Brian's note: We're opening our holiday series on silver with an essay from master precious metals investor Chris Weber. When we originally published this essay back in November, it got a huge response. Many readers haven't yet bought silver... and after the precious metal's huge run up, they're worried it's too late. If you fall into that camp, read on...
The last time I was able to identify a period when a precious metals correction was about over happened two years ago...
At that time, gold hit a low of $693 and silver $9.63. Since then, gold has risen about 100%, but silver has soared 206%. This is an extraordinary occurrence in just two years.
Back in October, I thought both metals, and especially silver, were due for a rest, and perhaps a correction.
Silver reached $24.75 on October 14. I expected a back-off to begin. Silver briefly touched as low as $23. That is a 7% fall. In the universe of silver, this is nothing. And then the rise resumed. In December, silver reached a new high of $30.50.
This all feels unprecedented to me. Gold has not been giving people an advantageous entry point for a long time now. But silver is supposed to crash at certain times... It can almost be relied upon to do this.
Not this time. At least, not so far. Given an opportunity to correct or even consolidate its prior gains, silver barely takes a breath and then reaches new highs.
Why? Some say silver shorts are covering. But why now? Why this time? Silver prices refused to fall, and then rose... Of course under these circumstances shorts will cover.
No answer I've heard is satisfying. I just take the price action as the news. And the news is that this is bullish behavior the likes of which I don't think I even saw back in the last bull market of the 1970s.
Of course, over the life of that bull market, silver soared from $1.29 to $48: a rise of 3,600%. So far this time, silver has only risen from $4.03 to about $29.50 today. That's "just" 632% during a similar time period.
But the feeling this time is different. Silver has only had one typical correction: from $23 to just under $10. But while the percentage correction was typical (over 50%), it was all over in just seven months. A huge and powerful bull then quickly returned silver to new highs.
And so far, this time, when I expected a real rest, silver isn't having it at all.
It is possible that average investors now think gold is too expensive for them and see silver as something they should have. For a few hundred dollars or the equivalent in other currencies, silver is regarded as within the budgets of all investors, be they from India or Indiana, from China or Chinon.
Can you imagine what would happen if every investor on earth became convinced they needed to own some silver? My old forecast of $187 per ounce may start to not look so wild.
One other thing has happened recently that I haven't seen mentioned. Silver has now clearly overtaken gold as the best-performing asset class since 2000. Gold has risen from $256 to $1,390. That is a rise of 443%. Silver has risen from $4.02 to $29.50. That is a rise of 632%.
As important, those advising silver accumulation have been few in number, and remain so.
For those who have been waiting to buy or add to their silver holdings, there is no guarantee we'll have any big correction, or even a consolidation. I'm forced to advise people to simply buy or add without trying to time their purchases.
In general, this is what you should do in a bull market, but I had until now thought I was clever enough to attempt to time purchases a little. I no longer consider myself so clever. So my advice is to bite the bullet and accumulate at least some physical silver.
Editor's note: Chris Weber is one of the best investors we know – and definitely someone you should listen to. We've never seen him be wrong about a major market call, ever. Right now, Chris is recommending a simple way to hold gold (this was the investment that started his multimillion-dollar fortune)... and a currency savings account that's made him 1,700% over the years. For more on what Chris is doing with his own money, click here.