Gold Drops, Silver Tanks

Commodities are tanking generally, as the dollar gains strength as a safe haven.  Of course, long-term this is a mistake, as the reserve currency is the most abused.  But for now, the masses foreign and domestic are creatures of habit, so they will run to the dollar as geopolitical skirmishes pop up everywhere.

If you have some precious metals, wait it out, or if you believe you need more, nibble in.  The goal is to have at least 5 - 10% of your net worth in physical precious metals, as a counter balance to your financial assets.

If the stock market corrects, precious metals may decline in unison, but will rebound as market participants wake up to the fact that the metals represent real purchasing power.  If equities crash, then well, you better have some exposure to precious metals, because it can get even uglier than 2008/2009.

Perspectives on scale and magnitude are important.  At the last secular bottom in 2001, silver was $4/oz. and gold $250/oz.  In 2011, silver peaked at $49 and gold peaked at $1923.  Today, silver is $17 and gold $1208.

Can both drop further?  Probably.  But timing the exact bottom will be impossible.  Can both rally much higher?  Certainly, as long as fiat currencies continue to be created out of thin air, backed by nothing more than promises from insolvent governments.

Accumulating hard assets is the right play.  But it also takes resolve, because timing is an unknown.

“Markets can remain irrational longer than you can remain solvent.”― John Maynard Keynes