), though not in an easily quantifiable way. Finally, keep an eye on the dollar. Previous metal prices often tank when the dollar strengthens, and rise when it weakens.

You don’t have to be scientific about all this; just keep an eye on the news and the metrics. When the conditions seem favorable, look for that downtick in the price, wait until you think you can’t wait anymore, and pounce. Buy silver bullion in quantity, so you can sell it later at a nice profit.

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