Two to Own as Metals Become More Precious
04/06/06 - 10:33 AM EDT
Michael Brush
With gold and silver at levels not seen for a quarter-century, and an exchange-traded fund (ETF) on the way to make it easier for the average Joe who's already hooked on GLD to daytrade silver, contrarians have one question on their minds: Is a top at hand for gold and silver?
Ultimately, the answer depends on your timeframe. In the short-term, at least, you should expect gold and silver prices to lose their luster, cautions Ryan Detrick, who follows the metals at Schaeffer's Investment Research. His reasoning: Gold and silver have recently outpaced the shares of companies that mine these metals. When this happens, the metals usually pull back, he says. Secondly, for the past two years April has been a bad month for gold and silver, but a good month to buy ahead of the rebound in May. What about the medium-term? For help with that, it pays to consult a fund manager who has the golden touch. So I recently checked in with Thomas Winmill, who manages the Midas Fund (MIDSX) in New York. Shareholders are up over 86% in the last year, as Winmill's fund is in a dead heat for top honors among 60 precious metals funds, based on trailing 12-month returns, according to Morningstar. So what's his take? The rally is far from over. And if you agree, there are two stocks to consider. He believes gold will be at $625 to $650 an ounce in a year, compared to prices of around $585 recently. And while Winmill agrees that silver -- given the recent parabolic rise -- could back off of recent levels of $11.70 an ounce, he predicts it will be at $13 to $14 an ounce a year from now. The following factors are what he says will drive the price gains in the medium-term.
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