And that got me thinking about other ways to use binaries. Specifically for portfolio protection.

I spent a week at the Agora Financial Investment Symposium in Vancouver. It was a great opportunity to hear my colleagues’ thoughts on the economy and learn what readers think about binary options. (If you missed my binary options tutorial, click here.)

A key message of the conference, driven home in Agora founder Bill Bonner’s closing address, was that U.S. economic conditions are “going to the cellar.”

Today it looks like investors are getting the message. That makes it more important than ever to diversify and protect your portfolio.

And binary options can be an important part of that strategy. I’m not talking about their ability to add speculative gains to your bottom line. Instead, I mean using them as a form of protection and insurance.

When you use binary options as a protection tool, the goal is to insure your portfolio against a big financial move down. To do that, you can use our old friend, the deep-out-of-the-money (DOOM) binary.

For example, let’s say you have large exposure to U.S. equities…

Historically, gold is one of the most reliable hedges against large drops in equities.  As stock indices fall, gold tends to go up. And gold binaries offer a quick and affordable way to capture gold’s hedging abilities.

See, most Monday mornings you can buy a deep-out-of-the-money gold option for around $20. That $20 buys you $80 of profit potential— and a 100-lot position offers a potential $8,000 net gain against a $2,000 cost.

So if you have a $100,000 stock portfolio, in theory, the binary position offers protection for an 8% drop in stock prices over the week. As stock prices plummet, you can expect gold to go up, pushing your binary into the money.

It essentially acts an insurance rebate that pays you when there is financial storm damage.

Keep in mind, this kind of play is not designed to always work. It’s strictly there for protection. And adjusting the position size can increase or lower your costs while maintaining an insurance effect.

If you’re still on the fence about trading binaries, I urge you to try a Nadex demo account. It’s an easy and risk-free way to get a real-world feel for binary options.

Just go to www.Nadex.com. It only takes a few minutes to get started, and the staff at Nadex is very helpful as well.

Sincerely,

Abe Cofnas
Currency Analyst for the Penny Sleuth

Currency in Focus: Using Binaries to Protect Your Portfolio was originally featured in the Penny Sleuth.

The extreme sensitivity to all financial news and world events had made gold, normally just a safe haven asset, look more like a currency in itself.

Remember how metal prices earlier last year maintained power even at the U.S. Dollar index highs in June 2010? That’s a true sign of internal strength.

Some analysts on Wall Street were starting to really beat the drum for gold in October of last year. There were risks to buyers at these extreme highs especially after gold, silver, copper, coffee, cotton, wheat, corn and soybeans had made the run.

Repeated profitable Resource Trader Alert metal plays has made me reflect on market trends versus bubble talk. The majority of so-called experts expect gold to move higher with $5000 and $10000 projections in print and on the idiot box for all to see.

While danger signs abound it may still be a prudent investment choice with a solid reward to risk plan. Always focus on risk/exposure and be prepared to live with the worst-case scenario.

This according to Bloomberg:

Gold dropped for a fourth day in New York, falling to a five-week low, as signs the U.S. economy is recovering and a stronger dollar curbed investment demand. Other precious metals declined.

A fourth daily drop for gold futures would be the longest losing streak since May. The metal reached a record $1,432.50 an ounce last month.

Gold futures for February delivery lost as much as $15.20, or 1.1 percent, to $1,356.50 an ounce, the lowest level since Nov. 29, and were at $1,358.80 by 7:53 a.m. on the Comex in New York. Prices are down 4.4 percent this week, the most since February.”

So with this recent pullback you could have a solid entry to profit from a modest move upward utilizing the power of commodity options!

On the equities side of things, the masses may be running to buy shares of the popular Exchange Traded Fund (ETF), SPDR Gold Trust (GLD). This ETF controls 1/10 of an ounce per share, but hardly gives you the profit potential you could gain.

The gold futures options we trade control TEN times as much and offer leverage on leverage with completely limited risk. So with a modest move of 9% in the price of gold, you could be able to cash in a 233% winner.

Sincerely,
Alan Knuckman
Penny Sleuth

January 21, 2011

Achieve Golden Riches Using Options was originally featured in the Penny Sleuth.

Our resident commodity expert, Alan Knuckman, chimes in with his thoughts on squeezing out additional gains from silver right now…]

The November stall in stocks has not negatively impacted the metal complex, which is on the way to new highs once again. The rally in gold and silver is especially impressive against the headwinds of the dollar.

