A New Low for One of Our Favorite Assets... Time to Buy?

By Brian Hunt and Ben Morris, editors, DailyWealth Trader Monday, July 13, 2015

Some weeks, excitement and rising prices dominate the financial headlines. But for the past couple weeks, it has been fear and falling prices… Chinese stocks are crashing. Greece is in the midst of a financial crisis… creating huge volatility in Europe. Crude oil recently saw one of its largest single-day declines in six years. And last week, one of our favorite assets dropped to a major new low… As we'll explain, there are a lot of different ways you can buy this asset… But today, we only like one. We're talking about silver. On Tuesday, the price of the precious metal fell more than 4%… It broke down to a five-year low.  This breakdown is a continuation of a four-year downtrend… And lower prices are likely to follow.  In April 2013, when silver fell below its 2012 low of $26.34, it went on to slide another 30%. The breakdown below $18.75 last September was followed by an 18% drop. We wouldn't be surprised to see another big drop in the near future.  So if we expect lower prices ahead, why do we suggest buying?  As we said, there are different ways to buy silver… And different reasons to own it.  One reason is for speculations with 100%-plus upsides. Silver is one of the most volatile hard assets in the world… And silver mining stocks are even more volatile. When we find low-downside, high-upside opportunities, we like to use these stocks as speculations.  But we only suggest small position sizes for these types of trades… And now is not the time to open new bullish trades in silver stocks.  The other reason we like to buy silver is for financial-disaster insurance. For this purpose, we recommend physical silver (coins or bars). This is the only way we suggest buying silver today.  Regular readers know we like to be prepared for anything the market throws at us. We encourage folks to implement a "catastrophe-prevention plan," which consists of three powerful wealth-protection ideas: position sizing, stop losses, and the most important of all… asset allocation.  By holding some of your wealth in cash, stocks, bonds, real estate, and precious metals, some of your assets will "zig" while others "zag." And in the case of an all-out financial storm, you'll prevent catastrophe.  Silver and gold (which is also near a five-year low) should make up some percentage of your holdings. (We suggest at least 5%-10%.) These metals have been used as currency throughout history… And folks turn to them as stores of wealth when they're worried about paper currencies.  Right now, central banks around the world are printing money in an attempt to prop up their struggling economies. They're devaluing their currencies. Over the last 12 months, Europe's common currency, the euro, and Japan's currency, the yen, have dropped 18%.  Savers in these countries have turned to the U.S. dollar as a safe haven. The dollar has climbed 21% in the last year… And a rising dollar puts downward pressure on hard assets (like precious metals).  But there's no guarantee the U.S. dollar won't collapse, too. And the safe havens next in line are gold and silver. The metals are likely to soar in a global financial crisis that takes the dollar down.  To be clear, we're not predicting a collapse of the dollar… The world has a tendency not to end. But just like we have car and home insurance, we own precious metals as financial-disaster insurance… And we hope we never have to use it.  The recent breakdown in silver isn't a good sign in the short term. It's not a good time to speculate in mining stocks. But it is the best time to buy physical silver in the last five years. We suggest buying some over the next few months to hold for the long term. You can start today.  Regards,  Brian Hunt and Ben Morris