Saturday, February 26, 2011

Sold Silver Friday And Reinvested In Gold

About two years ago I put on similiar sized positions in gold and silver [ GLD, SLV ]. My worry was the same as most people, rising inflation and currency debasement. Since I wasn't targeting growth, just protection, I elected to stay with physical metal in a vault, not miners or intermediaries.

To my pleasant surprise, I got growth. Gold moved very nicely and silver skyrocketed. For many years the two precious metals have traded closely, but this past year silver took off. Gold was up, I'm trusting memory here, about 25% and silver about 100%! A look at any comparative chart will show it much more dramatically than my previous statement. Was silver really undervalued, compared to gold, by that much? Are they now at parity? I've read all the literature and silver bulls still love the metal and silver short sellers are giddy with anticipation.

I tell myself that I don't care what happens to the price of silver from here forward because I only want to own the metal for protection. Additionally, those two similiar positions had changed dramatically because of silver's 4-to-1 move and needed to be rebalanced anyhow. So, I sold SLV and intend to buy back more GLD as it pulls back when some of the geopolitical issues subside. I don't believe silver has another 100% year in it, and if it did run too far, it may give much of that gain back. My chances for price appreciation are better in GLD, plus I'm getting the protection I want. Silver has a large element of speculation in it at present and I prefer the sidelines after being lucky.

Now if silver jets up another 50% I'm going to memorize the preceding paragraph and try to feel better.

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