Remember how metal prices earlier this year maintained power even at the U.S. Dollar index highs in June? That’s a true sign of internal strength.

Fundamentals are supportive as well for higher prices with demand for investment grade silver coins filling a void as gold may be out pricing itself for some. At $27 an ounce a whole bunch of these anti-currency chips are affordable for most everybody who seeks safety in real monetary value. Plus the numismatic angle (interject that word into the holiday dinner to impress family and friends) dwarfs the meltdown monies of coins at this time.

This from the Financial Times:

Silver coins are selling at a record pace as investors – especially in the US – seek to limit their exposure to the dollar. The world’s top mints have seen their silver coin sales jump to record or near-record levels, and they and coin dealers are working overtime to meet the surge in demand from investors…

While the price of gold is now well above the nominal record it touched in 1980, silver remains below the $50 an ounce it hit that year. Dealers said investors were buying silver in expectation that the so-called “poor man’s gold” could soar in price.

…The interest is primarily from retail investors, [but] private bank clients and sovereign wealth funds have begun to increase investing in silver, bankers said. Although prices are largely driven by investor sentiment, silver – unlike gold – is also being helped by buoyant industrial demand.”

This heightened silver interest forced Agora Financial’s 5 Min. Forecast to call on me to clarify a reader’s concern about a recent climb in trading requirements at the exchange.

Hopefully I address both sides of the coin… so to speak:

Question: “I noticed your comments,” a reader writes, “about recent drops in the price of gold and silver partly due to recent increases in the margins by the Chicago Mercantile Exchange.

“Could you please explain whether there are any laws and regulations regarding when and how much these exchanges can increase their margins (fees), or are they allowed to manipulate the prices of the markets whenever they want?

“Please also comment whether the above significantly changes your views on the future of silver, gold and other commodity prices.”

My Response: Trading futures/commodities outright is a leveraged play with theoretically unlimited risk. The gains and losses occur at a fast rate because of the approximately 20-to-1 deposit requirements versus paying the full cash value.

To trade a gold contract, long or short, the deposit is over $6,000 with a cash value on the 100 ounces today at $134,000. That upfront cash would be enough to pay for nearly a 5% one-day move in gold before putting the account in negative territory.

Unlike stocks, that ‘margin’ is not borrowed funds, but an actual cash deposit. The amount of margin you need to put up is a function of volatility. As individual markets get more or less active and the total daily dollar amount moves, a change in the deposit may be required. It is infrequent, not even a month- to-month occurrence, but sometimes necessary for protection if the cash value of the contract has significantly increased.

The exchange wants the margin to be low enough to ensure liquidity and, therefore, efficient trade execution for all sides. At the same time, the deposit has to be large enough to protect counterparties when large moves occur.

I have found over my 20-year career that when the margin requirements are increased, it doesn’t impact the traders on the right side of the market — only those who are undercapitalized when the trade is going against them. Either they put up more money or get out.

The exchange has no vested interest in the markets moving up or down as they make money on a small transaction fee per trade.

But leveraged, high-risk plays aren’t the only way to trade commodities. In fact, the recommendations that I give my Resource Trader Alert readers are strictly limited-risk options plays where the maximum financial exposure is the premium paid.

The bottom line is this: while risk-averse investors are staying away from precious metals right now, the professionals aren’t. In fact, I’m still monitoring the metals market for a price set-up that I like. I’ll be sticking with the same strategy that led my readers to multiple metals gains in the past 12 months.

Don’t eschew silver just because it’s seen shares rise in 2010. You may be leaving potential profits on the table…

It all comes back to commodities,
Alan Knuckman
Penny Sleuth

December 2, 2010

Should You Still Be Betting on High-Growth Silver Plays? was originally featured in the Penny Sleuth.

This chart says it all:

It shows that global sentiment is moving away from the U.S. dollar and into gold. A weaker dollar cascades into other markets and inflates value of other products. Export-based sectors increase.

In fact, the Standard & Poor’s GSCI Index of 24 raw materials reached its highest level since October 2008. Even corn and soybeans are getting a lift from a weaker dollar.

But clearly, the U.S. dollar-gold nexus has become the main theater of action and is getting all the attention. The key strategic currency question is whether this dynamic is becoming a major “outlier” event that ultimately cannot last.

Nobody knows the answer.

