Silver surge prompts conspiracy theorists

In 1980 it was the Hunt brothers. In 1998 it was Warren Buffett. And in 2011?

For anyone unversed in the history of the silver market, those dates refer to market squeezes that caused surges in the silver price. The talk among some conspiracy-minded traders and analysts is that something similar could be happening today. 
It is easy to see why: during the past 12 months the price of silver has risen 154 per cent, outpacing gold (32 per cent), wheat (65 per cent), oil (45 per cent), and indeed almost any investment you’d care to mention.

Perhaps the most telling measure, the ratio between the price of silver and that of gold is the price of an ounce of gold divided by the price of an ounce of silver) has dropped to 33.5 times – after averaging 60-70 during the past decade.

 The last time the ratio fell even close to this level was in 1998, when Warren Buffett’s Berkshire Hathaway quietly accumulated a huge position in the silver market, driving prices up 90 per cent in a few months to what was then a 10-year high of $7.90.

On Wednesday, silver hit $45.37.

Before that, the last time the ratio was below 40 was in the early 1980s, following the most notorious silver market squeeze – that of William Herbert Hunt and Nelson Bunker Hunt, two billionaire oil baron brothers.

 Is something similar happening today?

 The silver market is never short of a wild rumor.

The difference this time, though, is that the conspiracy theories are being seriously considered by senior figures in the industry. 

As one senior banker puts it: “I just do think it has the smell of somebody with a pretty significant buying program.

Silver is the sort of market that every decade attracts some one. ”

The reason why the conspiracy theories have taken hold is because few traders or analysts can see a convincing reason for silver’s astonishing rise. According to data from consultancy GFMS, the silver market was in a surplus of 178m ounces last year. 


Crucially, of course, that surplus was mopped up by investors. But visible investor positioning is hardly overwhelmingly positive – indeed, last week, even as silver prices rose, investors cut their bullish positions in the US futures market by 8.4 per cent. 



Hence the conspiracy theories. Some of the whispers making the rounds in dealing rooms in London and Zurich include: 

A Russian billionaire with an eye for silver has been discreetly buying (for some reason Russia seems to be the most popular location of this putative billionaire – he or she could also be Middle Eastern or perhaps East Asian).



There has been a secretive silver buying program by the People’s Bank of China or some other central bank (but China is the favorite). 

Chinese traders are using silver imports as collateral to obtain credit in a similar way to copper – thus vastly inflating the country’s silver demand.

 It is impossible to say if there is even a grain of truth in any of these tales.

While some traders are taking them seriously, others believe the rise in prices is perfectly well explained by very strong, inelastic industrial demand plus extremely high retail demand in the US, India and China.

 One explanation for why the silver market is confusing to many bankers and traders may be that they typically deal with large investors and so see little of the flow to retail investors and industrial consumers.



What is certain, however, is that with the view that silver is a speculative bubble so widespread, a sharp and painful correction can’t be ruled out. 

Again, history may be informative. After the Hunt brothers’ squeeze in 1980, the price of silver collapsed 80 per cent in four months; the Hunts were later sanctioned for market manipulation and went bankrupt.



And following Warren Buffett’s silver play in 1998, the price of the metal dropped 40 per cent and Berkshire Hathaway recorded its worst annual results on record, relative to the S&P 500, in 1999. 



*The silver market is about to enter a bubble phase.

The superior gains on metals

Faster than an F1 race is the US race to debase the American dollar. To keep it's economy afloat, the Federal Reserve is betting on printing quadrillions of unbacked currency which in turns devaluates the existing money supply. Just like the tragedy in Japan where the first thought that comes is somewhat like this "Whatever nuclear radiation comes from the power plants, it won't affect me here in the Philippines!" Wrong answer.

Think again, since the US Dollar is the reserve currency of the world. The US is not only tricking it's citizens by over printing dollars, they are in fact robbing the entire world right behind our noses. The US of A is definitely digging it's own debt grave if there was such a term.

Because the US Dollar is the world's currency of choice, your peso which is constantly being pegged against the US dollar (get it?) will likewise also lose much of its purchasing power. I am not an economist but hey, that is outright common sense now is it?

Had you come into the market early in let us say 2008, your investment portfolio of metals could have risen 300% in the last 2 years, not bad. But there is no time to waste, Silver as we speak is spiking toward $40 per ounce and the situation is not getting any friendlier. Some financial gurus think that 1400$ per ounce Gold and 40$ per ounce silver will be bargains in the year 2012. So find out where you can acquire these metals in pure form and start gathering for yourself. If sophistication in investing is beyond you then start acquiring the metals on the side for yourself and realize the benefits of having a great investment vehicle in the next few years.

