Gold and Silver as an investment.

Posted by admin on February 17, 2009

If you look at my post from February 10, 2009 with the chart of the S&P 500 showing a possible long term double top, you will realize that we are at the support level of 800 on the S&P.

As a studier of technical analysis theory suggests that double tops and double bottoms are reversal patterns.  If we move below 800 on the S&P 500 on the weekly chart then we will have broken the support level of 800.  If conventional technical analysis holds true then we will have moved from a high of 1500 to support of 800 on the S&P.  The technical analysis books I have read, most notably Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications (New York Institute of Finance), say that when a chart breaks support it will move below the support the same distance from the high.

You can do the math on that.  If this holds true we would move back to an S&P value of 100.  I am NOT saying this is true, and we could just as easily hold this support of 800 this week and form a short term double bottom and begin moving up again.

I would advocate putting money into precious metals at this time.  I would suggest buying gold, silver, or platinum right now.  The world economies are devaluing their currencies by printing more money in an effort to try and stop the recession.  This will create an increase in the currency values of these precious metals.  I do not believe this is an investment that will make you wealthy, however it will allow your current funds to hold steady with inflation.

If you are worried that gold is to expensive then purchase silver as another option.  It is not as pure of an inflation hedge as there is more physical demand for it, but it will perform much of the same function for smaller dollar amounts.

You can also purchase ETF’s for you individual investment accounts or IRA’s.  The main gold ETF is GLD and silver is SLV.

There are several places you can purchase gold and silver bullion.  You can do a Google search for “Buy gold bullion” and go from there

As always please read the disclaimer as I am not a registered investment adviser or tax adviser.  Do your own due diligence before you invest.  I am currently long GLD though options as of February 17, 2009

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