Uh-oh, silver is breaking out...

Silver just plowed thru resistance at $13, and sits just below $14.50, another resistance level. Next resistance levels appear to be $16.50 and $20. I'm a big believer of silver leading gold upward, as the COMEX silver market is manipulated even more by the commercial shorts than the gold market, as capital requirements are smaller and hence, easier to manipulate. And with base metal mines being shut down due to demand destruction lately, silver production has summarily plummeted.

Once silver is sprung from its artificial suppression, gold will surely follow, as the inflation hounds will be unleashed. As long as silver holds above support levels at $11, we won't see silver in the single digits again. With the USDollar losing ground against even weak currencies like the Mexican peso, and US Treasury bonds looking increasingly vulnerable, inflation hedges like precious metals become more attractive as safe havens.

My long positions in ABX, GDX, FRG, and SLW are all surging. I will be looking to add more longs on any pullback. I am leaning towards more speculative plays to increase leverage for upside potential.

After taking some profits in oil, I anticipate a pullback in that sector as well, where I will add an offshore driller to maximize upside potential.

While this is good for reflation portfolios, it can't be good for the long-term recovery of the economy, as there will be upward pressure on interest rates. The Fed is desperately trying to suppress interest rates lower, so that the housing sector can recover. The Fed will be in the uncomfortable position of trying to induce economic recovery by keeping rates low, but when the explosive money supply starts flowing into the economy, they will be pressured to raise interest rates to dampen inflation. There is no free lunch with debt monetization.