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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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Go to your corner! What a 'Dunce' comment!
All I know is the USGS estimates 400,000 tons of in ground reserves worldwide. Annual production is around 20-21,000 tons. That means in 20 years or so there will be no more silver left to mine.
In all seriousness, what matters is when silver hits peak production. After it peaks, it should enjoy a price incline similar to what gold has done since it peaked in 2000
In all seriousness, price of both per oz in 2000 vs price now?........When silver peaks those that have it will will not trade it for gold.
Charts? Fuck your charts.
The Goddamn manipulators been painting the charts ever since $8...
The fucking markets are so entirely manipulated, your charts are worthless; unless you go along for the ass-raping.
Soon, all the physical you sold will never again be available in such quantities regardless of price. The morons who think PMs are just an investment will find that they screwed the pooch by buying into the trading mentality.
I think you are correct. The article is an apologist's speech for a false religion: that is, that you can consider gold and silver as an "investment asset" wherein you would allocate some of your Federal Reserve Notes.
The real truth is, paper money fails every single time. Silver and gold have never failed as money. Paper's track record is 100%. And it usually takes about 40 years. So, it looks like we're right on schedule...
paper money--->bubble--->recession--->stimulus--->inflation--->price controls--->shortages--->riots--->troops on your street
Someone please tell me of another investment that is below 1980's inflation adjusted prices? Homes? Food? Gasoline? Vehicles? I know! How about a VCR or BetaMax player? Name one!
Keep your powder dry and pray for $4.00 silver soon. Dumping FRN's is my life long mission now!
If USdebtclock.org is to be believed, US debt and unfunded liabilities grow at $23.6 billion a day. All the silver bullion available in this world is estimated to be 2 billion ounces - or $62.7 billion worth.
Estmates for just the Greek bailout are as high as $600 billion.
If you want to consider just US debt, it is growing at at least $1.7 trillion a year. It is rather foolish to expect silver prices will fall except for short term panics and manipulation via margin hikes.
Are we suppossed to count the 53 Trillion with a T in worthless derivitives BAC just foisted of on the Taxpayer? just askin
Main heading can't even SPELL silver right,how do you expect him to know anything about it ?
Damn slivers.
The author implies that buying US dollars is safer. I'm making the assumption that his baseline is dollars because that is what his chart is created with.
He completely neglected the supply and demand conditions in US dollars. M2 has absolutely gone ballistic since 2008. There is practically no historical evidence that shows there will be continued US dollar demand to keep inflation from hitting us like an avalanche.
Bottom line: you have to store wealth somewhere. If you wait until we are living in 10% annual inflation then you will be trying to trade fiat dollars for gold and silver at the same time as everyone else.
Buy gold and silver. Fiat dollars are in their endgame.
If you take a minute to check the Shadow Government Statistics website (shadowstats.com)
you will be overjoyed to find that inflation exceeds your 10% and has done so for some time now.
P.S. We just read that the paper money supply is up nearly 40% in the past few months...
Here is that same Barclay's analyst crapping on silver in 2009 due to" fundamentals".
http://www.cpmgonline.com/reports/02-09-07.htm
They are shortsighted and who don't accept the premise that investment demand is real demand. I wonder what the Hell they think is keeping AAPL stock up??? Since paper stock certificates have no industrial use, then all buying of them is not real demand?
I find it hard to accept the premise that silver has not peformed well since the crisis started in either. I guess telling everyone the big swan is coming to flush their cash down the toilet is bad for business.
"slivers" on slopes usually are not slippery cause silver slippers save stumbling.
Silly.
I met some slivers recently. Mostly involved wood, not PM. Outstanding catch.
Want a job in a publishing company as a proof reader?
I ignore the noise and buy low/sell high but hold on to coins in my vault
Believe me, I view any "Tanking" or losses as a back up the truck oppertunity. Papers are kaput. Only physical.
There will be a day a-coming.... one fine day....
Knowing now what I should have known 30 years ago I should have bought silver at 5 and gold at 200. Sheesh.
There are times Silver will go up or down in minutes. You snooze and you lose. Then again, if you have not sold any, you have not "LOst anything" as long you are not selling below what you paid for your ounces.
But mark my words... there will be a day a-coming. Until then, ACCUMULATE and ignore the articles.
Full on. 1 of those "junk silver" dimes is still = 1 gallon of gasoline.
Still working on my lead/copper "investments". Please bring the price of silver down some more JPM.
Of course...good luck finding sellers at these rediculous "paper silver" prices. I sure am NOT SELLING.
That May 1st takedown (commie mayday) occurred on a Sunday evening in thin trading with most of the markets closed. They locked the barn door and burned it down, then point their greasy fingers and say, 'see? gutter metal after all.' It was followed up by 5 margin increases in just a few days.
This article implies this was all normal market activity. Therefore, this article is bullshit, gave it one star.
