The argument for Silver

I tripped over this article today and it’s certainly is as detailed, competant and literate as anything I could pump out(If not more so) and since I’ve touched many of these issues before I’m sure as hell not eager to write it up again, so I won’t, enjoy!

I like to find these kind of articles, first, it leaves me with the feeling I’m not alone and second, it give me time to finish what I’m writing from scratch.

It should be noted the article is from a U.K. site, so any bias against physical silver is not just about the weight and storage issues as stated but also that the U.K. applies a steep tax to physical silver sales. While they did not deride physical silver they also did not look at the danger of accepting paper silver the equivalent of the real thing. The kind of silver you choose can be as important as making the decision to invest in silver, be informed.

Silver Questions

I’m in a bit of a mood today totally unrelated to the drop off in metal prices. I’m wondering why are my hits are going up yet the comments are minimal.

That in mind I have some questions I would like answered.

Have you accepted the argument of metals as a sound investment or at least economic insurance?

Do you hold Gold or Silver or both?

If Silver, are you basing your investment on the belief in a probable eventual silver shortage or simply as real money and a hedge against the dollar?

What are your favourite products, why?

How are you dealing with storage?

How do your perceive the relative safety of paper silver/gold?

Do you dabble in metal equities or purely bullion?

What are your target prices, short and long term?

Off metals for a second, should we expect an inflationary or deflationary sprial to bring this mess to crisis?

I should really do this in a survey form but this will have to do. I hope to get some feedback about these issues, after all I know what I believe but I’d like to know what the bigger consensus is.

What if anything do you wish to see discussed on this site?

Thanks
Kubera Jones
Lord of Wealth

Silver and stuff april 23

So we got beat up a bit at the end of last week but we still managed make back the vast majority of on Friday so I’m not too concerned, There was news of more French Central Bank gold sales so fact that the big dip was only 1 day long shows that there is real strength and enough demand in the market to suck up excess supply nearly as fast as it be added to the market.

Gold is down just under 2 dollars again today yet silver is up .13 and just off last weeks highs. I’m convinced that metal strength is real and will remain strong but it appears that flooding of the market to suppress the price could continue this year so I won’t get too cocky and mortgage the house just yet. Last week we saw the Japanese come out in support of IMF gold sales to cover operating losses (and no doubt bolster the U.S. dollar). How much will gold the IMF sell is anyone’s guess. I still think the bigger question is the relevance of the organization!

On the other side I’ve seen predictions that gold sales will follow last years trend and continue to drop. There are two reason for this I suspect, 1 the banks are running out of bullion to sell, 2 self interest- since bullion selling seems to be having less and less effect on gold or the dollar so it’s in their best interest to hold and capitalize on gold’s appreciation.

The financial breakdown in Zimbabwe has reached a new stage with the closing down of all major gold mines in the country. The Government has not been paying the miners for the bullion since January creating cash crunches for most operations. It’s also been reported that the government has failed to fulfill their agreements to make 67% of payments in foreign currency. The lack of cash flow, the constant devaluation of the currency from the 1700% inflation rate and a fixed price for gold in Zimbabwean dollars left miners finding it hard to produce gold at a profit. The final straw however was the lack of foreign currency which left the miners unable to purchase cyanide for leaching gold ore. While Zimbabwe is only a small piece of the supply picture no drop in supply can be ignored.

If I had any cash available I would still be comfortable buying at this point. Of coursem, what do I know;)

Silver and stuff

Recent Silver news has Toronto brokers GMP (Griffiths McBurney Securities) predicting an average silver price of 14.25 with peaks of $20 for 2007. That is certainly news to warm the heart. Studies show that both jewellery and industrial use of silver is growing faster than new mine supplies, all of which looks good for continued strength of silver this year. Silver looked flat and steady for most of last week but Friday’s jump over the important 14 dollar mark is significant, give it a few days and if it holds or continues up I think we are on the annual spring run which I predict will take us to near $17 U.S.

It’s my belief that India will stop or greatly lower government silver sales this year. With the natural yearly deficit and no Indian sales to fill the gap supplies could shrink by 100 million ounces this year, or 80% of the NYMEX holdings. No one knows or is saying how much silver India has but they have to see eventually that they are giving it away at today’s prices. It only makes sense that at some point they will see the coming shortage and hoard the remaining silver to exploit the price at a later date. Then again who says governments make the correct decisions, and who says they are not selling it to friends so they can exploit it personally rather than have the Government profit?

What is knowable is that India is in the position the U.S. was in for decades as the supplier of silver to make up for supply deficit. The U.S. with billions of ounces of silver eventually ran out so will India! The year India gets smart or runs out will be the beginning of the parabolic rise for silver prices. I only hope I can increase my position before that moment.

In the Gold world at least 29 tonnes of bullion has been released for sale in the last couple of weeks and the markets did not even flinch. Last year this kind of selling would have caused a severe price hit but this year nothing there was nothing but salivation as someone gobbled it all up. Aggressive central bank gold selling is not going to have the desired effect in dropping the price by flooding the market, 1 they don’t have enough left to do the job , 2 other central banks are the ones buying it up. If it was only funds and retail buyers the prices might have tanked but big money is in the buying mood and a meagre 29 tonnes is not enough to satiate them.

