Top Gold Stocks and Silver Stocks to Buy Now

Silver and gold prices and gold stocks and silver stocks are ready for a new uptrend. The gold and silver prices both broke out of their downtrends of 5 months last week. The recent Fed announcement to keep rates low through 2014 was viewed as bullish news for precious metals. This news created a technical breakout that could gain more momentum in the next few months and the rest of 2012. In addition, the gold stocks and silver stocks also saw big price and volume days on the Fed news. This article will look at reasons for more upside pressure for both traders and investors. Finally, Momentum Rider will provide their top mining gold stocks and silver stocks to take advantage of this new uptrend. We will be following up with one more blog on the top junior mining stocks and the speculative gold and silver mining stocks.


Gold Technical Breakout From Downtrend:



Silver Technical Breakout From Downtrend:



Precious metals for numerous reasons will have upward price pressure for the next few years and beyond. This report focuses more on silver for getting the larger return of the two metals but gold will see strong appreciation as well. MR would expect gold to see at least a 50% increase and to possibly exceed $3,000/oz in the next 5 to 10 years. We believe silver may even see a double from the current levels.

Specifically, MR expects silver to exceed $60/oz over the 3 to 5 years and $100/oz in the next 7 to 10 years. The following five reasons explain the upward pressures pushing both metals, but especially silver, much higher in the future.

Reason #1: Silver is used in coin money and is acting more like a real currency.
Silver has been used in coins for thousands of years. Both the sales of Silver Eagle Bullion coins and the general coin fabrication as measured in millions of ounces of silver has been growing exponentially since 2006. Further upward pressure from both collectors and those using silver in coin fabrication will continue.

Reason #2: Silver is very cheap at its current $32 level based on both an inflation adjusted basis as well as measured by the Gold to Silver Ratio.

Remember that silver reached over $90 in the 1980’s on an inflation adjusted basis. Furthermore, silver measured against the historic Gold to Silver Ratio (GS) is significantly undervalued. The typical GS ratio in modern times has been about 15. The ratio right now in late January, 2012 ($32/oz silver and $1720/oz of gold) is about 54. We also know that silver will do the majority of the price movement to close this ratio based on its higher beta.

So it is not out of the question, as both silver and gold move up in price, that silver could hit $60/ounce or even $100/ounce over the next 5 to 10 years. For example, $2500/oz for gold would put silver at $167/oz to get a 15 GS ratio. It is also worth noting that since gold’s peak in 1980, gold's up only 65%, while inflation is up 175% and stocks have gained 900%. So there's plenty of room for both gold and silver to move up.

Reason #3: The silver supply is actually disappearing much faster than gold as it is actually used in industrial applications. Some would argue that it will become even more scarce than gold in the future.
Unlike gold that is stockpiled by countries and also preserved in jewelry, etc., silver is not and it is also used extensively in industrial applications for electronics. That means that a large amount of silver is being heavily used and then discarded and not being safeguarded or preserved.  So the supply is quickly vanishing and the industrial uses remove that supply forever unless it is somehow recycled. That is not the current practice with expiring and older electronics. They are moved to the trash heaps of the world.

Reason #4: Silver is moving off the open markets at a very fast rate and into the hands of private investors which reduces the available supply.

The open market or public supply of silver is dwindling at an alarmingly fast rate. Even the US government has a difficult time finding silver to use for making coins. A recent estimate shows declines from 1800 million ounces of silver in the open market in the early 1990’s to what is now about 600 million ounces of silver available. In addition, there are estimates that private investors now hold over 90% of the world supply of silver which could even increase.

Reason #5: Inflation will become a huge issue in the next few years and beyond. This will put significant upside pressure on both silver and gold as it did in the late 1970’s and 1980’s. This reason alone supports a minimum move of gold to over $2,500 and silver to over $60 and ounce once inflation starts kicking in.
With the Fed’s constant printing presses and with their recent decisions, huge inflation is only a matter of time. And when the economies get a stronger recovery, it will be hard to stop.

MR will reveal five more reasons in our second blog in the series along with more picks in the gold and silver mining area. For now, here are the top picks for the larger gold and silver miners. We have highlighted some of our best picks in yellow.

Top Stocks to Buy Now for 2012 - Best Mining Gold Stocks and Silver Stocks:

Other ways to play this uptrend move in the gold and silver prices is with ETFs that track the real asset prices. Here are the top ETFs for investing in the underlying prices and avoiding the individual risk of mining companies. Remember, mining companies can be shut down with flooding, strikes, cave-ins, etc. They carry more risk than the ETF’s following the asset price. Also, an ETF basket of Gold Miners minimizes the individual company risk as well (see GDX).

Gold ETFs: GLD, IAU, SGOL, DGP (2X), UGL (2X); Silver ETFs: SLV, SIVR, AGQ (2X)

Gold Miners ETFs: GDX, GGGG, GLDX, PSAU, GDXJ (Jr. Miners); Silver Miners ETF: SIL

Gold and Silver Price Mix ETF: DBP

Precious Metal Basket (Gold, Silver, Platinum, Palladium) ETF: GLTR

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Good luck in your trading and investing,

Keith Hugenberg

CEO Jalexa Trading Consultants, LLC

www.momentumrider.com

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