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Wednesday, December 29, 2010

On the topic of Silver

This week I have talked about Quantitative Easing and how it can only continue. QE has triggered currency induced cost-push inflation.

Recognizing these trends are important. Understand what is going on around you and you can take advantage of it.

Quantitative Easing is having its expected effect. QE is debasing the purchasing power of the dollar. This has caused gold and silver metals prices to rise.

In 2011 this trend will continue.

And because of this I sincerely believe you should shun real estate and look to Silver as the best investment for your money, particularly if you are someone looking to buy into the real estate market for the first time... or if you are nearing retirement and looking to invest the proceeds from you bubble inflated housing asset.

If you haven't seen it before, I highly recommend you read Sprott Asset Management's Double-Barreled Silver Report

  • "While gold dominates the headlines, the silver market actually enjoys a superior fundamental supply/demand story than that for gold."

Sprott explains the complete rational for this statement and it is worth checking out.

Some have speculated that they believe 2011 will see an economic retrenchment in the markets which will bring down gold and silver in the short term - repeating a situation like we saw in 2008. The stock market crashed and metals/commodities came down with it.

I don't think that will happen this time around. I believe, in 2011, we may well see another Lehman type event in the first half of 2011, but the effect will be quite different from 2008. You will see a strong demand for physical metals in preference to any paper substitutes.

Instead of a rush for liquidity and a flight to the safety of the US dollar, I believe the flight this time will be to the safety of physical metals.

I also believe, in the short term (meaning the next two and a half weeks), we are going to experience another strong upturn in the price of silver.

Since late August silver has moved up in stages. After an initial run from $19 to $23, silver had a pattern of sharp price increases, followed by three-week consolidations.

The latest peak was about three weeks ago so, history would suggest that we are about to rise again. I have been looking for this week or the first week of January for the next move.

So far this week silver is up over $1.50 and sits, as I write this, at a new high for 2010 of $30.85.

I see silver moving to $32.50- $33.00 with an outside chance of $34.00 over the next 2 weeks.

Let's see what happens.

As for those of you who worry silver and gold are in a bubble which is about to burst, I say: not a chance. Precious metals are a long ways from a bubble yet.

Ask yourself, how many of your co-workers talk about real estate?

Now... how many talk about silver or gold? How many even know the current price of silver or gold? Put it to the test... ask them tomorrow.

In the meantime, check out this youtube interview of Harvard students on how the current state of the economy has affected their lives. Most of the students were very optimistic on the economic future of their country.

Towards the end of the video, the interviewer offers all these Harvard brainiac's the chance to buy an ounce of silver for $5 (this was posted on youtube on December 14, 2010 when silver was at $29.50/oz).

Not ONE of them accepts and appear to disdain the idea of buying silver.

Bubble? Not by a long shot.


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7 comments:

  1. On the subject of Silver, you may want to look at the long-term trend, specifically the 5 year chart. When the housing bubble popped in the U.S. in 2007-8, Silver took a nosedive. The only PM that did not take a nosedive was gold.

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  2. Shh! Please keep quiet about silver until I finish buying my next thousand ounces!

    I've liquidated my bonds, ETF's and now the rest of my equities, and it's all in bricks of shiny bullion. Vive le physical metal, bay-bee, and devil take the hindmost.

    In a couple of years, when houses have dropped by 70%+ in the lower mainland, I'll pull out a handful of clear, ringing one-ounce coins and take my choice of properties.

    We silver vultures are just waiting . . .

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  3. You are correct. I would encourage you to read Sprott's report and combine that with the QE in America and Europe. The dynamic is very different. There is a massive inflow of funds into silver on a scale that wasn't ther in 2007-2008.

    The total silver comex Open Interest today rose by a huge 4291 contracts to 137,918 from yesterday's level of 133,627.

    It almost looked like world war III hit the silver comex warehouse. There were no deposits of silver but there were huge withdrawals.

    The dealer reported two huge withdrawals:

    Dealer no 1 had a withdrawal of 446,851 oz and
    Dealer no 2 had a withdrawal of 44,783 oz for a total of 491,634 oz.

    The customer had withdrawals of 122,405 oz

    There were ZERO deposits.

    Meanwhile the US Mint again halted production of silver eagles yesterday "because of unprecedented demand for American Eagle Silver Bullion Coins." Until recently, all available silver bullion blanks were being allocated to the American Eagle Silver Bullion Coin Program, as the United States Mint is required by Public Law 99-61 to produce these coins "in quantities sufficient to meet public demand".

    As per their press release, "However, because of the continued demand for American Eagle Silver Bullion Coins, 2010-dated American Eagle Silver Uncirculated Coins will not be produced.The United States Mint will resume production of American Eagle Silver Uncirculated Coins once sufficient inventories of silver bullion blanks can be acquired to meet market demand for all three American Eagle Silver Coin products."

    The mint produces around 40 million oz of silver coins. The mint is forgoing over 1 billion dollars worth of gross profit by stopping production. The Max Keiser campaign of "Kill JPMorgan" is having a devastating effect on the banker cartel. So is Eric Sprott who is purchasing the ever dwindling supply of silver.

    We live in interesting times and times of great opportunity.

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  4. An analyst I follow agrees the silver comex is on fire with massive amounts leaving the registered vaults for offshore.

    He is confident, based on his analysis that 9.255 million oz of silver will be the total amount of silver that will be standing and will be settled upon by the bankers. In gold, the total gold is very close to 1.2 million oz.

    In his words, "in silver, you have to mentally add the options from the November options exercised which totalled 4.5 million oz. So together, in silver almost 13.8 million oz are waiting for settlement. There is no doubt that physical silver is disappearing off the planet."

    It is suggested that the US Mint has beens under instructions to produce as many gold and silver eagles as possible this year in order to avoid the perception that silver supplies are tight. This is why big coin dealers seem to have an endless supply of silver eagles. But sources indicate that there would be a severe silver shortage starting sometime in 2011.

    That shortage may have started a bit early.

    I can confidently say 2011 will not be like 2007-2008.

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  5. Im trying to work out, if it is true that China is playing both sides of silver (via shorting through JPM / HSBC), if the price could be drawn down significantly. I keep reading that London Bullion has nothing left in it, nor do other banks in Canada/SWZ. It all looks good, but.... could this just be a trap to shake off some investors, and pick up a greater position... somehow? ...V

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  6. If it is, the upside will be even stronger once that happens.

    As I have posted before, these will be times of tremendous, tremendous volatility.

    I see several severe corrections during the course of this year.

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  7. Silver is now at $30.90 in the overnight and it is time for bed. Night all.

    ReplyDelete