We do know that it can last a lot longer than most people believe because of how market sentiment feeds upon itself. Right now, the crowd is rushing into gold and running from the dollar. When “buy your gold” ads and booths are everywhere, it’s a sign that a top, at least from a sentiment point of view, is being formed.

A great deal of the near-term U.S. dollar’s weakness is also due to the “expectation” that the Federal Reserve will proceed with quantitative easing. But any surprises on the level of easing, or even surprise statements by Fed Chairman Ben Bernanke hinting at the level of easing, could cause a major sell-off in either the U.S. dollar or gold.

Also, do not ignore the continuing political and economic pressures now becoming known as “currency wars” to keep a currency low in value. Globally, it’s good politics, but we can’t have all the currencies simultaneously lower in value.

As I have also pointed out, the upcoming U.S. elections will very likely have an impact on “expectations” regarding U.S. fiscal policy toward spending. Fear of debt expansion is part of the pessimism driving the dollar down. A strong reversal of power may be a catalyst for stemming the flight away from the dollar.

All this benefits us as currency traders, because, in a real sense, we simply look for opportunities that provide high rewards and known and minimum risks.

There is no doubt that U.S. dollar scenarios offer short-term as well as longer-term currency option plays. Strategies and tactics also exist that allow us to play short-term countertrend moves and still be in long-term timeframes — in either direction or both directions.

Let’s not forget though, that the U.S. dollar is not the only currency option game in town. Other opportunities are forming for further winning plays on the Aussie and Canadian dollar as both are probing parity. (I’ll chime in on this in a future edition of the Penny Sleuth.)

For now, enjoy your weekend!

Sincerely,
Abe Cofnas
Penny Sleuth

October 15, 2010

The Dollar-Gold Trade: How to Play Gold’s Upcoming Slide was originally featured in the Penny Sleuth.

Truly, the unemployment data isn’t the leading indicator that it’s cracked up to be.

Nowadays, especially in a tight economy, bottom line corporate profit can be and has been maintained with less staff – staff that works harder and smarter with an underlying fear of additional layoffs. This is business pure and simple – maximizing assets and hiring the workers to make money, not over hiring just to feed society’s need for jobs.

In fact, it’s very possible that companies don’t feel the need to rebuild the workforce when forced efficiency and technology lets them do more with less. The employment numbers are a lagging indicator of growth that may not get back to pre crisis levels for a very long time.

Furthermore, hiring people is one of the last acts in a recovery, especially when corporate profits are at all time highs. A company’s duty to shareholders is to maximize profit, and right now a majority of companies are accomplishing that goal – no matter what the unemployment numbers portend.

Market Action Is Positive

The unemployment data is merely one data point, whereas market movement encompasses many, many more factors.

The stock market has recovered to pressure the 11,000 level for the blue chip Dow – amidst reports that more than 75% of second quarter earnings exceeded expectations. Corporate profits are not in a recession. And you don’t need to take my word for it, check out this story from Newsweek:

According to the St. Louis Federal Reserve, corporate profits hit $1.37 trillion in the first quarteran all-time high. Businesses are sitting on about $2 trillion in cash reserves. Business spending jumped 20 percent last quarter, and is up by 13 percent against 2009.

As corporate Americas position is getting better and better, the recovery is looking shakier and shakier. Unemployment is high. Housing looks perilously close to a double dip. Job growth is weak. And corporate America, for all its profits, isn’t hiring. The 71,000 jobs the private sector added in July aren’t sufficient to keep up with population growth, much less cut into the ranks of the unemployed.

A look at the history of financial crises shows that our slow, halting recovery is right on schedule, and the business community’s caution is predictable.

So business may be back, but its customers aren’t. That’s the Catch-22 of our recovery. Businesses will start hiring when the economy recovers. And the economy will start to recover when businesses start hiring.

Economists have lowered the probability of a double dip recession from 30 to 15 percent. The euro currency has stabilized, the dollar has lost its temporary safe haven appeal, crude is holding the $80 a barrel level and gold has reclaimed $1200 an ounce after some profit taking sales.

The financial markets are showing stability while the employment figures wane.

Of course, that leads me to my favorite financial instruments: commodities. That’s because commodity fundamentals play a more direct role in their pricing. Right now, I think there are new gain opportunities to be found in gold.

Positive action in gold last week drove prices $20 an ounce higher and a close above the critical $1200 level for the first time since July 15th. A much needed shakeout and recovery has set up Gold to move higher. A rally above $1220 leads to another run to the long-standing technical target of $1300.