Silver Demand on a HIGH

It was with sudden frustration and surprise when I received a secure message on my Anglo Far East Account Inbox stating that they were making a notice that my account would be closed if by the end of the month, the maintaining balance of 50,000 US Dollars would not be made. Well, that is a lot of money, around 2 Million pesos worth of metals needed to be in the account for it to continue.

This was really a shock to me, knowing that Anglo Far East is one of the companies that David Morgan of Silver Investor has been recommending and yet from a no minimum account policy, they easily pulled the rug under their clients and say that "this is going to be the policy" from now on. I cannot blame them since they are tasked to increase profitability.

This can mean one of many things, it could mean that the metals are at a high and that many "accredited" investors are moving into the market or investors who have the capital and who are willing to get a big slice of the metals so as to hedge their wealth. Or it could also mean that supply is tight especially for silver which is not as many as gold. Gold can easily be re-used while actual silver runs out, thanks to the industries for their electronic components and other industrial uses.

With the fiscal craziness going around and all that is happening to fiat currency, you may be able to find peace in knowing that once you place some of your wealth in precious metals, you are in fact protecting yourself from the power of the Central Bank of your country.

Do something now while the price is still at $24 per ounce, the same principle in "Buy Low Sell High." Don't wait until the majority of the world's population come rushing in which eventually would push the prices further.

In the meantime, I am diversifying into actual silver inventory. Goodbye Anglo Far East and no thanks.

Silver’s Historical Correlation with Gold Suggests A Parabolic Top As High As $714 per Ounce!

By: Lorimer Wilson

The current price of gold and the price of silver – the silver:gold ratio – continues to hover around the 67:1 range which is way out of whack with the historical relationship between the two precious metals. It begs the question:

“Is now the perfect time to buy silver instead of the much more expensive gold metal?”

It is critical to step away from all the noise and clutter that passes for knowledge and take the time to gain perspective on where the price of gold and silver are in terms of the ‘big picture’, i.e., where they are in respect to their historical relationship with each other over the long, medium and short term and, based on those relationships, how they might perform in the future.

Gold
We are now in the very early stages of Stage Three with gold having gone up 24% in 2009 and up 13.3% in the first 6 months of 2010. As such there are no shortage of prognosticators who see gold going parabolic reminiscent of 1979 when gold rose 289.3% in the course of just over a year (from a $216.55 closing price on Jan. 1, 1979 to a closing price of $843 per ounce barely a year later on Jan. 21, 1980) and 128% higher in a late-1979 parabolic blow-off of just under 11 weeks! A 289% increase in the price of gold from $1250 would put gold at $4,866. That being the case what appear on the surface to be rather outlandish projections of what the bull market in gold will top out at don’t seem quite so far-fetched.

Silver
Silver has proven itself, time and again, to be a safe haven for investors during times of economic uncertainty and, as such, with the current economy in difficulty the silver market has become a flight to quality investment vehicle. The 49% increase in silver in 2009 attests to that in spades (albeit up only 10% in the first 6 months of 2010). During the last parabolic phase for silver in 1979/80 silver went from a low of $5.94 on January 2nd, 1979 to a close of $49.45 in early January, 1980 which represented an increase of 732.5% in just over one year. Such a percentage increase from the current price for silver would represent a future parabolic top price of $155. Frankly, such prices seem impossible in practical terms but that is what the numbers tell us.

Silver:Gold Ratio
How both gold and silver perform, in and of themselves, does not tell the complete picture by a long shot, however. More important is the price relationship – the correlation – of one to the other over time which is called the silver:gold ratio.
Based on silver’s historical correlation r-square with gold of approximately 90 – 95% silver’s daily trading action almost always mirrors, and usually amplifies, underlying moves in gold. With significant increases in the price of gold expected over the next few years even greater increases are anticipated in silver’s price movement in the months and years to come because silver is currently seriously undervalued relative to gold as the following historical relationships attests.

*Now is the best time to buy all things silver!

When gold won't do, invest in silver

by John Waggoner - Jun. 11, 2010 08:39 AM
USA Today

If you're a gold investor, you have to be worried about an unwonted outbreak of good news. What if the economy doesn't enter hyperinflation? What if peace breaks out, or the world's terrorists scare themselves to death?

Gold rarely thrives on good news, so you might consider adding silver to your portfolio. Like gold, silver is a good investment if paper money collapses. But unlike gold, silver is also an industrial metal, and demand for silver should rise in an economic recovery. As an added bonus: An ounce of silver is far cheaper than an ounce of gold.

