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I was in Dallas for an interview last week, riding in the back of the car sent to bring me to the studio. As we sat in some mid-town traffic, I struck up a conversation with the driver.

The topic quickly drifted to the cost of living, which is no surprise as it has been increasing steadily for pretty much everyone. People notice very quickly when rising food and energy costs hit their wallets.

I told him the real problem facing people today is inflation. I explained that how someone has their money positioned to deal with inflation is what will ultimately determine whether they are able to grow their wealth in the years ahead, or whether their wealth will steadily lose value.

I pointed out a chart I’d seen from Reuters recently as an example. It took the average wage in America and showed how many gallons of gasoline one hour of work would buy someone at that rate.

Well, 10 years ago, one hour of work at the average wage bought 10.8 gallons of gas. Today, it buys half as much – just slightly over five gallons!

As I told the driver, you can’t just decide to fill your gas tank up halfway. After all, you still have to drive just as far as you always have to get to work, church, the grocery store and all the other places you have to go. So, what it means is that we have to work twice as hard and twice as long to fill up our tanks … unless we position our wealth to beat inflation.

Playing the Fed’s Game

I explained to the driver that this weakening of our purchasing power is the prime example of why inflation is a harsh taskmaster. The average American works for inflation and doesn’t even know it.

And there are no signs that it’s going to get any better. The Federal Reserve has an open-ended quantitative easing program (QE) going on right now, and that’s only going to stoke inflation further.

Therefore, the job of the investor is to understand the Fed’s game … and what steps to take to stay ahead of it.

One of the best ways to fight inflation and the Fed’s money printing is to buy gold and silver. Both of these metals tend to rise in value during inflationary periods as investors seek safety. Gold may be the first thing on most people’s minds, but when QE programs crank up, silver generally outpaces gold.

As silver strengthens relative to gold, you can see it reflected in the downturn of the gold-to-silver ratio. Silver will perform better percentage-wise and is cheaper for most people to take a position in as well.

In fact, silver finally woke up from its year-and-a-half long slumber as the latest round of QE kicked off.

QE is Fuel for Silver’s Fire

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The weekly, three-year chart above shows how silver has performed. Silver had gotten ahead of itself as it went parabolic in late 2010 and early 2011.

It fixed that situation with a lengthy, healthy consolidation. That helped to ease concerns of a silver bubble – silver didn’t “pop,” and burst bubbles don’t have another run higher like what we’re seeing now.

Silver is now entering the next leg of its uptrend. You can see it in the chart above. Silver is still above its major moving averages, both of which are trending upward. It’s also above its red, downward corrective line as well.

Additionally, it’s broken out above the red downtrend line on the moving average convergence divergence (MACD). That’s bullish for silver going higher, as it shows a shift in the trend to the upside again. Also, you’ll notice that the MACD is beginning to come back into a positive reading by moving back above the zero line.

The Relative Strength Index (RSI) shows silver is overbought at the moment, but that just means that a pullback is likely before the next advancement higher. The gray arrow at the right of the chart indicates how I feel silver will act from here.

A Different Way to Play Silver

Now, I know a lot of people buy into SLV, the silver ETF – and there is nothing wrong with that. I’m a believer in it too. However, I’ve found a cheaper way to buy into silver’s current move: silver miners.

As silver producers, miners will benefit as the metal continues to move higher. While you could invest in individual miners directly, I like going into silver miners through another ETF: Global X Silver Miners (SIL).

SIL consists of 10 silver miners from several different countries such as Canada, the U.S. and Russia. It includes companies like Silver Wheaton Corporation, which has been a staple in our Sovereign Individual portfolio for many years. SIL represents a simple way to gain international silver exposure through an easy-to-invest-in ETF right here in the U.S.

SIL is cheaper than SLV, but it’s every bit as volatile. Let’s take a look at its weekly chart below…

Silver Miners Are Mirroring Silver’s Move

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You’ll see the same thing is happening with SIL that was happening with the spot price of silver in the top chart.

SIL has broken its downward corrective line, and it’s above its moving average. It’s broken its MACD line and is coming back up above the zero line. It’s temporarily overbought and likely due for a slight pullback, but will gear up for its next advance afterward. And just as I expect silver to move, I expect SIL to follow suit.

As I told my driver that day, owning silver is one of the best ways to play the Fed’s inflation game. And today, I’m telling you that one of the best ways to own silver is through the Global X Silver Miners ETF.

Have a nice day!


Sean Hyman
Editor, Commodity Trend Alert

P.S. The Fed’s policies mean that the dollar’s decades-long decline is going to continue. But, even as the dollar falls, other currencies will be strengthening in response. In my Currency Cross Trader service, I’m always watching the global markets to see which currency pairs are ready to make big moves – and how you should play them. My techniques have brought my subscribers a string of winners over the last 11 months – click here to find out how.

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