Countdown Proceeds for Gold and Silver Liftoff

"Mission control, we have ignition!"

Following Tuesday's convincing breakout to fresh highs by both gold and silver, a strongly supportive technical environment provided the spark to ignite the fuel for gold and silver.

Everything that is required to lift gold and silver prices into the parabolic rise that I've predicted is already in place. All systems are "go," including:

  • Overdue recognition of the fact that gold is a currency: check.
  • Heavily impaired and deteriorating condition of major reserve currencies: check.
  • Expanding Western sovereign debt amid stagnant economic conditions: check.
  • Unwaveringly accommodative fiscal policy for an extended period of time: check.
  • Explicit, official support for gold from China: check.
  • Seasonal strength in demand from India: check.
  • Robust and increasing global demand, including that from central banks: check.
  • Growing public scrutiny of oddities within the global bullion markets: check.

After striking a new all-time high of $1,271.25 intraday, gold managed to close above its previous record in a glittering show of force. Not to be outdone, silver continued to gleam with a long-awaited push beyond its prior 21st-century high to finish near $20.50 per ounce.

Familiar efforts by market commentators to identify a single proximal cause, in this case German economic data, are yet again ill-founded. Booster rockets have been strapped to these metals for years now, waiting for the marketplace to recognize the enormity of a financial upheaval even while it is under way.

I have repeatedly advocated some exposure to precious metals and related mining stocks to my readers for several years running, and I am pleased that some have discovered the tremendous growth potential of well-selected equities during a trend of this magnitude. Whether Fools elect to ride my favorite rocket Silver Wheaton (NYSE: SLW  ) to my long-term target price of $100 per share, or consider a promising future producer like Alexco Resource (AMEX: AXU  ) , I continue to believe that silver equities as a whole are in a position to outperform their golden brethren over the coming years.

Pan American Silver (Nasdaq: PAAS  ) has earned this Fool's praise as an oddly persistent value proposition -- like a silvery counterpart to Yamana Gold (NYSE: AUY  ) -- and on this auspicious day the stock finally gained some traction with a 6% surge.

Silver Standard Resources (Nasdaq: SSRI  ) notched a healthy 6% climb Tuesday as well. After this week's preliminary assessment, which evaluated the Snowfield and Brucejack deposits as a massive combined project with a 27-year mine life, it's not hard to see why Silver Standard is steadily building an audience. All the same, I believe there are safer plays in the silver universe, including ultra-low-cost producers Hecla Mining (NYSE: HL  ) and Silvercorp Metals (NYSE: SVM  ) .

As this latest technical breakout progresses into a potentially parabolic move, I view silver as a golden ticket to capital appreciation in an era when few such opportunities exist.

Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Alexco Resource, Hecla Mining, Silvecorp Metals, Silver Standard Resouces, Silver Wheaton, and Yamana Gold. Try any of our Foolish newsletter services free for 30 days.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a sterling disclosure policy.


Read/Post Comments (4) | Recommend This Article (26)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 15, 2010, at 1:45 PM, Gonzhouse wrote:

    Sinch,

    Surprised that Great Panther (GPRLF) did make your list. GP is a little speculative as a silver start-up but it has the same characteristics as the others AND it is below $1 a share, opening up potential volume moves on share price alone.

    Following your blogs for the last 2 years has caused me to re-balance my portfolio to 20% for precious metals. I am now a believer - thanks.

  • Report this Comment On September 17, 2010, at 6:19 AM, quaternion2 wrote:

    In his recent article of Sept 19 2010 "Will Yamana Gold Disappoint Analysts Next Quarter?", Jeff Jayson suggests Yamana may be experiencing some problems with payments. All of this sounds odd for a company which is supposed to have the lowest extraction prices. Can anyone help understand?

  • Report this Comment On September 26, 2010, at 12:40 PM, wmarshb wrote:

    Sinch

    As I understand it, two of the primary factors resposible for the bullish outlook for gold/silver are the devaluation/lack of confidence in the US dollar, and the recognition of decades of price supression through fractional reserving on the COMEX.

    I believe these are exactly the factors recognized and acted upon by the Hunt brothers in the 70s.

    I found little mention of the Hunt brothers on a search of CAPS, and surprisingly little on the web in general. I'd love to see a knowledgeable comparison of what happend then compared to what's happening today.

    My understanding is that the Hunts initially bought physical silver because of the Nixon shock and perceived devaluation of the dollar, recognized the susceptibility of the naked shorts to demand for physical delivery, and it snowballed from there. They were exaclty right, caught the COMEX fatcats flat footed, and eventually the Fed stepped in and instituted ridiculous trade rules on the COMEX that essentially transferred all of the Hunt's profits plus their original fortune to the fatcats.

    I wonder if this offers any insight as to the Fed's actions if gold/silver continue on their current path?

    Warren

  • Report this Comment On September 26, 2010, at 12:59 PM, NOTvuffett wrote:

    Sinch,

    Do you have an opinion on the legal hurdles faced by that PAAS project in Argentina?

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