Like gold, silver is widely used as a medium of exchange when paper money loses its value. It's a good store of value, and easier to carry around than chickens or canned hams. Silver and gold have been rising in the past few years, and with good reason:

•U.S. government debt is now $8.6 trillion, or $13 trillion if you include intragovernmental holdings, such as the Social Security trust fund. The nation has the option of using a mix of tax increases and budget cuts to reduce the budget deficit and, ultimately, the debt. It also has the option of inflating its way out of the debt. Gold's rise in price reflects the widespread notion that we will use the printing press to reduce our debt.

•The euro has been sinking the past few weeks, as the world tries to figure out if Europe will be able to stabilize its more fiscally creative members, particularly Greece, Portugal, Ireland and Spain. Whenever the future of a currency is in doubt, investors look for an alternative, such as gold or silver.

Gold has soared from $258 an ounce in March 2001 to $1,221 Thursday, a 373% gain. Silver has trailed gold slightly during the same period, rising from $4.30 an ounce to $18.34, a 327% gain. If you buy any precious metal now, you're certainly not getting in on the ground floor. But the metals may still have some room to run. "This is the best environment to invest in precious metals," says Shanquan Li, manager of Oppenheimer Gold & Special Minerals fund. "The worldwide currency problem isn't easily solved."

Industrial uses

Unlike gold, silver also has myriad industrial uses. It's a great conductor, so it's in widespread use in electronics. The chemical industry uses about 700 tons of silver a year, according to The Silver Institute, an industry trade group. And it's an effective antibiotic, useful in water purification, which accounts for its appearance in the portfolio of the Kinetics Water Infrastructure fund (ticker: KWICX).

Should the global economy recover, silver should have some additional upside, says Joe Foster, co-manager of Van Eck Global Hard Assets (GHAAX). "I expect silver to outperform gold, because it has some industrial applications as well," Foster says.

If you're interested in investing in silver, you have a number of choices:

•Physical. The most cost-effective way to buy silver is in large bars, says David Beahm, vice president of economic research at Blanchard & Co., a New Orleans precious metals dealer. Those are a problem if you only want to sell a quarter of your bar, he notes. Most people buy 1-ounce silver coins. "Look for the coins with the lowest premium, whatever that might be — American Eagles or other 1-ounce coins." A premium is the coin's markup from the silver spot price. You can also buy bags of "junk" silver — pre-1965 silver coins — but those, too, are cumbersome. Try hauling around $5,000 in quarters some time.

Bear in mind that you'll have to store your silver somewhere, and that depends, to some extent, on how much you trust your neighbors. If you put your silver in a bank safe-deposit box, your rental fees will eat into any profit.

•Exchange traded funds. Several ETFs now invest in physical silver, which makes the problem of storage much easier. If you're worried about a financial collapse, however, your silver shares won't go far at the corner grocery store.

•Silver-mining stocks. Silver is typically a byproduct of something else, and so there are few pure plays in silver. But silver stocks aren't followed as closely as gold-mining stocks, says Oppenheimer's Li, and that can be an advantage.

One interesting silver stock: Silver Wheaton (SLW), which buys silver production upfront for a fixed cost from miners, typically as a byproduct. Its cost of silver in the first quarter was $4.04 per ounce.

Silver is a highly speculative investment, and if you're worried about taking losses, then you should be investing elsewhere. But if you think the world is in trouble — but are willing to admit you could be wrong — silver is one way to go.

John Waggoner is a personal finance columnist for USA TODAY. His Investing column appears Fridays. His book,Bailout: What the Rescue of Bear Stearns and the Credit Crisis Mean for Your Investments, is available through John Wiley & Sons. Click here for an index of Investing columns. His e-mail is jwaggoner@usatoday.com. Twitter: www.twitter.com/johnwaggoner.

Good advice on silver!

Perfect storm for silver brewing as antibiotics substitute--Silver Institute

Silver may soon replace antibiotics as an alternative for healing, and is increasingly gaining ground in the burgeoning field of nanotechnology.
Author: Dorothy Kosich
Posted: Friday , 25 Sep 2009

SPOKANE, WASHINGTON -

The over-prescription of antibiotics and the rapid spread of bacteria globally are creating "a perfect storm for silver," which will encourage even more medical use of the precious metal, Silver Institute Executive Director Mike DiRienzo said Thursday.

In a presentation to the Silver Summit in Spokane, DiRienzo detailed new and emerging uses for silver, lead by the metal's growing significance in hospitals and the practice of medicine.

