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Chart of The Day: The Slippery Slope of Sliver
By EconMatters
Silver has taken some serious beatings lately, but there seems to be a renewed optimism in the market place towards the white metal as Bloomberg reported that
"Investors for now are getting more bullish. As well as adding to ETP [Exchange-Traded Product] holdings, they are also buying bullion coins, with the U.S. Mint selling 4.46 million ounces of American Eagles in September, the most since January.
....Combined assets in ETPs rose 4.8 percent to 17,515 metric tons since mid-July, equal to almost nine months of mine production, the data show.
Money managers raised bets on higher prices for the first time in more than a month in the week ended Oct. 11, Commodity Futures Trading Commission (CFTC) data show. The net-long position gained 1.3 percent to 11,573 futures and options contracts."
The median in a Bloomberg survey of 11 analysts, the metal may average $38 an ounce this quarter and rise to a record $42 by the final three months of 2012, which would imply about 18% and 33% gain respectively from the current price level. China industrial usage, and investment demand partly due to U.S. Fed's record low interest rates, are cited as the primary reasons to be bullish on sliver.
But not everyone buys the China growth story with silver. Morgan Stanley, for example, is pouring cold water by predicting output from mines will rise 1.4 percent this year, accelerating to 4.5 percent in 2012, and that the global oversupply of silver will persist until at least 2016. Barclays also echos a similar bearish outlook for silver believing "the fundamentals still look very weak,” and expects the metal to average only $27 in the fourth quarter of next year, implying a 1% loss from the current level.
Bloomberg furtherpointed out that historically, silver has not performed well during crisis as the metal slumped 24 percent during the 2008 financial crisis, the most in almost a quarter century, while gold rose 5.5 percent. So sliver, although considered as part of the precious metal family, may not preserve asset values as much as people tend to think if we head into a double dip recession or if some kind of crisis erupts.
Many investors, using gold as a benchmark, believe silver is an attractive alternative investment to gold as it is cheaply priced relatively to gold with the recent pullbacks. Moreover, silver could still benefit from China and investment demand.
However, technically speaking, whenever you see two gigantic vertical Niagra-Falls-size drops, with several sizable mini drops in between--all within a 6-month time--on the price chart (below), without the justification of a far superior return, it is a sign that you would be much better off elsewhere in terms of risk / reward.
The chart below compares price performances of Gold, Silver and Dow Jones U.S. Gold Mining Index. As the chart illustrates, silver would give you a lot more sleepless nights (EMS probably needs to be on standby as well) than Gold or the stocks of gold miners..
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Chart Source: stockcharts.com |
Furthermore, based on market fundamentals, the recent data coming out of China suggest the world's growth engine is still fighting inflation and is definitely slowing down. While we see a very low probability of a China Crash Scenario, this downshift will most likely weaken the demand side of the investing thesis for silver
We got a lot of flak when we warned physical sliver investors in April that the metal was at the bubble stage, and the pitfall of following the futures market actions. At the time, based on the market condition and valuation, we concludedthat,
"This is the epitome of a bad investment. You’re supposed to buy low and sell high, not the other way around. Remember, you are an investor not a trader if you’re buying the Physical Silver Coins. Thus you have to be a “Value Investor”. And I am here to tell you there are no ‘Values’ in the Physical Silver Market, or any other Silver Market for that matter."
Now fast-forward six months later, the price of silver has tanked almost 32%, whereas Gold has held up a lot better -- up 7.65% in the same period. Silver coins, which represent the physical market, were as high as around $52 in April, and now it's at the $32 range, a 58% plunge, even worse than the spot silver. So what that means is that some investors could be $20 underwater on each silver coin if they got in around the peak.
Currently, the valuation of silver may have improved from the bubble level six months ago; nonetheless, due to the uncertainty in the broader market and economy, the sector market specific thin liquidity, ridiculously high volatility and margin requirements, we maintain our rating that silver remains an ultra speculative / risky investment option that investors should stay away from.
We have written at length here,here and here, regarding the pros and cons and potential pitfalls of investing in the silver market, and strongly caution investors against even engaging in that market -- Let's just say even if you were an Olympic skier, you would not want to ski on that slope.
