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Dear Daily Crux reader, Longtime readers know we consider Chris Weber one of the world's best investors. His track record in precious metals, especially, is almost unbelievable. Chris began investing in gold at just 16 years old... and was so good at it, he was a millionaire by the time he was 20. When he talks about gold and silver, we always listen. Read on to learn what Chris thinks about the precious metals today, and get his answer to the question on everyone's minds right now... Good investing, Justin Brill Managing Editor, The Daily Crux www.thedailycrux.com –––––––––––––––––––––––––––––––––––––––––– The Daily Crux Sunday Interview Super-investor Chris Weber answers the No. 1 question about gold and silver today The Daily Crux: You recently alerted your subscribers to something unusual happening with the U.S. dollar and precious metals. Can you explain? Weber: Well, a few weeks earlier in October, I thought the U.S. dollar was ready to rally. It had been smashed down so much – and gold and silver had gone up so much – I thought we'd see a solid bounce at the very least. So I recommended buying the U.S. dollar for a trade, with a tight stop loss of 2.3%. But it didn't. The dollar didn't rally, and the metals did not fall back... That, to me, was an early warning that this was going to be something quite unusual. ---------- Advertisement ---------- Is Obama's $75,000/month NON-GOVERNMENT income ethical? I recently learned something very surprising... Did you know that President Barack Obama collects more than $75,000/month in personal income? Even more shocking is where exactly all this money is coming from. Exclusive video reveals everything. Click here for more information. ------------------------------------ We got stopped out of our trade in the dollar... and the precious metals – silver especially – have rallied strongly. Longtime readers know I've been waiting to see how silver reacts at the $25 to $27 area... which represents the 50% retracement level of the previous big bear market. In other words, that's the level where silver will have rallied back to the halfway point between that all-time high in 1980 and it's lows in the early 90's. In technical analysis, this level tends to act as tough resistance. Well, silver just blew right through that area and made a new high over $29. Since then, it's pulled back... But so far it's remained above the $25 to $27 area. That's an extremely bullish sign. Crux: So I have to ask... do you recommend buying now? Weber: I've actually been getting this question a lot lately. You know, I've been talking about how competitive devaluations are going to raise the gold and silver prices since early '01, and I get the sense that some people are just now starting to believe that. It actually had to happen for them to see it... What they're calling the "currency wars" in the financial news is competitive devaluation in action. To try to answer it simply... I don't think it's too late to buy. Especially with the events of the past couple of weeks... Both gold and silver have gone past the levels where I would say, "Hold off to see if they fall." But it really depends on the individual here. For me, I've probably got about 25% of my assets in cash right now... mostly U.S. dollars. The rest is predominantly in gold and silver, which I view as alternative currencies. Now I didn't set out to have 70% or 75% in precious metals, but since I bought them quite a few years ago, they've gone up so much they make up the majority of my assets. I could sell and rebalance, but there's nothing else I'd rather own right now. At the same time, I think if you have 75% of your portfolio in any asset class like I do, it would be pretty stupid to add to it. If you own no gold or silver – or less than 5% of your net worth – you're in a very different situation. But as far as whether this is the best time to buy or not, I would say I'm pretty much over-trying to pick entry points. Just bite the bullet and buy some. And then continue to add regularly until you own as much as you feel comfortable holding. Of course, the metals aren't as cheap as they were a few years ago, but that seems to be the way of the world. People don't seem to want things so much when they're very inexpensive. But when they start going up every day, everyone wants to buy them. We've just seen what can happen when an item, in this case silver, starts to go up by 3%, 4%, even 5% per day. People start to jump in and it really increases the volatility. In just the past couple weeks we've seen some huge moves. We saw silver jump over $29 one day, then plummet 10% within a few hours, only to rally back up again. That's the kind of thing that happens. What we've seen recently is, I believe, just a taste of what's going to happen down the road... at far higher prices. Could it still correct before heading higher? Of course. This recent rally began in August, when silver was $18. And by the time it got to $29, it had almost increased 60% in just a few months. So it's definitely entitled to back off to rest. But you can't count on it. On the other hand, you've also got to be prepared for the possibility that we could just as easily see silver fall to $15. In fact, I would be willing to bet we'll see silver drop 50% or more again in a short period of time. If that were to happen, it'd actually be a great buying opportunity. But it very well could happen from a much higher level, where the low point is actually higher than it is today. Ideally, I'd like to see gold and silver hang out in their current neighborhood – around $1,400 for gold and $27.50 for silver for the next few months. Now obviously, I don't mean exactly those levels... I'm talking around those levels, give or take 10% or 15% either way. To me, that would be the most bullish scenario possible, setting them up for a new lunge upwards at some point. For silver especially, if it can hold above the 50% retracement level it would be extremely bullish. But we just can't know for sure. So your best bet is to be prepared for either scenario. Again, what that means will be different depending on the person. But the idea is, you want to own a comfortable amount of gold and silver, and hold enough cash to see you through any major corrections. Crux: For those readers who feel they don't currently own enough precious metals, do you recommend buying a certain percentage of gold or silver at this point? Is one a better buy right now? Weber: That's a tough question. In general, I think silver