Monday, June 06, 2011

So we’ve had a correction, so what! There are bigger stories.

While I only posted it on Facebook (I was too busy working an election campaign to blog) I mentioned a number of weeks ago that we had gone too far too fast and I suggested selling silver equities between $45-50 silver and waiting for what seemed a guaranteed and much needed correction. It turns out I was correct in theory but was once again too busy to fully execute my devilishly cleaver (dumb luck) plan. I started to get antsy about $47 and pulled the trigger on my silver Wheaton, Arian, and a couple others but I didn’t get around to selling everything. Still it was a decent call and while fearful of catching the falling knife I re-entered the market and rebalanced my portfolio on the way up at about $35. I’m relatively confident we’ve seen the worst moves the year and it’s mostly up from here but this correction may not be the most important story of the year. I believe the bigger but largely ignored story is the state of the COMEX stockpiles which highlights two important trends


Total silver

While the total amount of silver in warehouses fluctuates as you’d expect, the total of silver on hand continues to trend lower. I believe total silver stocks will break below the 100 million ounce mark this year, a move which should be a major psychological milestone bringing much more ignorant chatter about industrial shortages to market.

Deliverable silver

The other trend has been the shift in delivery status of COMEX silver to a point where only about 30% of their stocks are in the registered category, the category that’s available to fulfill contracts. This is a strong signal that the owners of silver are either not interested in selling their silver at today’s price or perhaps not interested in delivery at any price. This reduction in deliverable silver will eventually be a big story, one which relevant or not will push the next wave well past $50 oz.


Reality vs….

Of course any talk of absolute shortages at this point would be total gibberish as smart silver users would have looked into direct mine/smelter purchases or created a large enough SLV position to demand delivery from London some time ago. As long as SVL is actually backed by bullion(?) and the rules allow large baskets to be delivered there will be no real shortage. This situation could however create additional hurdles for manufactures in both costs and complexity. Any COMEX shortage story will not necessarily indicate a real shortage but could in time turn into a self perpetuating prophecy as large players and greedy speculators (us?) start hoarding.

All said it could get nauseatingly volatile in the next year or so if you must speculate do so in cash and only in equities, hold on to your physical silver so tight your fingers bleed.

There will be a time to sell physical silver but not below triple digits or a Mad Max scenario.

14 comments:

CHR said...

If you are looking for another reason to hold onto your physical silver "so tight your fingers bleed", see that it's already so much more manipulated than stated; there is ~no~ bullion behind SLV. Just more invitations to the Musical Chair Ball brought to you by the JP Morgue!

Check Harvey Organ.

CHR.

Anonymous said...

What is the best way to purchase physical silver in Canada? It seems that prices here for physical silver are always much higher than from US online silver stores even when you add in their shipping charges.

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Anonymous said...

Anonymous, for physical silver, I have dealt with suisse gold corp at www.golddealer.ca
It's easy to make arrange the payments. And I have always received what I ordered.
Never deal with a bank. TD will not sell you physical, or honour their certificates (as I found out a couple of years ago)

CHR said...

Hmmm .. had bad luck recently with Suisse Gold Corp (golddealer.ca), a previously recommended supplier to the Canadian marketplace. Tried to set up a purchase during the big silver dip and found that he no longer support direct cash deposits for Canadian customers and now wants all payments via a US bank wire which is just flat out ridiculous (expensive, unnecessary reporting through the predatory US financial system and completely inconvenient). When I called to complain about no notification on the change of rules (and hence, please cancel my order), the owner got real nasty. Downright pouty. Do yourself a favour .. find another supplier; that jerk will screw you, the next time.

CHR.

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Anonymous said...

I am new to the silver market. Silver is currently hovering around $30 CDN but every site I visit sells it for anywhere from $34-$40/oz -- can this be correct? Can someone tell me where to purchase at a reasonable cost? I am looking to purchase around $10,000 in silver.

Thanks!

Anonymous said...

Hi. If I am buying physical silver as an investment does it matter what for it takes (coins vs bars, 1oz vs 100 oz etc?). Is there any chance that purchases through golddealer.ca would not bu 99.9% silver as advertised...any chance of fakes, etc?

Thanks again.

Anonymous said...

Hello, I am re-posting Anon here for myself - I am new to the silver market. Silver is currently hovering around $30 CDN but every site I visit sells it for anywhere from $34-$40/oz -- can this be correct? Can someone tell me where to purchase at a reasonable cost? I am looking to purchase around $10,000 in silver.end

I would like to add - I'm losing money on my 'conservative' investment with rbc and would like to use it instead to buy silver. I'm new to 'all things money', do I just tell the bank manager I want to close the investment account and put it in savings until I want to buy the silver? $10,000

Anonymous said...

Anonymous, What kind of silver you purchase, depends on what your financial objectives are, and how you plan to sell it.
If you are planning on major financial collapse, and you are going to barter with it, then rounds/junk silver is probably a good choice.
If you are looking for use as an easily cash-convertible investment, then you may consider opening an account with Scotia-Bank, and purchasing some 100oz LBE recognized Good Delivery Bars. These have a lower premium than individual rounds - mainly due to lower manufacturing cost. You can take delivery (for a fee) or have them store them (for a fee)
The (RCM) Royal Canadian Mint was recently recognized by the LBE as a provider of Good Delivery Bars, and Scotia Bank is an RCM dealer - so supply shouldn't be an issue as it was for me at TD Canada Trust, which does not necessarily own any physical metal.
Also look at options to convert your CDN (I'm assuming) to USD - you'll get dinged a couple of percent there each way. It might be beneficial to look at opening a free USD acct for better conversion rates.

Cheers!

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