[Ed. Note: If you’re interested in taking advantage of the profit potential of gold, one option is the SPDR Gold Trust (NYSE: GLD), an ETF that actively purchases physical gold for storage in its subterranean London vaults. Each share of the fund represents real ownership of the precious metal…]

Sincerely,
Alan Knuckman
Penny Sleuth

August 13, 2010

[Independence Note: Unlike scores of other penny stock resources, we're 100% independent from the companies we talk about in the Sleuth – that means that we never accept compensation in exchange for profiling a company, and our editors never own a position in any stocks they talk about.]

The Stock Market’s Irrational… Buy Gold! was originally featured in the Penny Sleuth.

With that in mind, here’s a look at why commodities are heating up in 2010 – and how penny stock investors can best play them…

Emerging markets were kicked into high gear over the past two years — this was fully evident in the middle of 2008 as many commodity prices reached all-time highs. As global demand increased, the prices for commodities like oil, corn, sugar and cotton rose to dizzying heights.

The market cooled off in late 2008 and early 2009, but now we’re beginning to tick back up. Many commodities have achieved a 50% retracement to 2008 highs, which to me signals a continuing uptrend.

(Take a look at CRB commodities index below.)

After worldwide demand destruction in late 2008, a solid uptrend has formed.

This uptrend is a combination of fundamental factors, but the most important is coming from markets like China and India. These emerging markets consumed everything from oil to orange juice — and believe me, after 2008’s hiccup their craving for so-called luxury goods has just started.

Worldwide demand for these staple commodities (fuel for a car, coffee as a new delicacy, corn-fed meats on the dinner plate, etc.) will continue to rise.

Is Gold Headed Higher in 2010?

My gut feeling about gold is that it’s headed higher.

I know, I know, I really went out on a limb with that prediction. But past all of the investment bank upgrades and positive market consensus, there are plenty of solid reasons that gold is set to rise in the next 12 months.

Technically speaking (and I’m sure you’ve heard this before) gold hasn’t even reached its inflation-adjusted all-time high. For that to happen, we’d need to see gold over $2,000 an ounce — a 75% increase from today’s price.

Will that happen in 2010? It easily could.

But a more conservative, yet realistic goal would be $1,500 gold — which could easily happen in the next 12 months.

Other than technical indicators and charts (which are tough to decipher long term for a commodity like gold), there are plenty of fundamental reasons to assume the metal will go higher.

Here are the two main reasons I believe gold will shoot up to $1,500 an ounce…

First and foremost, there is an implicit flaw with Western government. Governments like ours here in the U.S. inherently choose short-term fixes for long-term problems (it probably has to do with re-elections and such). And I don’t see that trend magically stopping in 2010 — chances are it will continue.

As short-term fixes expose more government-monetized debt, the prices of precious metals will rise, that’s for sure.

The second reason that gold will shoot to $1,500 in the next 12 months is supply related.

With prices around $1,100 an ounce, it’s clear that demand is strong, but will supply be able to match it?

No way, José.

As gold demand rises, you can bet that miners are doing everything they can to pull gold out of the ground. So when scarcity rears its head, watch out! Prices will have nowhere to go but higher.

Yours for resource investing,
Matt Insley

February 4, 2010

Commodity Demand 2010 — Set to Move Higher? was originally featured in the Penny Sleuth.

But one thing I’d like to stress in today’s Sleuth, with the Volatility Index ($VIX) around 25, is that I believe we’re still at a reasonable level of volatility – and if anything, last week’s correction was long due.

The sell off was the worst since March 2009 with a 5% drop in the last three days of the weak week. Put in perspective, though, 15 Month S&P highs were made Monday January 19th – only a few trading days ago.

My focus lies on the recently humbled physical commodity markets that were down 6.5% as the raw materials sector retreated on Chinese concerns. Their coordinated announcement of slowing growth from the official 10% latest quarter GDP jump is designed to temper inflationary pressures – but contrary to some published obituaries the Red Dragon is still very much alive.

Last week has definitely gotten our attention but remember we have seen this action repeatedly before. For the last 10 months, every time the market looks like it will turn down it has responded with a rally to new relative highs.  Take a look:

One component in pricing for the options that my Resource Trader Alert readers invest in is volatility. For our purposes it helps us determine simply to buy an outright option if price are cheap or to purchase a spread if expensive (in relative terms). An increase in volatility is an increase in price movement – and don’t forget we need the markets to move in order to make money on our positions.

