The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage. The opinions expressed are those of the author and do not represent the views of TheStreet or its management.
By Ian Wyatt
NEW YORK (
) -- Concern over a power struggle in Libya has sent precious metals soaring. Right now silver is trading at more than $33 an ounce.
Investors tend to flock to precious metals like gold and silver in times of conflict, and unrest in the Middle East is certainly a major catalyst moving the markets right now.
Part of the issue is that Libyan Leader Muammar Gaddafi has recently called on supporters to defend the government by fighting anti-government groups, which have joined with defecting army units.
The unrest in Libya follows closely after the riots in Egypt, both countries are in the northern part of Africa, and events within their borders have serious implications for the world's oil market.
The clashing groups are a potent mix in Libya, Africa's richest oil country. The fact that disruptions in the region could affect oil supplies is helping to push oil prices higher too; crude oil for April delivery has shot to around $96 a barrel, a two year high.
With silver and oil prices moving higher, investors are likely wondering if they should add exposure to silver, and if so how.
The answer is absolutely yes. Investors should be buying silver - but on the dips and not just because of what's going on in the Middle East. Investors that add exposure to silver in the
at the beginning of the year are likely to be sitting on profits within six months. The added boost from Libya is just another catalyst that points toward the need for investors to have exposure to silver.
Peter Barnes, CEO of
, one of the larger silver miners, recently said in
that the metal could hit $50 in the next three to four years.
Precious metals trading can be frightening at times, with significant ups and downs in the spot market. For those who don't have the stomach for silver bullion's roller coaster market, there is a better way to play the trend: silver mining companies.
Mining companies typically see their stocks rise more than the price of silver because as the price of the metal increases, their margins rise even more. That's because costs are usually fixed, although they do increase as production ramps up to meet demand. Even with a moderate bump in cash costs, these companies tend to book huge profits in bull markets for precious metals. And shareholders book huge gains.
I recommend that investors consider silver mining stocks rather than bullion. What I like about mining stocks is that as the price of silver goes up, their cost structures remain the same, increasing their profitability.
Three great silver opportunities are in my special report,
. We recently booked a 62 percent gain on half of one of these positions, and are ready to add back shares if the stock pulls back again. The other two stocks in the report are buys right now.
Ian Wyatt, editor of SmallCapInvestor.com
Disclosure: Ian Wyatt owns shares of GOOG and SLW in his personal investment account.
Wyatt Investment Research, founded in 2001 as a publisher of newsletters, offers independent investment research of financial markets, stocks, bonds, ETFs and mutual funds to about 250,000 individual investors. The company is led by founder Ian Wyatt, who serves as publisher and chief investment strategist.