Friday, July 15, 2011

Q&A With The Doc- I Was Waiting to Buy Silver at $25-$28, NOW What Do I Do?

Anthony writes:
Hi Doc,
I foolishly believed/ hoped that silver would correct to $29-27 or even $25. Of course, it did not and now I'm starring at almost $39.00 an ounce spot!!! Will there be at least another $1-2 or more correction, where I will "immediately purchase all I can with both hands"?
Mr. Sprott is calling for $55 an ounce by years end, I think. What are your thoughts?
God help me, I will not be so foolish again!

Great question,  many of our readers are in your same situation, and this is why we recently wrote about accumulating silver professionally here.
As to your question...the answer depends upon how much silver and or gold you already currently own in your own possession.

If the answer is zero, I would personally obtain a physical position as soon as possible.
Personally, I started adding to physical positions at $43 (after the nearly $7 correction from $49.73), and purchased all the way down into the lows. So even if you purchase here in the low $38's you're not doing all that bad (and beating that initial $43 purchase of mine!).
If it was my own money and I was looking to invest in silver for the first time...I would pick up a significant position now (as long as you will be able to hold your position without liquidating in a panic if silver drops $5-$10 from current levels), and hold some cash back to help your emotions out should price dip lower.  This way if silver does drop a few dollars lower you will be able to BTFD, and will feel like relieved that the priced dropped and you were able to still get a "great deal".   Go 100% in now, and if price dips a couple bucks lower, you'll be second guessing yourself again, this time for price chasing the run from $33 to $39.
That being said, while silver has gained $6 from the recent lows, it is still down ~ 25% from the May highs. This is still a significant correction and buying opportunity, particularly as silver's fundamentals have not changed one iota.
If you wait for another sizable dip now to establish any position, its possible that you may not see one for quite awhile.
If you followed silver last August-May of this started its move up in late July 2010 at ~ $17/oz. Once silver neared $23-$25...many would be silver buyers sat tight waiting for that pullback to $20 they were positive would happen.   Never came. Silver kept moving to $29, had something like a 2 hour correction to $26, then quickly moved back up to $33...barely paused, and continued to climb to nearly $50 before the next significant correction. 
The point is that while its important to respond professionally to price weakness, with the exception of May's big take-down, pedal to the metal accumulation has been the best strategy for silver over the past 2.5 years.
The commercial COT report is also currently the most bullish its been since the start of the last major leg up.
Main thing to realize is that silver bought at ANY price in the $30's will look like an AMAZING investment in several years. (just like our initial investment in silver in 2001 at 4.75/oz, or even in 2008 at 8.50/oz.
We agree with Sprott that silver is likely to surpass $55 before the end of 2011.

The most important thing is doing everything you can to protect yourself and your loved ones from a hyper-inflationary dollar collapse that is likely to occur in the next 2-3 years.
Short-term price movements won't matter when you hold physical silver in your possession and the US dollar is worthless.
That's about the best advice we can give without "telling" you what to do with your money or giving professional investment advice.
Good luck, and don't stress about missing the lows near $33-$32, learn from it and next time don't attempt to anticipate how low silver could go, respond to price weakness professionally by accumulating. (One thing that helps is to view investing (in real assets like silver) like how your Granny shops at the grocery market: if apples are on sale, she responds by putting them in the cart. She doesn't wait till next week to see if they're marked down even lower. When things she likes are on sale, she buys. Next week, if they're on sale again, she buys more. 
Seems like such a simple concept, but your emotions will be screaming at you to do the opposite 100% of the time!)