Stocks had slowed in the last couple of weeks and the $VIX, which measures the S&P 100 stocks, was solidly below 20 and as low as 16 January 11th. No fear, no movement as you saw quiet market conditions with tighter daily trading ranges while the market searched for a catalyst for prices.

Earnings have begun once again feeding the beast with its necessary diet of market information to digest. Banks have been permitted to make back some money from interest rates held low by the Fed. They had to make some money the old fashioned way:  they Earned it with the risk free policies of the Central Bank allowing them to replenish their dwindled cash coffers.

Is This Just a Pullback, Jack?

After any turnaround (in any market), traders look for price support. The logic is to start small with not making new lows for an hour, then a day, then the week. For example, the highly traded e-mini S&P 500 futures declined to 1089 in today’s session but not below Friday’s lows at 1086 and reversed to move higher on the day.

As a group commodities have done much the same with Gold and Oil closing higher after testing last weeks lows. Crude actually made a lower low at 73.97 Monday for the March contract but closed higher on the day which is a positive technical sign with that reversal on lower volume than Friday.

Another clue can be taken from the action in Treasuries, which benefited from the stock uncertainty last week. 30-Year Bond futures are off by nearly half a basis point as some fear has subsided in the short term. The next round of market volatility will tell us a lot about the market’s future direction.

It may be cliché, but my nearly 20 years of experience makes me most afraid when others are not and gives me a sense of calm when the public is frantic and unhinged.

This from Bloomberg:

Traders are piling into bets that the biggest sell-off in U.S. shares since March will increase stock market volatility, pushing call options on the VIX Index to the highest level in 19 months.

The VIX jumped 55 percent to 27.31 in the last three sessions, the biggest surge since February 2007, as demand rose for options to protect equities from losses. Futures show traders are betting it will remain above 25 for six months after averaging 20.29 over its two-decade history.

The VIX had its biggest annual drop ever in 2009, falling 46 percent, as the smallest stock-market swings in two years reduced the value of equity derivatives. The gauge is still down 66 percent from a record 80.86 in November 2008.

These emotional inputs have been successfully interpreted and managed within my readers’ disciplined RTA trading plan through ups and downs. Risk is always quantified and controlled with our strategies and that does not change as volatility increases, but opportunities do. We’re going to take advantage of those opportunities going into 2010.

It all comes back to commodities,
Alan Knuckman

January 29, 2010

Don’t Panic from the Pullback… Profit from It! was originally featured in the Penny Sleuth.

In the last year, my Resource Trader Alert readers have already had the chance to book 143%, 148%, even 200% gains thanks to the commodities market. And in the current economic climate, as commodity prices start to heat up once again, the profit potential is amazing.

Here are the resource plays that I see rocketing right now…

Gold and Silver are leading the markets higher with the decline in the U.S. Dollar.  The greenback is at its lowest levels in since September 2008.  Gold is solidly above $1000 an ounce and looks positioned to easily make new all time highs on a course to $1200, from my projections.

Silver has made an impressive rally as well – one that I see continuing into the upper teens.

Recently I’ve been concerned about the lack of recent strength in Crude compared to new highs in stocks and metals.  Last week, that disconnect was repaired with a 5% move in prices putting oil solidly above $70 a barrel again. And it looks like oil hasn’t stopped its ascent either…

More Fuel for Higher Market Prices

The Organization of the Petroleum Exporting Countries (OPEC) did a good job of pushing oil prices up this summer. While OPEC managed to boost oil prices in the last six months, at current levels black gold is still a far cry from where it was a year ago – and where it could be again soon. This from Bloomberg:

“OPEC’s success in more than doubling oil prices since a five-year low in December will probably persuade ministers to maintain production quotas after this week’s meeting.

“Reducing shipments beyond record cutbacks last year would endanger the global economic recovery, the Organization of Petroleum Exporting Countries’ president said last week. Oil rose to $75 a barrel on Aug. 25, the price Saudi Arabian King Abdullah says is fair for consumers and producers.”

A major flaw in the governments’ unfair obsession with speculators is the failure to acknowledge the role of OPEC in energy prices.  They are a cartel!  Traders can buy and sell but only OPEC colludes to determine price levels.  Until hybrid cars, solar and geothermal technology, and algae fuel replace black gold we can fight the battle for financial gains.

We’ll continue to do just that.

