Like myself, Richard Russell had been vocally skeptical about the parabolic surge in silver prices. But he isn’t a believer in the silver theory. Russell says the recent correction is healthy and he feels as though the recent consolidation is setting the stage for the next leg up. In his latest Dow Theory Letter the investment legend explained why he’s bullish again about silver:
“Silver — According the Constitution of the United States, only gold AND silver are money. Silver is a lot cheaper than gold, and for a while the “crowd” rushed in to buy silver as a ” safe haven substitute” for gold. Silver turned into a speculative bubble, and when the bubble broke, silver suffered a crushing drop from a price of 49.75 to 32.
I wrote that silver’s upward post-crash correction might surprise most silver-haters and silver shorts. As I write silver has rallied to above 37. The bull market in gold is still very much intact, and I believe gold will take silver UP with it.
Remember I said that during recessions, silver is treated as an industrial metal, but during periods of inflation silver is treated as a monetary metal. With inflation built into America’s future, I see silver following gold to higher levels. And I see the public once more rushing in to buy silver as a safe-haven currency against a shaky dollar.
Below I include a daily chart of silver, going back two years. Like gold, silver seems to respect a 150-day moving average, which I have drawn on the chart (blue line). Also, note that silver is still severely oversold, as per RSI.”
“Confession — I had sold much of my silver prior to the big break (I didn’t like the parabolic action of silver and the accompanying public excitement), but I have changed my mind about silver. Now that silver is trading above 37 again, I like it and suggest positions in SLV and CEF.”
Source: Dow Theory Letters
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.