I agree they have successfully demoralized the silver gang, but we'll be back.
The chart is more interesting than the article but a simple commodity chart would be clearer.
Gold: http://futures.tradingcharts.com/chart/DG/W?anticache=1319401531
Silver: http://futures.tradingcharts.com/chart/SV_/W?anticache=1319401602
Silver is definitely a bear market along with other commodities. When Greece defaults and money tightens the question will be whether the 'safety' trade will flow into silver or head straight into gold?
Gold and silver decoupling is interesting but silver has more of an industrial use component than does gold. Silver bear sez China's run is kaput. Gold appears to be solidly a bull market. That might be more a central bank hedge since CBs are gaining both questionable currency deposits (Europe) with likewise questionable system reserves. In 1950 the world was comfortable with dollar reserve dominance (along with US industrial dominance). Even if the US wasn't a mess, nobody feels confident with a dollar ONLY reserve system. Gold looks to becoming a reserve substitute for the hapless euro, the totally mispriced yen and loan shark- priced yuan.
"global oversupply of silver" ?
COMEX vaults emptied from 2 BILLION oz in 1990 down to 31 MILLION oz today, some oversupply.
COMEX IS NOT the silver supply, idiot. How many times does this shit have to be explained to you?
There is no "THE" silver supply. There are lots of places to buy silver, and yes, the COMEX is reletively small in the grand scheme of physical deliveries.
But what you fail to understand is that they are the ONLY futures exchange for silver, and as such, any and all industrial users or producers who wish to protect themselves against future price movements are FORCED to use the COMEX. Any futures exchange represents a gigaantic amount of future demand. If said futures exchange or the major actors within the futures exchange are found to be participating in fraud, panic ensues, and all that future demand gets shifted into immediate demand.
But you already know all this. You put on this act to try to convince people not to own silver, because you want them poor so they won't survive the coming economic collapse so they won't use any of your precious oil. Despicable.
It's still silver that's gone now, or in strong hands. The US govt. had close to 10 billion oz on hand nearly 50 years ago, now it has zero.
This was a productive weekend!
I think I finally managed to match them!
Now I have a really superb forecasting /history study interest tool . Have a look at exercise behind matching GREAT DEPRESSION and GREAT RECESSION timelines for the first time ( once I managed to patternalize ( ?) OUT FED's grip on USA stock market prices) and, as usual, better visibility charts plus explanations here:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&p=34732#p34730
And here:
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&p=34732#p34732
The supplement chart for rereading the history of GREAT DEPRESSION and rethinking the future as time line can be extended as well:
http://farm7.static.flickr.com/6055/6273870574_8de9d22b08_o.png
http://farm7.static.flickr.com/6217/6273870954_52bd042a99_o.png
http://farm7.static.flickr.com/6232/6273871980_62a22ec234_o.png
This article smells like a corporate anti silver propaganda piece to me.
Data without context reeks of propaganda. Saying that silver was down 24% during or right after the 2008 crash without mentioning it was up 400% from its low earlier in the decade does not give the novice a notion of the market.
I tried to buy silver at spot plus markup when it crashed in 2008 without much luck. I now have a lot more sources and a much better idea of the types of silver I want to hold, so it was an educational time.
Silver is complex, to try to resolve its price movement to a single factor is pointless. I hope it does go down for a while, I like a sale price.
Ultimately it is bound to rise in price as long as humans want it and it does have some very useful properties so I would think the price will rise long term. I'd rather have some money parked in silver than paper dollars.
"I now have a lot more sources and a much better idea of the types of silver I want to hold"
As a person new to PM's in general, would you care to share some of your hard earned education? I am never sure what exactly to buy or even where. I am buying physical but beyond that I am probably making lots of mistakes.
Thanks in advance
Buy silver eagles, silver maple leafs, 1 oz silver bars and 10 oz silver bars. If you can find junk silver, dimes, quarters, 1965 or older or silver half dollars and morgan/peace dollars. Go to local coins shows, check prices online, get a good idea of how much over spot you are paying once you factor in shipping, handling, taxes etc. Don't buy into anything collectible or "rare" avoid commerative coins that are 90% silver unless you can get them for spot price. Buy the dips.. and so forth. But the best luck I have had is coin shows and sometimes you can get silver close to spot at jewelry stores, just make sure to factor in sales tax. Not sure if that is the type of advice you were looking for, but I thought I would add my two cents.
> Don't buy into anything collectible or "rare"....
This is nonsense. Both Ag and Au Libertads and Perth Mint Lunar series have a huge following and you'll never get most at anywhere near spot prices; their premiums can far outstrip spot price increases. A good expample is a 1983 proof libertad in a complete collectors set. Try and find one for under a grand - if you can find one at all. I've never seen the price/premium go down when they become available, regardless of spot price... only up. And Libertads and Perth products are only two examples. There are many 'rare' items out there that have new collectors outpacing available product every day.
