Prepare for a Rally in Gold and Silver
Prepare for a rally in gold and silver... The 'dumb money' is finally giving up... One of the best forms of disaster 'insurance' is on sale again... 'The cracks are starting to appear'...
Are we finally seeing capitulation in precious metals?
Earlier this month, we noted that speculative traders – as measured by the U.S government's weekly Commitments of Traders ("COT") report – were fleeing from precious metals. As we wrote in the July 11 Digest...
Net speculative positions have fallen from an all-time record of more than 100,000 contracts this spring to less than 30,000 contracts today. And they're quickly closing in on levels that have marked important bottoms in the past.
Speculative positions in gold – which didn't surpass last year's record this year – have experienced a similar decline.
Again, this doesn't mean the next rally is imminent... But it suggests we're finally close to a significant bottom in gold and silver.
Stay patient... Your next great buying opportunity is approaching.
Since then, speculators have continued to unwind their bullish bets. According to the latest COT data, net speculative positions have now plunged to fewer than 10,000 contracts as of last week...
As you can see in the chart, speculators now hold even fewer bullish bets than they did in late 2015, just before the new bull market began. It appears they're finally throwing in the towel for the first time in nearly a year.
Remember, these traders are known as the 'dumb money'...
As a group, they tend to be wrong at the extremes. They get super bullish at market tops, and super bearish at market bottoms. So today's pessimism is a bullish sign for prices going forward.
But that's not all. As you can see in the next chart, silver prices have begun to diverge over the past few weeks...
The dumb money is giving up, but silver prices have been moving higher, anyway. This, too, is a bullish sign.
Again, as we always say, sentiment is not a precise timing tool. Speculators could become more bearish still, and prices could move lower again in the near term. So don't back up the truck just yet.
But for the first time since precious metals peaked last summer, we now have the necessary ingredients for a lasting bottom. If you've been waiting for a great, low-risk buying opportunity, get ready. It's likely just around the corner.
One of the best forms of financial-disaster insurance is on sale again...
Now, we should be clear... This advice applies to those who already own some physical gold and silver...
As longtime readers know, we make a distinction between physical, "hold in your hand" gold and silver, and vehicles like mining stocks and exchange-traded funds, which carry more risk.
Physical gold and silver bullion are a form of savings... They're financial-disaster "insurance" you buy and hope you never need to use. And we urge everyone to put at least a small percentage of their savings in them.
So if you don't yet own enough physical gold and silver – or worse, if you own none at all – there's no need to wait. It's never a "bad" time to buy.
Fortunately, it just so happens that one of the best forms of physical silver is on sale today, too. As our colleague Ben Morris explained to his DailyWealth Trader subscribers last week...
It has been a long time... But one of the best forms of financial-disaster insurance is available at a reasonable price, once again.
Not only is its price down, though. The premiums you have to pay to get your hands on it have also dropped.
And that is one of the main reasons I suggest buying "junk silver" today...
As Ben reminded his readers, when you buy physical gold or silver bullion, you must consider two important things. First, you want coins that are recognizable and easy to identify...
The term "junk silver" refers to U.S. government-issued dimes, quarters, and half dollars that were minted before 1965. Each coin is 90% silver. And each $1 worth of coins (called $1 in "face value") contains 0.715 ounces of silver.
In other words, 1,000 pre-1965 dimes have a $100 face value and contain 71.5 ounces of silver. The same goes for 400 junk silver quarters or 200 half dollars.
When you buy junk silver, you'll buy a bag based on its face value. Some bags may hold only dimes, only quarters, or only half dollars. Other bags may hold a mix. Which coins you get doesn't matter... Only the face value and the weight in silver matter.
And second, you want to pay the lowest "premium" possible... meaning you want to get the largest quantity of metal for the lowest possible price. More from Ben...
Most coin dealers will sell bags of junk silver with face-value amounts of $100, $500, and $1,000. With silver at $16 per ounce, a $100 face-value bag is worth $1,144... a $500 face-value bag is worth $5,720... and a $1,000 face value bag is worth $11,440.
In 2010, I remember junk silver often sold at a tiny premium over its "melt value" (or silver content) of no more than 2%. But in 2011 and after, I saw premiums rise as high as 30% or more. That's absurd. Now, premiums have come down to about 5%-7%. That's much more reasonable...