It ALL comes back to commodities,
Alan Knuckman

September 14, 2009

What You Need to Know About the Future of Silver, Gold and Oil was originally featured in the Penny Sleuth.

The first is to have at least 5-10% of your portfolio invested in precious metals. (Or more, if it helps you sleep at night.) That’s gold, G-O-L-D. Or silver, S-I-L-V-E-R. Take delivery. Don’t entrust your gold and silver to somebody else. An ETF like streetTRACKS Gold (GLD: NYSE ARCA) is good for trading in your account. But it ain’t real gold. It’s a CLAIM on somebody else’s gold. And somebody else might say “no” one of these days.

This is Gold 101: For absolute monetary safety, you want real metal under your control. Remember the old expression, “Gold is money.” Some people — economists, mostly — disagree with that. OK, buy their gold. Smile. Say thank you. Walk away briskly with the gold. Don’t look back.

Here’s the second: Accumulate positions in solid, cash-rich gold miners. Sure, some of the junior mining guys are great speculations. Eventually, the really good explorers and mine developers will get bought out by the large companies. That’s how it works. Eventually. But for now, especially if you are just getting into owning gold miners, go with the ones that have large reserves, strong operations and plenty of cash flow.

Here are some of the best gold miners. Look at AngloGold Ashanti (AU: NYSE), Agnico-Eagle Mines (AEM: NYSE), Goldcorp (GG: NYSE), Kinross Gold Corp (KGC: NYSE), or Yamana Gold (AUY: NYSE).

I like all of these companies. All of them have good management, reserves, operations, technical ability, cash flow and sheets. Are there any risks? Yes, the stock prices tend to track the price for gold. So if the price of gold falls, these stocks take the hit.

Also, if the stock market has another round of selling, the gold miners may go down in the suction. That’s bad. What happens is that when the market tumbles, some players have to raise cash in a hurry. So they sell their winners, which of late have included many gold miners. Or their broker sells them out at the end of a trading session to meet a margin call. So moving down with the market is a chance we’re taking by owning shares in any stocks at all. Even owning good gold miners has risk.

The third thing you ought to do is be sure to assemble positions in good, solid energy plays. I noted above that gold is money. Let me add that energy is wealth. Really, it’s hard to do very much in this world without energy supplies. You can live in a cave and freeze your butt off, maybe. So the view from my perch is that well-run companies with energy reserves and good cash flow ought to hold up over the long term.

Until we meet again,
Byron King

April 9, 2009

Three Important Pieces of Advice from a Gold Bug was originally featured in the Penny Sleuth.

That’s why the greatest inflation fighter in the world is under stress. Of course, we’re talking about gold. Gold is– and always has been– the safest place to put your cash. It has been traded as currency, stockpiled to backup paper money (think Fort Knox), and hedge spend-happy governments. Today, its hedging attribute is important.

Over the past few months, it’s become more and more difficult to buy physical gold. Even if you do locate it, what you actually pay is quite a bit more than its spot price.

In many cases, these buyers were willing to spend up to 25% more for gold than its value. That’s like your broker taking a quarter for every $1 share you buy.

So, if gold is too expensive, where can investors turn? Well, there’s always gold’s little brother…

Silver is not commonly thought of as an inflationary hedging tool. That is, until times get tough. And I don’t think you can find too many times tougher than right now.

Silver is often referred to as “the poor man’s gold”. We call it opportunity. You see, during the 1978-1980 precious metals rally, silver showed up late. Almost all of the large gains in silver came in the last few months.

We see the same events unfolding this time around. As we pointed out in the past, gold has always traded for about 16 times as much as silver, until the past few decades. Currently, the ratio sits around 71. When this number falls, silver booms.

Macroeconomics and ratios aside, there is one final reason we expect an enormous silver rally…

About 3 out of every 5 ounces of silver come from base metal mines. Roughly 28% of all silver comes from copper mines and another 32% comes from lead/zinc mines. Both of these sources are decreasing — and in some cases, completely shutting down — production due to the overall commodity market.

Only 10% of all silver comes from gold mines, which leaves just 30% of the total market to pure silver plays like Coeur d’Alene Mines Corp., Hecla Mining, and Pan American Silver. These serious cuts in production, gives us pure silver investors the inside track to cornering the silver market.

We are seeing a perfect storm brewing in the silver market. If you get in now, you might just beat the rush…

Sincerely,
Jim Nelson

March 17, 2009

How You Can Win with Silver was originally featured in the Penny Sleuth.