Silver is silver and gold is gold - it's just a matter of what shape it comes in. But some shapes are far more desirable because of beauty and rarity and - if you like them - there's nothing wrong with having some of these hard-to-come-by items mixed in one's stack of tarnished junk.
This is right but only barring meltdown.
I concur completely as this has been my plan for the last 3 years. I would also recommend some gold. Buy a few gold eagles in different amounts. If SHTF you will want some FRN's initially when cash is scarce. Next, use junk 90% silver, dimes quarters and halves. you can use the morgans and peace dollars for medium purchases. Next step up is the silver eagles, maples, libertad's. perth minth and austrian philharmonics. After that buy 1, 5 and 10 oz bars. For larger purchases. Then we you need serious coinage for even larger purchases or just for wealth preservation. I have would recommend gold in a few 1/10 ounce a few 1/4. couple of 1/2 and then the remainder in 1 ounce Amercian gold. eagles. You will pay higher premiums for the smaller fractiions but if thungs get bad you will have got them cheap
All good advice except the coins only had silver through 1964, except for the half dollars which became 40% silver in 1965.
Without context is with pretext.
I sleep better at night knowing I own physical. US stock market is the casino. Not Precious Metals. Mega Banks always bad-mouth PM's because they can't print it thru the FR.
http://www.arabianmoney.net/gold-silver/2011/10/06/physical-silver-running-out-because-its-spot-price-does-not-reflect-true-investment-demand/
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/10/21_London_Trader_-_Sovereign_Silver_Buying,_Middle-East_Shortages.html
No mention of CME, COMEX, or JP Morgan?
Way to analyze... This article is incomplete at best.
Not incomplete. Incompetent.
The author can't even spell silver right. The rest of his analysis is just as wrong.
So what that means is that some investors could be $20 underwater on each silver coin if they got in around the peak.
That's right, everybody that ever invested in a Silver Coin did it Easter Sunday night at $49+. Who tol' ya?
wtf part of "some" is incomprehensible to your tiny brain?
Mosely-claven was pumping for silver to da moonz and $60 "by next week" and all of you fresh bagholders were trying to junk off anyone who advised caution.
Repeat a lie often enough, and people accept it as the truth, at least, that is what your Nazi idols claimed. I specifically said that "at the rate, silver will hit $60 in a week", in a HIGHLY EXASPERATED manner, as I had been calling for greatly increasing volatility and falling paper prices since FEBRUARY, which I posted proof of repeatedly. But I fucked your dumbshit Fukushima arguments over and made you look like a fool, so now you havbe made me your enemy for life, and you have to make up lies about what I say to make yourself feel better after your wife and children left you for being a delusional genocidal maniac who called for mass sterilization of people according to your own arbitrary standards which inevitably would have caught your children as well.
Poor Trav. Boo-hoo. All alone and hated by everyone in his social group, so he has to go to white power rallies to feel like he is something other than totally worthless.
ok mr. oil to da moon.
that's not even remotely close to anything I've said.
That got a chuckle from me as well. I got my "junk silver" at face value. How much for that jar of peanut butter friend?
Silver priced in fiat money will remain unstable as long a people still "believe" in fiat money. "Chinese industrial demand." HAHAHAHAHAHAHAHAHAHAH! The author sounds like Jon Nadler. When fiat money fails, and it will, the demand for real money will dwarf Chinese "industrial demand." The whole world is just one big "Bitcoin" operation, and no one seems to know that yet.
No need to disparage bitcoins. That's a straight up game compared with the USD.
Hey Midas, it wouldn't have been much of a fairytale if everything you touched turned into nothing, would it?
B.S.
Electronic money == fraud.
Thank you, please drive through.
Regards,
Cooter
Government-issued, debt-free, interest-free fiat money is not fraud -- if that government is elected by and accountable to its citizens. Of course that ended about a hundred years ago. But debt based money issued by private banks is indeed a fraud which is why I'm loaded up on PM's. I'd much rather be in government issued currency than PM's though because of the environmental and social implications of mining, but unfortunately we don't have sovereign governments anymore so I don't have that option.
I agree "Electronic money = fraud"
That's why when I read the Fed will backstop $50T or $75Trillion of BofA's derivatives I scream WTF???? Where the hell are all the pallets of $Trillions? There are none - its all electronic and it's all fraud.
So as I drive thru, I'll buy some more Ag & Au. BTFD.
http://maxkeiser.com/2011/10/21/by-forcing-down-the-price-of-silver-wall...
“The price of silver has no reality to the paper market at all, absolutely zero reality there anymore.”
.
..
" The tightness in the market is the reason why when the Chinese buy massive tonnage of silver they have a long wait to receive physical delivery. The end users are in line in front of them. So now the silver market is on a razor’s edge because they are trying to make sure the industrial users get their silver, otherwise all hell breaks loose.” The London Trader