Silver is near its long-term lows while stocks are hitting new highs. It's cheap relative to gold. And the premiums on junk silver are lower than they've been in years.
In sum, financial-disaster insurance is cheap. I suggest you take advantage by buying junk silver today.
'The cracks are starting to appear'...
Speaking of insurance, regular Digest readers know that Porter and his team believe it's an ideal time to "hedge" your portfolio by buying long-dated put options.
Due to the dramatic decline in stock market volatility - as tracked by the Volatility Index ("VIX"), the prices of these options have plummeted to historic lows. This means you can protect your entire portfolio with just a few small positions.
Of course, this is exactly the strategy they're recommending in their Stansberry's Big Trade advisory...
They've identified 30 of the most troubled companies in the world – a list they've dubbed the "Dirty Thirty." These companies are likely to struggle even if the rally continues. And they're likely to lead the way lower when the bull market finally ends.
In short, buying cheap, long-dated puts on these firms is a low-risk, high-reward way to "insure" your portfolio while still benefiting from the ongoing bull market. It's truly a no-brainer.
But we've heard from some folks who still aren't entirely clear how this strategy works. If you're among them, you'll want to be sure to catch up on last weekend's Masters Series essays.
They feature an in-depth, two-part interview with Stansberry's Big Trade senior analyst Brett Aitken, who explains exactly how the strategy works and why today is such an incredible time to take advantage of it.
If you're still on the fence about Stansberry's Big Trade, drop everything and read Part I and Part II of the interview right now.
New 52 week highs (as of 7/21/17): AbbVie (ABBV), Boeing (BA), Becton Dickinson (BDX), ProShares Ultra Nasdaq Biotechnology Fund (BIB), CBRE Group (CBG), Ctrip.com (CTRP), Emerging Markets Internet & Ecommerce Fund (EMQQ), iShares MSCI South Korea Capped Fund (EWY), iShares U.S. Aerospace and Defense Fund (ITA), Nvidia (NVDA), ALPS Medical Breakthroughs Fund (SBIO), TransCanada (TRP), Invesco High Income Trust II (VLT), Verisign (VRSN), Weight Watchers (WTW), and short position in IBM (IBM).
In today's mailbag, a subscriber weighs in on "Bizarro Capitalism"... and another Stansberry Alliance member finally "gets it." What's on your mind? Let us know at feedback@stansberryresearch.com.
"Hi Porter, i agree with you that we are in a bizarro world, and it is being enabled by a world wide self interest insanity, that allows people to accept that central bank created currency units have value. the insanity extends to every financial transaction and valuation you can name, from bond pricing and yields, to gold pricing based on many years of production, not yet mined, being traded in seconds on the exchanges. i think Steve S. is going to be surprised by how high and long the market keeps moving up. i am long with stops and every time i take a profit (often, of course, thanks to my Stansberry education and advice) i put a % into gold maple leafs. thank you for everything." – Paid-up subscriber Neil Silver
"OK... there are a lot of naysayers out there, but I'm a fan. Let's look at the data (after all, I have a PhD from MIT and I'm really good at what I do, but I'm too smart to be good at investing – I don't have a 47-page resume, but I have more than two dozen allowed U.S. patents). Late in 2016 I finally decided to use the advice of Porter, Steve, et al... I rebalanced my portfolio according to the TradeStops position-sizing along with the investment recommendations from several Stansberry publications. On December 21, 2016, the value of my portfolio was $294,106.63 and 2016 was a year where I did the classic 'round trip' – up 40%, but ended up only up 1.75%. In late December 2016, I FINALLY decided to rebalance my investments and invest in several of the positions promoted by the Stansberry geniuses (particularly [True Wealth] China Opportunities)!
"As of today, July 21, 2017 the value of my investments is at $443,891.90... an increase of 50.93%! Most of this is the result of China Opportunities, but there's a significant portion that is derived from Retirement Millionaire and Retirement Trader where options and dividends have played a significant role. Bottom line – all of my investment gains have been derived from FINALLY learning from the teachings of Porter, TradeStops, and colleagues... it took a while, but I'll keep following the recommendations of the Stansberry family of investments to ensure tranquility in my eventual retirement." – Paid-up Stansberry Alliance member Mike Richard
Regards,
Justin Brill
Baltimore, Maryland
July 24, 2017