[T.S.R:16548] Go Into 2011 stocked up with Gold and Silver

This secret indicator predicted the longest-running stock bull market ever in the early 1980s. And it predicted gold's amazing run-up over the last 10 years, back when gold was selling for a song.

Now, the same indicator is predicting this incredible bull market for gold will continue. In today's issue, I'll show exactly how the indicator works so you can use it yourself. I'll also reveal how I'm playing gold's run-up in the currency market.

Gold or Stocks? That Is the Question

One of the simplest ways to classify financial assets is to divide them into soft and hard assets. Hard assets are solid commodities, such as gold and silver. Soft assets are paper assets, like stocks and bonds.

Studies have shown that hard and soft assets have an inverse relationship. In other words, they tend to move in opposite direction over the long haul.

Precious metals and stocks tend to move in two different directions because of inflation. The risk of higher inflation tends to push up hard assets like gold and hurt soft assets like stocks.

Just knowing which asset to choose - hard metals or stocks - can make a huge difference in your portfolio.

Imagine if someone had told you to buy hard metals back in 2002 and give up your stocks? You would be up over 328% right now, in a decade when stocks did virtually nothing (and that's not counting how much the sinking dollar has cut into what little stock gains you had).

So when should you increase your holdings in hard assets and pare back some position in soft assets? When should you do the opposite?

This secret system provides the answer....

This Ratio Tells You Where to
Put Your Money...

A simple way to visualize the performance of hard and soft assets is by looking at their relative performances. To do that, you can look at the Dow Jones index in terms of gold, for example. While stocks represent soft assets, gold represents hard assets.

By focusing on the Dow priced in gold, we're essentially looking at a soft/hard asset ratio. When the ratio rises, it means stocks are outperforming gold. When the ratio drops, it means gold is beating out stocks.

This is very important because relative performance can last many years. So you can use this ratio to tilt your portfolio towards the assets that are most likely to perform best for the next 5 years or so.

Again, it's as simple as looking at this ratio. If you want an even more precise trading signal, you can look at the moving averages for this ratio. I recommend the 48 months Exponential Moving Average (EMA).

Don't let that name scare you. The EMA is just a moving average that gives more weight to recent data, so it tends to give trading signals earlier than the regular moving average.

You get the signal when the ratio crosses its 48 months moving average.

 

 

This Secret System Is Saying, "Buy Gold!"

In early 1980's the ratio crossed above the 48 EMA - and signaled the longest-running stock bull market to date.

Then in 2002 the 48 EMA indicated all investors should switch from stocks to gold, when the ratio crossed below its 48 EMA. That was back when gold was selling at $320.

What is this system telling us today?

This Gold Bull Market Isn't Over Yet

This signal is a simple way to decide which asset classes you should buy. As you can see, once a definite trend begins, it usually remains in place for many years.

The three big commodity bull movements in the 20th century lasted on average 17 years. This latest bull market is arguably 8 years old. So if history is any guide, we can expect to see commodity prices moving higher all the way to 2016.

Right now the ratio is sending the same message: it's time to emphasize hard assets like gold and silver, and not stocks.

For stock investors, it means you should focus on companies that produce hard assets. We should load up on stocks of mining, oil and agriculture companies. (My buddy Eric Roseman's Commodity Trend Alert service focuses almost exclusively on these companies.)

For currency investors, it means you should be buying currencies from countries that export raw materials. That includes commodity currencies like the Australian dollar, Brazilian real, South African rand, Mexican peso, New Zealand dollar, and Canadian dollar.

As an exotic currency trader, I'm watching the South African rand and Mexican peso in particular. Both currencies closely track commodity prices. In 2011, I see both the South African rand and Mexican peso shooting higher. (Since last summer, Exotic FX Alert subscribers have already played the peso for gains of 21%, 38%, 43%, and 80% - and next year's gains should be even better.)

For everyone, that means you should still be buying up gold and silver. And remember this super cycle will end one day. So that means this ratio can also tell you when to sell your precious metals too.

When you invest your money, you need to make many decisions. But the most important one is how you allocate your money among different asset classes.

Bottom line: This time-tested indicator is saying now is the time to buy up precious metals. Make sure you pay attention.

Stay long hard assets!

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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