Further Reading:
A Not-So-Marginal Risk in Silver
Silver Market: Why CME Must Raise Margin Requirements By 30% (EconMatters Note: The Exchange has gone overboard on this.)
Physical Silver Investors Are Being Hoodwinked by the Futures Market
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When these asswipes say they hate a particular asset that's your cue to buy it. And they never give out 'free' investing advice. Be assured they're doing the opposite of what they're telling you to do.
exactly
ding! ding! ding!
Give the distorted smileyface a cigar.
judging by the response silver still has a ways to go
...the dis-information campaign is ON full force to deflect attention from blatant manipulation of prices and naked short selling - crash JP Morgan, Kill the Squid and hang Hillary, it's going to get ugly and the frequency and blatatness of the lies says it is very near....buy PMs, guns and food.
what's your gripe with hillary? she was just following orders.
No, Hilary has been a cold-blooded killer for some time now: http://arkancide.com
Thanks for the advice. I'll definitely get out of silver and into some better paper investments like Netflix and Bank of America.
idiot...you could have sat on your FRNs and gotten nearly DOUBLE the amount of ASEs if you hit the bottom.
Instead, you put a false dilemma of NFLX or Silver. Well, BOTH crashed, so both were lousy investments. Enjoy your bagholder status.
Silver isn't an investment, trav. It's a store of...forget it. Go ahead and spit it all out if you'll feel better about it. :D
You have just discovered that paper silver has been fucked with again by JPM.
Silver, the metallic Element, is not available at the "paper dollar" prices.
Especially not from JPM
Buy a few hundred kilos sometime before you spout again as the planet's Ag expert.
you moron...why the hell would i want a few hundred kilos of this shit? I am not a manufacturer of electronics.
Silver IS AVAILABLE at spot. FACT. Just because you retards can repeat this LIE 50,000 times does not make it TRUE!
CNI has 1000oz COMEX bars at .7 over spot. Suck on that, moron.
Yes, silver trolls love to post that site, because they always claim to have it in stock, until you call to order. Surely no-one will ever call your bluff, right?
They haven't once had a single COMEX deliverable bar any time I have ever called them (generally the next business day after one of you idiots posts something like this).
Have you EVER gotten ANYTHING right?
So you don't own silver...but you do. Got it.
Lindz has a premier to make and she wants her crack pipe back.
And you know when and what the silver bottom is? I know what the bottom of Bank of America is - 0.000. I am willing to bet the farm silver is going to be higher than that - any time.
Old Chinese proverb say
Man who try to pick bottom get smelly finger.
SIlver is a tangible asset. NFLX is an IOU. Big diference. Trav is blowing steam. Trav, do you or don't you own silver? You are confusing everyone for the sake of a show.
Look at our coins which are minted nowadays.
They make the old Italian Lira coins look like real money.
How can we have confidence in a goverment that strikes coins such as these?
and god know what they are made from, the treasury may as well make plastic coins next in pretty colors.
As London Trader say's, The price on paper is NO WAY correlated to the real price of silver, or gold, it's smoke and mirrors.
really? So you're telling me I can't go buy any REAL silver for pretty fucking close to the paper price?
You silverbugz are delusional idiots. 1000oz comex bar at spot +.7. Generic rounds at spot +1.6. NOT spot +15 to put the "real" price anywhere NEAR what you morons paid for yours while you chased an obvious bubble.
Ask your doctor if lithium is right for you.
With your IQ firmly in the single digits, you appear to have a problem understanding a simple English statement.
Exactly how many hundred kilos of Ag have you acquired at the mythical paper price?
listen, you stupid idiot...how can you NOT understand that my statement stands IRRESPECTIVE of what quantity of silver I have ever attempted to buy?
WTF would I want 100 kilos of silver for?
Then why are you pumping oil so fucking much...do you own a refinery?
when has this guy ever said we should buy oil? You are making yourself look like an idiot. The more obvious bullshit I hear from the "buy silver now" side, the more I want to trade all my remaining silver into gold asap. However, in all honestly I will not sell any silver right now, because it's clear that the vast majority of idiots who post their logorrhea on this site have absolutely zero influence on the market
Stick it up your ass, Trav: Silver is an excellent bacteriacide.
