Guest Post: The Silver Sleuth
Submitted by Jeff Clark of The Casey Report
The Silver Sleuth
We once had an ongoing series in BIG GOLD called, "1001 Reasons to
Own Gold." The idea was that there were so many valid reasons to own
the metal that I wanted to track and report on them. If you've been
invested in the precious metals arena, you know there have been a myriad
of bullish indicators for silver this year as well.
Here's a couple new reasons to own silver that a lot of mainstream investors probably aren't aware of…
Due to increased demand from industry and investors, silver exports
from China are expected to drop about 40% this year. And that's
actually an improvement; customs data show exports plunged almost 60%
through the first eight months. China exported about 3,500 metric tons
of silver in 2009, but has exported only 970 tons through August of
What a lot of Westerners don't know is that China ended export
"rebates" two years ago to stem the shipment of natural resources
leaving the country. As a result of the regulation, silver exports
decreased in 2009 but are nothing like what they're experiencing this
year. In other words, the large drop in exports is a direct result of a
huge increase in demand within China itself. According to one Chinese
banker, the spike in demand is coming from all areas – jewelry,
investment, and industrial. In his words, it's led to a "physical
market shortage in the Far East."
How important is this? China is the world's third largest producer of
silver (after Peru and Mexico), so the amount of silver coming to the
global marketplace this year will drop by more than 74 million ounces.
This represents roughly 8.3% of total annual global supply from 2009.
If worldwide demand continues at its current pace, where is the extra
metal going to come from? This alone tells us the price of silver will
The next item I sleuthed out was that the U.S. Mint is expected to
release a new five-ounce silver bullion coin this year, the first ever.
The coin will be three inches in diameter and have a composition of
.999 fine silver.
I've read the five-ounce bullion coins will be near-exact replicas of the America the Beautiful
quarters. There will reportedly be five different designs, and the
mint plans to produce 100,000 of each. I can't wait to see them.
The coins will be classified as bullion, meaning they should be
available to the same dealers already authorized by the mint. This will
likely create excitement in the silver market, especially when you
consider its affordability. At $23 silver, the five-ounce bullion coin
will cost $115, plus premium. One ounce of gold runs $1,340 as I write,
while five ounces will cost you $6,700 plus commission.
Perhaps most bullish is the fact that silver is vastly underpriced
when compared to gold. Look at it this way: gold is currently priced
57% above its 1980 nominal high of $850; silver would have to more than double
to reach its 1980 nominal high of $48.70. And that's excluding any
inflation-adjusted calculation. Yes, silver's spike was partly a direct
result of hoarding by the Hunt Brothers, but my question to the
skeptics is this: what's keeping us from seeing similar stockpiling
today? What if there are several Hunt Brothers out there?
It's true that central banks don't buy and store physical silver, so
one source of demand that's common for gold isn't present for silver.
But let's keep things in perspective: demand for all forms of silver is
rising, and we see no reason the trend won't continue. And with
indicators like decreasing supply from China and increased attention
from a new bullion coin, I say the big picture on the silver price is
This silver sleuth says, buy some silver on the next dip. There's lots of reasons you won't regret it.
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