How to decide when to sell silver bullion and stocks

So long as a clouds hang over the economy, silver will likely retain its shine. Here are a few cues you can look for to help spot a mania-driven top in prices.

Silver’s meteoric rise has a lot of buyers on the sidelines wondering if they’ve missed the boat. Just how high can the precious metals market climb? Silver was up more than 17 percent in the month of February alone. Driven by a falling dollar, political turmoil in the oil rich Middle East and ongoing money-printing by the Federal Reserve, silver’s started off strongly in March, too.

Identifying a top in any market is difficult, but it’s important to look at metals from a historical context when trying to decide when to sell your silver bullion or stocks. The last major bull market in precious metals ran nine years from November of 1971 to January 1980.

“Many people don’t realize this, but silver rose 3,646 percent (during the 1970s),” Jeff Clark, the editor of Big Gold, tells The Daily Crux. “If you were to apply the same percentage rise to our current bull market, silver would climb another 500% from here, and the price would hit $160 an ounce. Those are just numbers, but it shows that we have an established precedent for the price to go much higher.”

Clark argues that fundamentals will ultimately determine the silver price – unless, of course, we enter a precious metals mania. That’s when identifying a top in the market gets particularly difficult. Even in a mania, prices don’t rise in a straight line; they tend to get even more volatile.

Still, there are a few cues you can look for to help spot a mania-driven top in prices. “I don’t think it stops until SLV, the silver ETF, is a favorite of the fund managers… until Silver Wheaton is a market darling of the masses… until Pan American Silver is Wall Street’s top pick for the year,” Clark says. “That’s when I’ll be looking for the end of this silver bull market.”

We’re not there yet. More importantly, the fundamentals for silver haven’t changed. Food inflation’s rampant abroad, the Fed’s still printing money, European banks haven’t found their footing, unemployment’s stagnant and the housing market could fall further before it stabilizes. So long as a clouds hang over the economy, silver will likely retain its shine.



Three triggers that could push silver over $50 ounce


National debt per person accelerating in U.S.


Top 5 reasons to invest in silver bullion


Signs double digit inflation is coming to U.S.


Gold price target in 2011: $1,800+


How to invest in rare earths stocks

Silvercorp Metals Inc. (NYSE:SVM): The Most Under-Bought Silver Stock on the Market?

If inflation does hit, expect to see Silvercorp Metals Inc. (NYSE:SVM) around its May peak of just under $9 per share.

All signs appear to be pointing to a bull market in metals as gold finished off a remarkable August, where it surged from $1,180 to $1,245 per ounce. Silver’s ride was less consistent. The metal rose from $18 to just under $19 per ounce, but it did most of it’s moving in the last week of the month.

With inflation fears held at bay by fear of a double-dip recession, you would think that investors would have give up on precious metals all together, but that’s not the case. Gold’s chart (see below) looks like it’s in the heart of a trend that will likely steepen once inflation becomes a reality.

30-Day Gold Chart

That brings us to one of my favorite stocks: Silvercorp Metals Inc. (NYSE:SVM). Trading at a P/E ratio of 26.85, Silvercorp would be appropriately valued if the threat of inflation didn’t appear to be around the corner. Throw that in the mix, and the Chinese metal producer could look like it’s trading at bargain prices a year from now. Indeed, the stock was recently upgraded by BMO Capital Markets, and it looks and heads and shoulders better than its competitors Silver Wheaton Corp. (NYSE:SLW), which is trading at a P/E of 42 and Pan American Silver Corp. (NASDAQ:PAAS), which is trading at a P/E of 28.

Even better than the upgrade? Silvercorp’s gross profit surged to $26.5 million in the quarter ending June 30. That’s better than the company has done in the past four quarters, and the stock maintained its dividend of $0.02 per share. That’s good for a 1 percent yield on top of any appreciation the stock might see. If inflation does hit, expect to see this stock around its May peak of just under $9 per share.