still has the most upside potential at this point. But the silver-to-gold ratio – since August – has essentially dropped from about 70-to-1 to just over 50-to-1, which is a huge move. The gold price has only gone up about 20% since August, but the silver price has gone up over 60%. This process of the silver-to-gold ratio falling is something I've been talking about for several years. And I think it's going to go much further than this. My near-term target is 33-to-1, and ultimately I think it will fall to around 16-1 before the bull market is over. But the thing with silver is, it's always a lot more volatile than gold. You saw what happened this week when it dropped about 10% in just a few hours. I've seen it fall by 25% in a 24-hour period. So you need to consider the volatility as well as the potential returns. If you're going to own a lot of silver, you've got to be in a position to buy it and forget about it. As an example, I know somebody who bought a lot of silver when it was at $20, about 2 ½ years ago. Of course, if you've been following silver, you know it fell down to $10 and even under $10 for a short time in 2008. But he told me, "You know what I did? I just mentally put it aside. I didn't think about it." And now he's up a great deal. If he had been watching the price every day, he probably would've sold when it crashed and he wouldn't be in it today. That's the kind of mentality you have to have. You're not always going to time it right. So while I believe silver will continue to have the potential to rise faster than gold and go up further in percentage terms than gold, how much of each you buy really depends on your psychology. If you're mentally and financially okay with the greater volatility and want the potential for the really big percentage gains, maybe go more heavily with silver. If that's not you, go with a greater percentage of gold. But you definitely want to own some of each, and I think you should have only as big a percentage or as big, in nominal terms, of each as you can afford to not panic over. For me, it's probably around 60/40 in terms of gold to silver today, but if silver continues to rally like it has, at some point I'm going to have to face the fact I've got more in silver. But that's something I'll take a look at down the road. Crux: How about gold and silver mining stocks. Are you currently recommending any of them? Weber: Well, it's been funny. I've been following them and it's very much a case of the individual stocks. It's been hit or miss. For example, the only big silver stock that has been powering into new record territory is Silver Wheaton, which is kind of a royalty company. The others – from Silver Standard to Pan-American Silver to Hecla to Coeur d'Alene – they've all been doing okay, but most of them are still far below their 2007 highs. People who are heavy in the mining stocks and don't own much of the metals themselves have been rather frustrated, unless they were lucky enough to put all their money in the few stocks like Silver Wheaton. When you pick a company, you potentially pick all that company's obstacles or problems, whereas just picking the metals themselves is much simpler. But again, it depends on where you are in life, too. If you've already got a lot, you don't really have to fool around with the mining stocks. On the other hand, if you're trying to make it big, it might make sense to speculate on a handful of the miners that can go up 10 or 20 times. I think Silver Wheaton has gone up over 1,000% just since the early '09 lows. I can sure tell you when I turned positive on the stock market in general, in March of '09, I wish I would've added Silver Wheaton to my buy list. Of course that's the kind of thing you can only say in hindsight. Overall, I've been happier just being in the metals themselves. I think this will be the 10th consecutive year that it will end the year higher than it started – the 10th consecutive year of annual increase. We never even saw that in Nasdaq in the '90s... It only got to nine years of consecutive increases. That's just amazing. It's really an extraordinary bull market... and the average person still isn't in it. It's only the wealthy people and central banks. The average person still – if you ask – doesn't own any, or if he does, he may own 2% of his portfolio and his total holdings will be in a stock like a Newmont. That's about as close as he'll come. I don't think we've really scratched the surface. I mean, if you have a swimming pool and your pool guy starts giving you advice and talking about how much he's made in gold and silver, perhaps you should start looking for the exits. But I've long thought we're on the cusp of a historic bull market – the type of a bull market that happens once or twice in a lifetime. Of course, I can say this for the past few years – but I get the feeling people are thinking that now – it's possible. Crux: Great stuff, Chris. Any parting thoughts? Weber: Well, I'll just repeat that I don't think it's too late to buy the metals. There could be a time in the future where perhaps I'll think it's too late to buy them, but that time isn't today. Own as much gold and silver as you can without losing sleep when they fall... because they will fall. One of the defining characteristics of a bull market is big price drops that make investors want to sell all their holdings. As I recently wrote to subscribers, bear markets want to take as many people along with them as possible, and bull markets want to take as few people along as possible. The best thing about a newsletter like the one I write is it kind of holds your hand through the bull market. The fact is that most people don't profit from a bull market, because they buy and sell at the wrong times. My job is to make sure you do profit. To hopefully prepare you for the fact that the metals could fall back temporarily, but not to panic and sell, not to trade your way out of it. We've had a pretty good run so far, but the bull market is only getting started. Crux: Thanks Chris. We appreciate you talking with us. Weber: My pleasure. Thank you. Editor's note: Chris Weber is by far one of the greatest investors we know. In fact we've never seen him wrong about any major market call. Today, Chris has grown his fortune many times over, and he writes about exactly what he's doing with his own money. His newsletter is a must-read for anyone interested in making maximum profits from the once-in-a-lifetime bull market in precious metals. You can learn more about theWeber Global Opportunities report here.