Precious Metals Bull Market Update

By: Ryan Jordan | Mon, Mar 17, 2014
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This article was originally posted on March 15, 2014


 

As any market veteran will tell you, markets are a mind game. I'm not always sure that everyone appreciates the role of psychology in the investment world-but to ignore the irrational nature of the herds of people involved in speculating on the value of this or that asset is to ignore the reality of the human beast, in my mind.

The issue of the mind games played by and on market participants is particularly relevant as we watch the upward thrust of precious metals and their related equities as we enter the third month of 2014.

The precious metals sector- particularly the stocks- were left for dead, loathed, reviled- and worse- at the end of 2013. And yet, just three short months later, here we are with the metals and the miners having outperformed nearly every asset class as the new year unfolds. This would seem to be exhibit A supporting the case of those who would advocate doing exactly the opposite of what is popular or of what the majority of people in a market thought was going to happen just a couple of months ago.

I am sure, however, that many are watching these rallies in the precious metals sector and simply viewing it as a dead-cat bounce. They may even be wondering when to go short this sector once it begins its inevitable head lower into a bear market. But to me, this is just an unfortunate case of people looking in the rear-view mirror. They are sympathetic to the views of those who were correctly cautious and bearish from 2011 to 2013, as the precious metals bulls appeared to have been discredited. But that was then and this is now. So often markets make turns when no expects them, as just as everyone is certain of price moving in the opposite direction. No matter how many times one observes investors selling at bottoms and buying at tops, human psychology is too powerful a force to avoid, and people make the same mistakes chasing an old story. As we speak, many are still succumbing to the temptation to get off what is likely only the beginning of another powerful move higher for the precious metals sector.

I say this because I believe that zero percent interest rates, a controlled (for now) global deflationary depression, attacks on the supremacy of the Pax Americana (think Russia and the Ukraine at the moment), plus global central banks convinced that inflation is too low are just a few of the reasons why we are in a secular bull market in the precious metals. As many learned from 2011 to 2013, a secular bull market is no guarantee of prices going up without interruption, but this does not change the longer term, larger picture.

And when we look back at the price performance of the precious metals as they came out of their corrections during a bull market, the price moves are stunning. Looking back across the 1970s, as well as the last 12 years, the average move for gold and silver combined was somewhere around 200% and, the miners made even larger moves. Just looking back at late 2008, when gold, silver and the miners last bottomed, the resulting moves upward were roughly 150%, 400% and 350% respectively (many of the junior miners had even better results.) If we overlay these returns with the present, we would come up with gold at nearly 3000 dollars, silver at over 75 and the HUI at somewhere over 600 by late 2015 or early 2016.

I hope you understand that markets are a mind game, and I hope you have the courage to realize the most important thing about an investment is not where it has been, but where it is going. This is another old market saying that I think will come in handy for precious metals investors over the next couple of years.

 


 

Ryan Jordan

Author: Ryan Jordan

Ryan Jordan
Silver News Blog

Ryan Jordan

Ryan Jordan has been blogging about the precious metals since 2010. However, his interest in the precious metals markets spans nearly 20 years as both a coin collector and private trader. Ryan believes there is a lack of serious discussion of how undervalued precious metals like silver are, and he aims to explain the many reasons why people should take silver investing seriously without relying on hype, sensationalism, or scare-tactics. Ryan Jordan recognizes that assets like silver serve a dual function: one, as a real asset that can provide portfolio insurance as a non- correlated investment, and two, silver can appreciate significantly in a short period of time. Silver could be the best performing asset you could own, with or without a significant crash in the dollar, or other financial mishap. Ryan Jordan's articles have appeared at financialsense.com, gold-eagle.com, investing.com, jessescrossroadscafe.com, silverbearcafe.com, silverstrategies.com, wallstreetformainstreet.com and numerous other sites.

Ryan Jordan believes a historical perspective is absolutely essential for anyone trying to navigate today's financial markets. It is this unique historical perspective that he tries to work into his analysis of the silver market. Ryan received a B.A in History from the University of California- Los Angeles in 1998, a M.A. in History from Princeton University in 2001, and the Ph.D in History from Princeton University in 2004. His professional research involves the history of social movements, religion, and freedom of speech in American history. His two most recent academic books include: Slavery and the Meetinghouse: The Quakers and the Abolitionist Dilemma (1820-1865) and Church, State ,and Race: The Discourse of American Religious Liberty (1750-1900). As a peer-reviewed historian, his articles have appeared in The Journal of the Early Republic and Civil War History. Ryan has taught US history at all levels, ranging from undergraduate to graduate students, at Princeton University, Lafayette College, the University of California-San Diego, Mesa College and Palomar College. Currently he teaches at the University of San Diego and National University, in La Jolla, CA.

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