There is danger however that the IMF will open the vault and start selling its gold to cover operating expenses. The IMF should be put down like the sick animal it is, it has very few clients beyond Turkey and the bureaucracy continues to grow and suck up profits. This gold was deposited by the U.S. as collateral to open the IMF, this is loaned gold and I don’t see how the IMF thinks it can sell someone else’s property to cover their debts. If I was the U.S. I would be demanding the IMF close and return my gold. Or perhaps they intend to turn a blind eye to the bullion sales in order to temporarily support the strength of the dollar. It seems they are so intent on continuing the charade of U.S. economic strength they will sell their future in the form of gold reserves to fool the public until the next election. As long as the sales are not huge volumes I think they will have a minimum impact, but if they manage to coordinate with central banks to make a splash, who knows?

The U.S. dollar was getting killed on tough protectionist talk last week. When you add in the debt, war, trade imbalance and the over creation of money factors, the U.S. dollar looks like it has no where to go but down, which is good for those of us holding metals. This however will not be good for export economies like Canada, Yes they will continue to buy our oil and steel etc but our meagre manufactured goods sector will be hard pressed to maintain business as the Can dollar appreciates against the Greenback. The impending recession will also hurt Canada unless we start making more effort to market ourselves and our goods in Asia.

I’ve noticed a spike in hits to my site and to the feed services. I hope all my readers are getting something out of my ranting and I would appreciate comments and discussion on these or any related topics. I’m also willing to post full articles for anyone not inclined to build their own blog.

With the renewed level of hits I will try to write more, I blog politically as well as on Silver and since the Canadian scene for the last couple of weeks has been rather interesting I’ve been torn between reading metals and economic material and posting political. I can’t seem to post on all topics and research all topics within the time I have.

I’ve added some auction links which seem a little erratic. They are supposed to show silver bullion auctions but occasionally show other things, fortunately no sex toys yet! Do people think they are distracting or acceptable?

I’m just adding this at the last moment before I post. Gold went on a run last night in overseas trading (up 7ish) and seems to be holding early, silver moved little but is also holding.

Good news, I sold my second car (an attempt at frugalizing and being Greener) so now I can go shopping today, mmmm, coin store, the bullion counter, or Ebay? Decisions, decisions!

Silver a calm happy week.

As far as I’m concerned this has been a good week for metals. Silver has been solid, no jumpy volitility and yet it managed to make a tidy little gain. I like this kind of week as it’s easy on the gut. I’m not expecting any sort of crazed parabolic climb just yet but I do expect more growth into the late spring. I doubt however we’ll have calm happy weeks like this too often. Will we see an attack on metals again by summer? Yes without doubt, the short possitions and the Central Banks all have a vested interest in seeing metals lower but with silver supplies shrinking and sellable Central bank Gold holdings also shrinking this reign of terror is nearing at the end.

Silver stocks are still acting flakey as companies with proven resources, good development news and even growing cash flows are not nessessarily reflecting the rising bullion price. Some of this is a reflection of base metal prices but even some pure silver plays don’t match the price action. I swear I’ve seen some price actions that look like manipulation, is it? I don’t know but with what I’ve seen recently on naked short selling I’m always paranoid when I see mindless swings

I’d like to ask for some reseach help. I was wondering if people have watched the Bloomberg Video on naked short selling called Phantom Shares ? If you have not seen this and trade stocks, please watch this, it’s unbelievable yet apparently true.
Phantom Shares video

I generally avoid buying U.S. dollar valuated stocks on currency concerns so I have little exposure to the U.S. exchanges, but I’d really like to know if this kind of fraud is practiced on Canadian markets? Is there anybody in the know that can tell me if they trading and settlement mechanism on the TSX is better than or just as bad as the fraudulent practices on the U.S. markets?

My last post was on silver equities and I neglected to mention one of my other rules for investing that I think is important. I always try to find out how much insider ownership there is in these companies. While it’s not always the case, I believe insiders with substantial stakes in the mine will have better motivation to improve your share price. No doubt there are well run juniors with low insider ownership and high ownership juniors operated by loons and fools but I still feel better knowing that the people running it are sharing my risk.

I’ve had 2 people write me directly asking for either my opinion on a junior or a list of what I hold. I’m loath to do this as I’m an amateur investor not an advisor. This kind of discussion invites abuse and trolls intent on pumping stocks and I’m not ready to deal with these issues on this site at this time. I don't do primary research on my stocks but poach information from others when I can then follow it up with other sources. I can’t authenticate everything I use so I would be uncomfortable making equity recommendations. I admit I do quote and discuss other peoples silver analysis but I have done enough research to accept the silver argument as true, I cannot be so adamant on all the equities I’ve taken the plunge on.

It’s funny that I believe the silver story so much and yet my best pick in the last year was Lionore a nickel play now about to be purchased. Nickel worked down to a ½ day supply and its price when nuts, Silver will have a similar supply crunch in a couple of years and my 300% gain on Lionore will look like a joke. Shortages do happen, look to nickel or better yet uranium, for an example of what will happen to silver when the deficit eats up the last above ground supply. Buy physical, accumulate and hold. Repeat for several years, and then retire.