"Currently we're seeing a surge of applications for silver-based biocides in all areas: industrial, commercial and consumer. New products are being introduced almost daily," he said.

Silver may soon replace antibiotics as an alternative to healing, he explained. The use of silver in medical implants is in the testing phase, such as the use of silver in medical implants to reduce the threat of spinal infections.

DiRienzo explained, "Engineers at the University of California, Davis have developed a ‘smart' contact lens designed to measure pressure within the eye. High eye pressure can be a sign of glaucoma, the world's second leading cause of blindness."

"At the heart of the new lens are sensors that measure stress on the cornea and the fluid pressure within the eye. The lens is composed of a type of silicone used in commercial contact lenses and silver particles placed on the lens that act as conductive wires and double as antimicrobial agents," he added.

The new lens could be used by hospitals and doctors to check for glaucoma but also by patients in their homes through a personal computer hooked into a wireless network.

Meanwhile, hospitals are increasingly utilizing silver in equipment surfaces, coatings, and other uses aimed at reducing bacteria growth. Silver is even being used in the paper used in hospital notes.

The Federal Drug Administration is permitting silver to be used in bottled water, DiRienzo noted. It is already being utilized in coatings for equipment used in the processing for milk.

Silver can also be found in germ-killing lockers now being used by the military, he said.

The precious metal is also being increasingly used in textiles, such as in polyester fiber coatings. DiRienzo said India just began using silver to preserve silk fabrics. Scientists at the Indian Institute of Technology in New Delhi have developed a method to create anti-microbial silk by infusing the delicate material with silver ions.

"This marks the first time that silver ions have been embedded into woven silk although it has been successfully applied to cotton and synthetic textiles," DiRienzo noted.

Among other consumer applications of silver are consumer electronics with millions expected to be invested in silver conductive inks by 2015, DiRienzo explained.

Silver has been used in surface mounting, which allows components to be fastened both mechanically and electronically to printed circuit boards. Components are placed in indentations on circuit boards and molten silver alloy solder flows across its surface to create an instantaneous permanent bond between the two.

Silver is used to concentrate solar-energy for power generation, and in humidifiers to slow the growth of bacteria. It also used in rechargeable solar batteries.

Silver is also reducing bacteria in refrigerators and in washing machines, he added.

DiRienzo noted that "the newest trend is the use of nano-silver particles to deliver silver ions as the nano-technology industry grows and we become more knowledgeable about how nano-particles behave."

He called silver nanotechnology "a huge market," which is being somewhat stymied by a two-year battle with EPA over the designation of the technology as a potentially toxic metal.

The U.S. has the heaviest nanotechnology investment, DiRienzo noted, with Japan is second place.

*This is going to cause a resounding demand for silver. Invest now while prices are still low.

Should you be buying silver now?

by Dr. David Eifrig M.D.(The Daily Wealth)

In 51 countries, the words for silver and money are identical.

Silver has been used as money for longer and in more parts of the world than gold. And silver was money long before the idea of paper and electronic currencies.

With the government creating an unprecedented amount of paper and electronic money, you could find yourself much poorer if you don't own something that holds value through chaotic times. That's why metals like gold and silver make sense in times like this. They have intrinsic value, and they can't be created on a whim... There's only so much gold and silver to go around.

For now, gold is more popular with investors. That's the problem... Lots of people are turning to gold as an investment. They've pushed gold prices up to $950. Gold hit its all-time high in March 2008 at $1,004, and I expect it'll get there again soon.

But silver at about $13 [currently about $14] is not even close to its all-time highs in the $50s (or inflation-adjusted highs above $1,000). As a result, gold is overvalued relative to silver (I'll explain this more in a moment).

Think about it this way: We've all seen ads from companies offering to pay you cash if you mail in your gold jewellery (don't go anywhere near those sharks, by the way). Have you seen any for silver? Me neither.

At the time of writing, you would need 71 ounces of silver to buy one ounce of gold. This difference in value is wildly out of step with centuries past. And it's not going to stay that way...

The US Congress established its monetary system in 1792 and agreed to mint coins using both gold and silver. At the time, you needed 15 ounces of silver to buy one ounce of gold. (In other words, what we call the "silver-to-gold ratio" was 15:1.)

That ratio was well established. In fact, 15 ounces of silver had roughly equaled an ounce of gold for the previous four centuries (at least according to my 1932 edition of the US Geological Survey Minerals Yearbook).

But then, in the early 20th century, governments around the world (notably ours) stopped backing their money with gold. People started hoarding gold, driving up its value, and the ratio went haywire, first cracking 71:1 during the Great Depression.

