Precious Metals — I follow many of the leading precious metals “experts.” Almost to a man they’ve been warning that gold is overbought. Most have suggested taking profit in gold, and most are partially or totally out and on the sidelines. These experts are waiting for the “overdue correction” that will allow them to re-enter and buy gold at lower prices. So far, gold has not obliged and given them the “lower prices” that they’ve been waiting for. And right now these sellers are suffering from what is often referred to as — “Seller’s remorse.”

I have never recommended selling gold or trading gold. My advice has been to buy gold, and add more to your holdings on any reaction. My reasoning was simple. We are early in a bull market in gold, and to trade out of your position often means to be shut out entirely. That could be what’s happened over the last month — a lot of people out of gold and waiting on the sidelines. In the meantime, we just went through a minor decline, and suddenly gold is again within shooting distance of its all-time high.

What about silver? During hard times silver is an industrial metal. But during inflationary times, silver joins gold and it becomes a precious metal. The ratio of silver to gold varies over the years. As recently at May, 2003. one ounce of gold would buy 80 ounces of silver. In November of 2006 that ratio dropped to 46. One ounce of gold would buy 46 ounces of silver. From there, the ratio moved in favor of gold again — one ounce of gold in December 2007 would buy 57 ounces of silver.But last December the situation changed again. The chart below shows the change. Starting on December 17, silver began to out-perform gold. At last Friday’s close, one ounce of gold would buy only 53.9 ounces of silver. I expect this latest trend to continue. Some traders are now selling GLD short and buying SLV. That doesn’t really interest me. My suggestion is to buy BOTH, GLD, the gold exchange traded fund — and SLV, the silver exchange traded fund.

I own both GLD and SLV (I’ve recommended both many times before) and I’m only interested in buying more. We’re in a once-in-a-lifetime bull market in precious metals. Somewhere ahead the third or speculative phase will take over. The US public is just beginning to be aware of gold and silver. This will change to active interest as the weeks and months ago by, and possibly even a bit of cautious buying by the public in coming months. This too will change as the metals work higher. In due time this same public will become frantic to buy both gold and silver.

Since the year 2000 gold has appreciated at an annualized total return of 14 % a year. Somehow this extraordinary rate of increase has not yet sunk into the consciousness of the public. My veteran subscribers remember the expression — “There’s no fever like gold fever.” The fever for gold opened up California and the American West. Back in the 1840s men left their families and loved ones and headed West in the hope of finding gold. That was a classic case of gold fever. Those of us who lived through the days of 1978 to 1980 got a taste of gold fever.

Somewhere ahead we will experience gold fever again. But at that time, the fever will be far greater than the fever of 1979-1980. Fortunes will be made. But the basis for those fortunes are being laid now.