Should You Buy Gold And Silver In A Shutdown?

I mean, doesn’t this mean there will be panic, anarchy and the end of civilization as we know it?

Ok, in all seriousness, one of the reasons the metals are selling down is because many traders are cashing in on short-term gains that we had when the most recent bottom was found in gold around $1,180 and silver around $18. They are locking in profits. Technically, both have fallen through support. Fundamentally, people are seeing this shutdown as a potential spark that could lead to the government finally cutting spending in the long-term. Less spending=less debt=bad for gold and silver. Short-term traders like it when it seems the U.S is on a path to being bankrupt. Long-term holders realize that is somewhat already the case and welcome this decline.

I believe you should be taking advantage of this selloff thanks to the government shutdown, especially those who have been on the sidelines waiting to start a position. Today is a great day to open up a position in precious metals as the long-term fundamentals are intact as I will highlight in this article. This pain that we are experiencing adds to the historic 2013 sell-off in silver (SLW ) and its streaming business model better than other silver miners that actively produce the metals. The company, based upon its current agreements, forecast 2013 attributable production is approximately 33.5 million silver equivalent ounces, including 145,000 ounces of gold. By 2017, annual attributable production is anticipated to increase significantly to approximately 49 million silver equivalent ounces, including 180 thousand ounces of gold. Other than its initial upfront payment, Silver Wheaton typically has no ongoing capital or exploration costs, and the company does not hedge its silver or gold production. The company has projects/agreements and is developing projects globally. It’s a long-term winner and a bargain at its current price of $23.80.

The best way to gain exposure to silver miners as a whole for those who do not wish to pick just one is through the Global X Silver Miners ETF (SIL). SIL currently trades at $16.15 on average daily volume of 173,000 shares. SIL has a 52-week range of $10.54 to $25.75. For those willing to take on more risk and do the necessary homework, an individual silver company such as SLW, or another miner I have recommended in prior articles could be considered in place of SIL, which potentially could offer better returns. However, SIL will offer exposure to the whole sector.

Conclusion
Take advantage of this “government shutdown selloff.” Use this weakness if you have been on the sidelines waiting to pick up some exposure on the cheap. For those just getting started, it’s the perfect time to start your long-term positions. I maintain that long-term precious metals stand to gain significantly from balance sheet expansion at central banks and currency debasement despite criticisms that this will not happen. While gold is an excellent play off of the stimulus coming from governments worldwide, I believe silver and silver companies may outperform gold in the next few years. Regardless of the precious side of silver it has massive industrial demand, particularly in the technology sector. Physical holdings are my preferred way to go, but the ETFs and companies mentioned in this article can be very profitable. Further, the list I provided is just a sample of ways to play – it is not nearly exhaustive. While I’m also adding to gold holdings, at current levels of $20.65, with the long-term fundamentals very positive, I believe silver and subsequently silver companies are significant opportunity buys over gold plays, especially for the long-term investor. In the end, this shutdown is just a sideshow in a long process of the US government spending its way into oblivion. This reason. among many others, is a reason to allocate some funds to gold and silver.