A variety of political and economic factors calmed the gold market and the ratio narrowed (though not to pre-Depression levels). It eventually bottomed out at 20:1 in the 1960s... when the US stopped backing its currency with silver. Soon after, people bought up silver coins, driving the price of silver higher relative to gold.

Silver is incredibly cheap relative to gold

Guess what? Right now, enthusiasm for gold has pushed the ratio back to its 15-year high of 71:1... exactly where it was in the last Depression, when people were crazy for gold. If the ratio dropped back to 15:1, silver would sell for around $60... a 369% increase from prices [at the time of writing] of $13.

I believe you will make a lot more money in silver over the next few years than you can holding ordinary stocks or mutual funds. And it's a no-brainer to hold silver versus gold.

Will the silver-to-gold ratio drop back to the pre-Depression ratio of 15:1? No one knows. But given the reasons for precious metals to rise, it's smarter to own the metal near its all-time low rather than the one near its all-time high. And I think the recent run in silver is just the beginning.

*Great advice for long term investments in silver!

Rare Metals could trigger next trade war

Written by Emilio Godoy / Inter Press Service

MEXICO CITY—Used in electric car motors and wind turbines, neodymium, a “rare earth metal,” is at the epicenter of the race between wealthy and emerging nations to create green technologies, while poorer countries appear to be relegated to spectator status.

Neodymium is a lanthanoid, at position 60 on the periodic table of elements for the number of atoms in a single molecule. Its production and wide range of uses reflect the quiet competition over raw materials in the area of green technologies.

José Luis Giordano, associate professor of engineering at the University of Talca in Chile, noted in an interview that there is a battle between the United States, China and Japan over neodymium, samarium and praseodymium, over ceramic superconductors, and for alternatives to these materials, still in the experimental stages.

These elements belong to Group 15 of rare metals whose unique properties—like their great magnetic capacity and resistance to high temperatures—make them indispensable for a wide range of new technologies that the world needs urgently to confront global problems like climate change.

Magnets made from neodymium help generate energy in electric vehicles and the rotation of wind turbines.

So far there are no viable alternatives to the rare metals. Substitution of neodymium is possible in wind turbines. The rare metal reduces the weight of the magnet mechanism, which will be heavier using other metals. Heavier turbines need stronger foundations, which means fortified concrete and higher costs.

Neodymium magnets have a magnetic force nine times stronger than conventional magnets.

The most similar alternatives, but even more costly, are made from samarium and cobalt or from samarium, praseodymium, cobalt and iron, Chilean expert Giordano said.

In this field, “without incentives and rewards for basic technological research and development, even if it has natural reserves, a country is condemned to being an importer,” he said. “Countries aren’t wealthy due to their natural resources, but because they have invested in R&D.”

Lifton, meanwhile, noted that it is likely there will be more economic advances in both magnets and batteries, due to the limits of neodymium and lithium supplies, and that there could be a return to steel and aluminum if demand for those technologies keeps growing.

Research has been under way since 1987 on semiconductors and ultraconductors of electricity, made from polymers, but none has been produced on a massive scale. They are characterized by their high capacity to transmit energy, durability and heat resistance.

Unless production of green technologies is supported outside of China by new mining in North America, Africa and Australia, the only place to manufacture them will be China, predicts Lifton, adding that if China decides not to export those rare metals, there won’t be any other place to obtain them.

**Rare metals like silver have industrial applications that is causing supplies to be depleted. Gold is hoarded while silver is used up, when you invest in something that is used up and the supply tightens then prices tend to go up.

Gold-Silver price ratio

Silver has undoubtedly outperformed Gold in terms of pricing and is now breaking away from the 15$ per ounce price. When I started this blog and was also beginning my precious metals savings, silver was at 10$ per ounce. If you are a trader then this would mean a 50% gain in what you have invested in, in just a matter of 8 months, not bad for someone wanting to do an honest living.

For those wanting to be long-term investors in this metals bull market which is just beginning, it is imperative to understand that there is what we call a Gold Silver price ratio. This just means that at the present price, it would take silver multiplied approximately 61 times to get to the price of gold. Based on economic history fundamentals, this is too high and some experts say that a ratio of less than 50 has been more parallel with history. This just means that for silver to get to the price of Gold, it needs to be at the 20$ per ounce level.

I am not investing in metals for the short term and I am looking to increasing my portfolio. I would rather buy metals than hold on to pre-need insurance to fund my child's education someday which is full of deception and greed. Increasing one's financial literacy as to investing in precious metals may help hedge income from unfavorable economic times ahead.