Anyone remember Pinky and the Brain? Trav is the Brain!
Trav is right, you can get all the silver you want right now. Until Tulving.com has lots of sold out items, there's plenty of physical around. They sell volume and are a major player, so if shortages show up there, something is probably up. Trading platforms like bulliondirect.com also have a consistent market at consistent premiums.
FWIW, you can generally net more selling on BD as opposed to seling to Tulving, and can generally buy a little cheaper on Tulving. The latter isn't always easy to deal with.
So these guys are connected (although I'm sure it's somewhere out on the fringe) to the "dark side"... how else could they have predicted silver's CME / JPM's criminal May 1st raid on silver!
Even one of the CFTC Commissioners (BC) is on record with this... and these guys brag about being in "the club" that gets to profit from the misfortune of honest investors. Congratulations boys... enjoy the hookers and coke!
put a 5 year chart up there and quit bullshitting around... come on pal. its a long range physical play ,not some tradable moment in the slv nonsense....the pm bullmarket has just started and this yoyo is talking out his ass....
I prefer to get ASEs for <$35, instead of $53 which you lemmings were willing to pay. I can get 50% more of it by WAITING instead of chasing a glaringly obvious bubble while pumpers were herding sheep into bagholder pens
I prefered to get mine at 19, so I did. I prefered to get more at 26, so I did............Whats your fucking point other than to state you also chased the bubble.
I didn't chase it, idiot. I was one of the people here telling YOU not to chase it.
I got my first ASEs at $6.52 each. Subsequent ones around $12.
then your first were less than two dollars over the low price in the last six hundred years, but still forty percent more than the bottom. however as the high price on a real basis (1998 dollars) is about 800, even fifty doesn't look so bad.
http://www.gold-speculator.com/editors-picks/5010-600-year-chart-silver....
You have nothing except bitterness and stupidity. Everybody knows you own NO SILVER cuz your riding the oil's going to $200 wave....you retard bagholder.
now that you mention it. hmmm,,,,
This is the first time I have heard Trav say he has silver. I know he has a "Bug out bag full of rubles", I know he likes oil, and gold, but I have never seen him type that he likes silver. Trav, if you have a fever you should turn in.
He lies on purpose because he wants the largest number of people possible to be poor so they don't use up any of his precious oil. I wouldn't be surprised if he was sitting on 10,000oz of silver, if he has any money left after chasing the oil bubble, which he now claims he didn't (lulz).
oh ok, so you think silver is in a bubble. got it.
Also known as Morgan Stanley talking their book.
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/10/21_London_Trader_-_Sovereign_Silver_Buying,_Middle-East_Shortages.html
Well, someone tell China and Asia.................
Here we sit with fiat, while they dump Treasuries/ FRN's and buy real wealth.( they know what's coming massive inflation),sooner of later the Data entries are going to have to become paper.
Also, the Chinese bought a MASSIVE amount of Gold(amount not devulged), read it all on KingWorld.com
I bought physical silver at the 10 dollar an ounce level.
I don't even give a fuck.
Buy physical silver... if it goes to a dollar an ounce, I'll buy it from the people stupid enough to sell it.
If it goes to 100 an ounce, I'll sell SOME of it to idiots foolish enough to wait that long to buy in.
Otherwise, I have ammo for werewolves and vampires... *in the spirit of Halloween*
silver bullets are good for vampires and also wooden stakes...
Whaddya got for vampire squids?
tentacle cuts?
....
It will be interesting to see which side wins, the "strength" the dollar gains from the Euro or the terror that comes if the the Euro really does disintigrate. As long as traders allow the algos to do the hard work I would bet on the strength of the dollar.
A few facts to mull over;
World silver production for ONE YEAR is 900 million ounces.
The paper silver markets trade over one billion ounces - PER DAY!
The amount of freely available investment physical silver, on any given day is approximately 1.5 million ounces.
Global over supply? Easy to see where the over supply is! Paper is paper. I use it everyday - just before I pull the chain!
Who cares how much was mined this year? How many Apple shares traded last session? How many new units were issued this year?