Silver and gold break out

At long last, the precious metals are turning higher for the first time since last summer.

By Anthony Mirhaydari Jul 22, 2013 1:52PM

Stockbyte, SuperStockPrecious metals haven't had a tailwind in a long time. They've been in a persistent downtrend since last fall -- a selloff that accelerated in January. A combination of factors has driven this, from lower inflation to higher interest rates and a Federal Reserve that's been threatening to roll back its cheap money stimulus. All of this boosted the dollar, and dragged down gold and silver, as I described in my column last week.

 

It's all changing now. Not only has the price of gold fallen to the point that supply is threatened as unprofitable mines are shut down, but those factors above are starting to reverse. The Fed is backing away from the tough talk of "tapering" its $85 billion-a-month bond purchase program. A dramatic rise in crude oil threatens higher inflation. And the dollar is sliding lower as countries like India and Brazil raise interest rates to attract foreign cash.

 

End result: Precious metals and the related mining stocks are on the move for the first time since last August. And it looks like the move has legs.

 

As a result, the Gold Trust (GLD) is challenging its 50-day moving average for the first time since January, while gold mining stocks -- represented by the Market Vectors Gold Miners (GDX) -- has jumped its 50-day average for the first time in nearly a year. 

 

 

Small, fast moving gold and silver mining stocks are taking flight. Just look at Coeur D'Alene Mines Corp. (CDE). Shares are up more than 10% Monday as I write this, taking the stock above its 50-day average and its upper Bollinger Band in what's a textbook breakout. The last time CDE posted a move like this, back in August, the stock moved from around $18 a share to a peak of nearly $32 in early November  -- a gain of some 78%.

 

Even a simple 50% retracement of the price collapse that followed would take CDE back near $22, which could be worth a gain of 33% from current levels.

 

In addition to CDE, I am adding the triple leveraged VelocityShares 3x Long Silver (USLV) and Direxion Daily Gold Miners Bull 3x Shares (NUGT) to my Edge Letter Sample Portfolio. Be aware, these are high risk positions only appropriate for aggressive traders.

 

For more conservative investors, consider the unleveraged GLD and GDX funds for gold exposure. For silver, consider the unleveraged iShares Silver (SLV) and Global X Silver Miners (SIL).

 

Disclosure: Anthony has recommended CDE and USLV to his clients.

 

Check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​om​​​​​​​​​​​​​​ and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.


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40Comments
Jul 22, 2013 4:23PM
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Adding tripple-leveraged metals indexes to your list of recommendations. Anthony, I'm not sure how to respond to that other than pointing out that is a truely reckless game you're playing right there. May as well go to Vegas and put your portfolio down on a hand of blackjack... about the same level of risk.
Jul 22, 2013 4:47PM
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How are we going to pay back the 85B a month printing free money?  Our dollar will be useless in the near future, there is not debt guarantee (Gold or Silver) for the 16 Trillion plus debt our president has helped to created.
Jul 22, 2013 2:41PM
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You go, grubbers. It should be getting completely obvious that your box is getting smaller and smaller with fewer choices and more GIANT manipulators in your venues. Buy that gold, buy that silver, buy this stock and that stock, this bond and that bond... unless you're a complete moron, you know that Ben Bernanke has infected all venues and the over-loaded venues have destroyed the economy. You are about to lose everything material. Do you consist of anything else? We're about to find out. Any IDIOT could have dropped $85 billion a month from an airplane flying across America and caused more recovery, economy and opportunity than ALL of Bernanke's QE. we're WAY off course, crashing is a relief that bursts all bubbles and only brings wealthy loafers trouble. If you are, do the rest of us a favor and paint a target on your forehead, makes it easier. You didn't earn it. You won't be keeping it. No matter what.
Jul 22, 2013 6:58PM
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It is hilarious reading the conspiracy comments and just general non cognitive responses from  MSN posts. What is this amateur hour?
Jul 22, 2013 4:37PM
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Sold my NUGT today. Took a hit on DUST when I liquidated last week. Will probably buy back into NUGT, will wait for a dip and watch the chart. Can't buy after the 18% jump today. They only have monthly options, these two are waaay to volatile to go that long on either of these, unless you buy in in the last week. Both are highly speculative, you can't take your eyes off them for a minute, I can't believe Mr. M recommended them to mom-and-pop investors.
Jul 22, 2013 10:22PM
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SOME can actually have their cake and eat it also....booyah.....wahoooo !!! 
Jul 22, 2013 4:27PM
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Yee Haaa... Check out DUST and NUGT!!
Jul 22, 2013 4:07PM
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Someone{pkee527}Don`t for get about those guys on TV pushing gold to

saps that aren't smart enough to buy good stocks.

Jul 22, 2013 4:01PM
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The only people making money from precious metals are the people that sell it by the pounds. Dont trust this stuff. FDR in 1933 by Executive Order 6102  - The order criminalized the possession of monetary gold by any individual, partnership, association or corporation. They did it then and they will do it again.
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 buying gold if for fools. when it goes up it gives you a high but the problem is that most don't know when to sell it until it hits bottom.
Jul 22, 2013 4:28PM
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MIRHAYDARI ......Run for CON-gress !!  You got the chops, sir.
Jul 22, 2013 3:03PM
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I don't understand *why* gold is breaking out.  Inflation is still low and money has been pouring into the economy for over a year at $85B/month.  There is no reason why it should be rising so fast so suddenly..
Jul 22, 2013 2:25PM
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Did you ever hear of a dead cat bounce?Gold is for losers.Buy great stocks and enjoy

the profits.

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