Gold and Silver Upside Restored

March 2, 2011 | By | Reply More

The last two weeks saw many technical analysts telling us that both gold and silver were in danger of a sharp correction. Such were their plaintiff cries that even our faith in putting the fundamental issues that we have relied so heavily upon in our belief that gold and silver have yet to reach greater heights became shaky.

So much so that we cashed in enough of our silver options stretching to 2012 with sufficient profit to leave our remaining options standing us in at zero cost. We should have had more faith, particularly with the upheavals in the Middle East adding so substantially to the fundamental equation. Now our conviction that both metals have much more upside has been restored.

Trade Options At Pullbacks

Of course there will be pullbacks in the course of the price ascent which we are looking forward to taking advantage of, if and when some attractive option plays become evident.

It will be the silver ETF, iShares Silver Trust (SLV-NYSE) to which we will be paying the most attention as the metal is as a general rule around twice as volatile as its running mate, volatility being the key to profitable speculating in options.

Gold, in the shape of its ETF, SPDR Gold Trust (GLD-NYSE) is not our preferred vehicle for option plays although we hold GLD $170 Sep 11 Calls that are now showing profit. Another reason we like is that SLV option contract prices are cheaper than those of GLD, and with the time decay situation factored in we like our option plays to as inexpensive as possible.

At present we have SLV options in several months through to January 2012 that are showing excellent profits at no cost to us. More importantly we have not succumbed to the temptation of cashing any of our core holdings in gold, gold bullion, and silver despite those alarmist calls by the technical gurus.

Precious Metals Look Promising

We think that it is now safe to say that the precious metal fundamentalists  have won the latest battle with the technical analysts ,or put another way a victory for common sense over theory.

As long as you took our advice in earlier articles not to go short and not to unload any of your long term holdings, the path ahead looks promising for both metals but, on a cautionary note, the market will have the last word and it can so often be entirely unpredictable, so stay alert.

There is still a lot more to play for with the expectation that gold will reach $1500 an ounce before very long and silver within sight of $38.00 an ounce.

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