Sunday, April 10, 2011

Get the most out of silver and gold

In this sordid high inflation environment, many are trying to hedge against inflation by buying silver, gold and other commodities.

The Federal Reserve Bank is expected to keep interest rates at a minimum during whole year which should only accelerate inflation in an already weakened US Dollar environment. It is known fact that most countries are dumping US dollars. India, China, Russia, Iran, Brazil and recently rumored Saudi Arabia have been setting up agreements to sell&buy their goods in other currency than US$.

On top of this dire state of affairs, the FED keeps on going with quantitative easing programs such as QE1 and QE2 with very likely prospects of a QE3,4,5 up to 100 on the horizon.

All of these events are basically putting enormous pressure on the US Dollar, driving its value down.

Beyond all of this, there are a great deal of rumors circulating about manipulation of gold and silver prices. Word goes around that certain banks that act as a proxy for the FED are trying to keep silver and gold prices low by taking huge short positions. Idea behind this would be to create a perception that the value of USD is actually higher than it really is and to sustain the absorption of excessive money printing.

One may ask: "Ok, so what`s best way to profit from this and not have my savings totally devalued?"

Answer is quite simple: silver and gold ETFs that can be bought like any security, such as shares of Apple for example.

Historically, gold and silver followed an impressive uptrend that brought long investors lots of wealth and financial stability.

Therefore, best way to play it is via the Ultra ETFs. These Ultra or leveraged ETFs provide double exposure. They can increase your profits by 2 or 3x. The most popular 1x ETFs, ticker: GLD and SLV increased over 1 year period by 26% and 121%. Their 2x brethren UGL and AGQ have grown over same 1 year period by 52% and 312%. Quite impressive gains over their smaller brothers. As you can notice in the case of AGQ, the gain was much more than 2x as these are also bound somewhat to demand and present certain fluctuations.

It`s really hard in today`s market to achieve such good returns, especially as we`re heading into a very dark economic zone within the next 2 years.

Some of you might argue that buying physical silver and gold might be better and safer which I can`t fully support. Yes, it might be better in case of total economic shutdown, which I see as unlikely.
However, one thing that you know for sure is that you have to overpay for physical. A premium over the spot price, including storage and maintenance fees are usually mandatory. All of these are certainties however. Further on the downside you won`t be able to benefit from these juicy 2x gold and silver ETFs, AGQ and UGL, which can effectively double your profits.

...sadly there`s no 3x silver or gold ETF, at least not yet.

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