With Silver over $30, Here's the Down and Dirty…


"With a silver jump on our radar, I’d suggest a three-prong approach to profit. It involves both the metal and miners."

There's more pressure mounting for the central banks of the world to start opening the monetary flood gates. Especially here at home, where we're seeing some more-than-coy hints coming from the Fed.

But you don't need to take my word for it. Just take a look at the lead article in today's Wall Street Journal:

"The Federal Reserve sent its strongest signal yet that it is preparing new steps to bolster the economic recovery, saying measures would be needed fairly soon unless growth substantially and convincingly picks up."

"Minutes released Wednesday from the Fed's July 31-Aug. 1 policy meeting" the WSJ continues, "suggested that a new round of bond buying, known as quantitative easing, was high on its list of options."

This is the move we've been forecasting for some time now – and it looks like we won't need much more patience. Silver is starting to really jump. And today I've got the best approach to playing it…

Fact is, after we aired yesterday's article silver prices periscoped above the $30 threshold. Looking closer at the ticker tape, that represents silver's 3-month high-water mark…and a sign of things to come.

So with silver prices looked to pop further, I've dug deep to figure out the best way to cash in…

"Okay Matt, What's The Plan! Metal or Miners?"

With a silver jump on our radar, I'd suggest a three-prong approach to profit. And yep, you guessed it… it involves both the metal and miners!

I'll start with the most controversial way to play silver. I say controversial because I'm sure I'll get some flavorful emails in my inbox chastising me for even suggesting this avenue. Anywho…

By purchasing a stake in the iShares Silver Trust (SLV: NYSE) you give yourself a way to play the silver bullion market, electronically.

This ETF trades in lock-step with the physical bullion market and gives you exposure to any move in the metal. For instance, in the past month SLV is up over 12% — that's the same gain you would have seen had you purchased bullion, shipped it to your house and hid it in your basement.

But instead of that hard work and logistical planning, the ETF gives you an easy way to play silver with the click of a mouse or a call to your broker.

This is the same philosophy that hedge fund manager John Paulson uses in the gold market. He's a major holder in the SPDR Gold Trust (GLD: NYSE) for the same reasons that I suggest you look at the silver trust: it's liquid, easy to buy and sell and gives you a perfect equivalent to the gain you'd see in the physical market.

All said, if you want to cash in on silver's rise to $40 an ounce, buying SLV will give you a straight forward way to grab 33%.

Two Silver Miners To Consider…

The alternative way to play silver's coming rise is to look at silver miners. If silver jumps 33% in the next six months, a well-run miner could easily outperform the metal.

The first silver miner that I'd suggest, isn't a pure play.

Fact is, a lot of the major silver producers aren't actually silver pure-plays. Instead, they're gold miners or copper miners that produce silver as a byproduct.

But even with silver production as a byproduct a company like Goldcorp (GG: NYSE) could do very well over the next 6 months.

Goldcorp is among the top five silver producers in the world – producing over 28 million ounces of silver — according to year end data from 2011. On a cash basis, silver accounts for roughly 20% of Goldcorp's operations. Simply put, if we start seeing fundamental support for both gold and silver, Goldcorp could be in the sweet spot of this market. And a skyrocket move for silver prices could be icing on the cake.

But, if you're looking for pure silver miners, there's one that I'd consider today…

Coeur d'Alene Mines Corporation (CDE: NYSE) is a great pure-play silver company. If you've been following the company since 2000 than you know that Coeur d'Alene has had a rocky ride – with highs above $60 and lows around $5. But, if its recent price action is any indication (up 44% in the past 30 days) there's reason to believe this miner has a bright future ahead.

For starters Coeur d'Alene has silver-producing mines in all the right places — mostly in the mining-friendly America's, along with one operation in mining-friendly Australia.

The company produces a lot of silver, too. The company's estimated high-end 2012 production is between 18.5-20 million ounces, which places it as the 8th largest silver producer in the world. A pure play with substantial production is something you want to see if you're looking for a short-term silver price-based rally. Simply put this means Coeur d'Alene will be producing ounces and selling them, immediately, into a strong up-trending market. This gives us the best bang for our buck.

Speaking of ounces, the best part about Coeur d'Alene is that each share purchased represents 2.7 ounces of silver in the ground – BY FAR the highest "ounce per share" of any major silver producer. Coeur d'Alene trades around $22 as I type, so that leaves a lot of meat on the bone for the company and the shareholders. With silver prices on the rise, keep an eye on this one.

Matt Insley

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