Gold & Silver Locked and Loaded – Don’t be Out of Ammo

The pullback this week does not negate the outlook for higher prices in the coming weeks and months.

Bullion.Directory precious metals analysis 22 September, 2020
By David Smith
Senior Analyst at The Morgan Report

The analogy in his essay is that from a technical (chart) standpoint, the price of gold and silver are building energy to the point that they are getting closer and closer to breaking out of a consolidation pattern, and beginning the next impulse in the bullish sequence of higher highs and higher lows.

The pullback this week does not negate the outlook for higher prices in the coming weeks and months.

All sorts of factors are contributing to being “loaded” into the launch chamber so that when the “hammer” is dropped, the two metals can burst out of the gate like a couple of thoroughbred race horses.

How many regular people, let alone most of the experts got it right when silver, which was supposed to spend weeks if not months working its way through chart layers from $20 to $22.50, instead cut through them like a knife, stopping just below $30?

It doesn’t much matter even if gold and silver first decline below $1,800 and $22 respectively. Sure it might be “painful” but what’s been happening so far is that when prices drop, physical (and miners’) buying volume increases. Yet when prices rise, buying still goes up!
 

You may be “on board” now, but get left behind later.

As prices advance, it will become more and more compelling to “take a tidy profit” – either with the idea that you might be able to buy back on a correction, or by selling on a double and getting what in the trade has become known as “a Casey (or Katusa) Free Ride.”

The thinking is that once you’ve done this, only the market’s money (representing your remaining position) will be at risk.

During “normal” runs this is often a good idea, because sustained trends tend to be relatively rare, whereas choppy sideways patterns are the norm.

But in a strong, enduring run, which we believe for metals and miners will be the case during at least the next 2-3 years, if your goal is to go for a larger portion of the bull’s total profit potential, this tactic can end up being self-limiting.

Don’t forget this critical strategic planning piece. David Morgan, at The Morgan Report, has performed extensive research on what the end of a secular metals’ run looks like.

David determined that as much as 90% of the profit potential comes during the last 10% in time of the entire bull market! This concept is further supported by a fascinating quote recently from Incrementum. They state that:

“One can see that every (gold and silver) bull market always ended with a parabolic upward trend that lasted 9 months on average, and at least doubled the price…presenting us with a potential once in a lifetime opportunity.”

We know there are no guarantees in life, but do you want to take a chance on missing such an opportunity if things play out that way?

Occam’s Razor works for a reason. William of Ockham, a theologian and philosopher from the medieval period posited that, for solving a given problem, the simplest solution is usually the best. “Cutting” away unnecessary details gives it the “razor” designation.

Acquiring and holding physical gold and silver doesn’t have to be complicated.

Just make sure you’re buying from a trusted source, stay within a budget you’ve decided on beforehand, find a safe place to store your metal, and don’t tell friends and neighbors.
 

Complexities can detract from your bottom line and limit the upside:

• Trading the Silver/Gold Ratio. In addition to getting hammered by volatility when one or both metals changes position while you’re making a switch, there’s the issue of spreads, high premiums and possible tax issues.
• Selling some core holding for “a tidy profit.” Coming out ahead once or twice may convince you that you’re smarter than the market -but you’re not.
• Buying more after a big rise and getting shaken out on a decline. David Morgan’s dictum that “silver will either wear you out or scare you out” is never more true than during times like we’re seeing today.
• Not buying “less than is rational.” Placing a large order on a breakout day – either up or down – can cost you a lot in terms of money and emotions if you’re wrong.
• Getting hooked into purchasing “limited-edition,” “proof,” graded, or special event bars/coins. Most of the premium paid at the store goes away as soon as you take delivery. Know your limitations, and almost always stay away from graded coins.
• Not having a big enough picture, and suffering from “palladium dysfunction.” Think you can call the top at, say $50? Maybe, but what if you’re off by another $100 an ounce or it jumps $20 just after you sell out? Are you willing to buy back at that higher price? Should you? Palladium tripled in price from its “top” – and almost three years later is still miles above the 20 year “resistance” breakout point – who would have guessed? Could silver do the same thing?
• Not having a good exit plan – and being prepared to follow it. Riding prices all the way up and all the way down may offer a lot of thrills at the time, but looking back, you’re not going to be happy. Start coming up with some kind of exit strategy that fits your temperament, risk tolerance and financial goals.

 
So… are you going to finish working your plan and consider adding to physical metal holdings during this time of uncertainty and possible price retracement, or will you step out onto the financial battlefield later with an empty magazine and nothing in the chamber?

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