- Money Morning Australia

An Almost Fool-Proof Investment for a Crisis-Proof Market


Written on 25 March 2011 by Aaron Tyrrell

NATO is still bombing Libya

The food in Japan is radioactive

Portuguese PM, Jose Socrates has fled the top joband left behind a AU$12.53 billion debt to pay off by 15 June… although unlike his North African counterparts, he hasn’t done a runner with any gold… for now!

Yet somehow the Aussie dollar reached US$1.0229 yesterday… just a few points of a cent short of its New Year’s Day high of $1.0256…

Why the hell isn’t the market taking a pounding? Why are stocks going up?

And – more importantly – is now a time to buy?

Murray Dawes, the technical wizard behind Slipstream Trader, has had enough. He finds it incredibly frustrating to trade with central bank manipulation and interventionist government policies propping up markets that should be crashing.

Last week he said:

“I’m bearish. But I’ll buy because the market keeps going up. It’s just a matter of time before it comes crashing down. But you have to respond to what the market does… not what you think it should do.

I told you about Murray’s crash prediction on Monday…

And with so much uncertainty surrounding the market, today I thought I’d show you one investment that seems set to do well whether the market goes up or down.

In yesterday’s Daily Reckoning, Greg Canavan wrote:

“Just buy gold and silver. The precious metals made new highs overnight, something we can’t say about global equity markets. This is the mark of a true bull market.”

Silver jumped 19% in February – three times more than gold. And the price has risen since then.

According to Kalpana Jain, senior director at global consulting major Deloitte: “The instability in the Gulf and its impact on crude oil have also made silver a key hedge investment — like gold in the past.”

If the unrest in the Middle East increases – the Japan crisis grows worse – and the EU has to add ANOTHER bailout to its books – only one thing will go down. The gold-silver ratio.

Take a look at how far it’s fallen since the drama in the Middle East got going:


Source: goldprice.org

Silver has gained 21% on gold!

The loooong-term average (around 2000 years) for the gold-silver ratio is around 17:1. Because there’s 17 times more silver in the earth’s crust than gold.

It makes sense. But it’s surprising.

And at the current rate of just under 40:1 there’s still a long way to go until we hit 17. But perhaps not that long… considering it was almost 84:1 in September 2009 and around 72:1 in February 2010.  And, as Greg Canavan wrote on 14th March, 40 was a key resistance level.

If the gold-silver ratio reverts to the mean, $60 or $70 silver is not out of the question. That could be a gain of 94% on $36-an-ounce silver.

For more information on why that might not be too far away, read this special report by Dr Alex Cowie on the secret deal that rigged global silver prices… or you could read another of Greg’s Daily Reckoning article: ‘Silver – a Brief History of De-monetisation’…

Yes, silver’s hit a nominal high at $36.52. But it doesn’t look overbought… especially when you think about the LONG term average. And gold is still hitting all-time highs too.

Sound Money. Sound Investments value guru, Greg Canavan, has been on silver for some time.

He recommends buying physical silver – something you can hold in your hand and be sure exists. Because demand is outstripping supply – and there are some doubts about whether the ETFs actually own the physical silver they claim to carry.

(According to the US Geological Society, if silver continues to be used at its current rate, it will all be gone by 2020!)

I got to hold a silver bar in my hand last week – Dr Cowie has been buying it off the web by the kilo. And I can tell you it feels safe, solid, sturdy and stable.

Unlike the market right now.

Aaron Tyrrell
for Money Morning Australia


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3 Comments For This Post

  1. AC Says:

    I have investments in both gold and silver ETFs, but considering i have heard more than once the idea that ETFs might not have the goods to back them up i would like to move this into something solid. Can anyone point me in the right direction for buying bullion either online or otherwise? i live in SA.

  2. Sandra Says:

    AC

    There are quite a few reputable bullion dealers all over Australia.
    For example Perth Mint in Perth, Ainslie Bullion in Brisbane, and others which have branches in various centres around Australia such as Gold Bullion Australia.

    I would encourage you to join a forum where you can discuss things and ask questions of like minded people, so avoiding many of the pitfalls which you may otherwise make.

    I recommend the following forum:

    http://forums.silverstackers.com/

  3. AC Says:

    Hi Sandra, thank you for your recommendation.

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