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Silver Makes Sense For Gold Investors ~ from AMEInfo.com
Note from S&GS: Today (at this writing) the spot price of gold is at $1103.80 and spot price of silver is at $17.59. Doing the math… this represents a ratio of 62.75 to 1. If silver were to maintain or return to its historic ratio of 16 to 1, it would be priced at $68.99 today. So, as you can see, buying silver at prices of even $25 or $30 would be a great buy… let alone our prices of $23, $21.50, and $20.50…
 
Silver Makes Sense For Gold Investors
from AMEInfo.com
September 10, 2006

If you are convinced by the gold bull case, and the gold price trend is still up according to chartists, silver is not only a logical diversification, it could prove an even more profitable investment. Let us review the relationship between these two metals in general and the silver-to-gold ratio in particular.

Silver behaves much like gold in times of financial crisis and is often spoken of in the same breath under the portmanteau of precious metals. But the best reason for gold bugs to diversify into silver is something called the gold-to-silver price ratio.
 
Now the long-term historical average gold-to-silver price ratio is 16. But this relationship does sometimes get rather out of kilter. Like today when gold is at $610 an ounce and silver hovers around $12 an ounce. And not at $38 as its long-term gold-to-silver price average would suggest.
 
This has happened because silver presently has no perceived monetary role, while the moment a financial crisis is at hand people look for quasi-currencies and silver is a longstanding currency of last resort from ancient times.
 
Monetary role
What that means is that in historical terms silver is cheap in relation to gold. Even more importantly it means that in a financial crisis silver is likely to close this gap and then move in line with gold. In short, silver will outperform gold.
 
Let us say that gold moves to $2,500 an ounce by the end of next year, which is a figure at which options are now being struck. If silver followed gold upwards and regained its historic relationship, then silver would be $156 an ounce, up 13-fold on current prices while gold would be 'only' up four-fold.
 
Highly successful investor Chris Weber has written an excellent report on this subject. He notes the gold-to-silver ratio has reverted to 16 during other major crisis periods of modern times: World War II; the early 1970s; and in 1979-80 when gold hit its all-time high.
 
Crisis time?
Of course, for this to be correct, then you have to agree with the assumption that another major financial crisis is around the corner. Will the US housing downturn precipitate an October crash in US stocks anticipating a recession in 2007? Will problems in Iran cause an oil price spike and a collapse in global stock markets?
 
This is admittedly a bit gloom laden. But why not hedge your bets and prepare for the worst? Then you will be a winner whether your other investments come off nicely or not.
 
It has to be said that Chris Weber is one of the most successful general investors known to the financial community, and that he is long on silver. This is not another fund manager who places your money and takes his commission while you bare the risk. It is a strategy to win whatever happens!
US Mint Suspends Sale of 2009 Gold And Silver Eagles ~ Mary Beth Maidment
US Mint Suspends Sale of 2009 Gold & Silver Eagles
Mary Beth at SilverAndGold Shop.com
November 29, 2009

If, like me, you have been watching the spot price of gold and silver lately you would be seeing that your investments in silver have been growing. One of the first things I do every morning is check the spot prices… Naturally, this is something I need to keep on top of throughout the day so that TPS can keep our pricing structure current… but as a fellow silver investor and co-owner now of a gold mining operation, I have a vested interest in watching what is going on.

In the last week we've seen gold almost reach the $1200 mark… and silver came close to $19. The first thing that this triggers in my mind is the question: "Okay… What's happening out there?" This, then prompts me to go digging for articles, research, commentary by the experts to tell me what has impacted the pricing spikes or drops (as the case may be). Much of what I discover in this process I bring to the TP Newsletter to keep YOU informed …

One of the things that happened this week is that the US Mint has suspended the sale of gold and silver American Eagles. Several people have called me to ask about this. But, before I go further though let me pontificate a little about the issue of numismatic values compared to investment values of precious metals, because this will have a bearing on understanding the rest of this article.

Numismatics, according to Wikipedia, is "is the study or collection of currency, including coins, tokens, paper money, and related objects." So when we speak of 'numismatic value' we aren't necessarily only talking about precious metals.

Numismatic values are driven by many factors besides the metal content itself. The following is a list of some of those factors:
  • Year of production
  • Design quality
  • Condition of the coin/currency at the time of valuation (circulated, uncirculated, scratches, dents, dings, corrosion etc.)
  • Minting errors
  • Socio-political events
  • Rarity
  • Quality - proof or burnished
Any or all of these factors can drive up the cost /value of a coin/currency from a collector's vantage point. Contrast this from an investor's vantage point. An investor is looking to purchase a commodity of value at the lowest possible cost with the highest possible value to hold until it increases in value, or is able to be leveraged in some way to his/her advantage. In the case of precious metals as one such commodity, the numismatic issues listed above are of little consequence because
 
1) They drive up the costs artificially and
2) The value of the metal itself as a commodity is what is important.
 
Having said that, however, the investor market still holds room for personal preference as to design features and other meanings specific to investor preferences.
 
So let's move on to discussing what's going on with the US Mint. Keep in mind that the Gold and Silver Eagles are Legal Tender (howbeit greatly undervalued with a face value of $1 for silver and $50 for gold).

1. As a government institution, the US Mint production of silver and gold products is dependent upon the annual allocation by the Treasury of precious metals purchased under their annual budget. This is a fixed, finite, amount (contrary to private mints or commercial entities that just purchase more when they run out).
 
In the last 2 years, 2008, & 2009, the US Treasury allocated LESS silver / gold than in previous years to their Silver Eagles program. This has several implications:
  • Silver/Gold Eagles for these years will be rarer than in previous years.
  • With current investment demand being higher due to the economic climate, there will be shortages.
  • The US Mint sales currently top 25,000,000 for 2009.
  • Because of the shortages, the short-term pricing will carry a higher premium (over spot). This is basic market economics.
2. In 2008, the US Mint also had to suspend sales of the gold & silver American Eagles. I had just begun investing in them in the fall of 2008… and I ran into this very issue myself last year. (Remember, the Treasury had cut back supply of metals in 2008 as well.)

3. Just because the US Mint has suspended sales does NOT mean that you cannot obtain these coins elsewhere from sellers who have had the foresight to stock up or vendors who are resellers for the US mint. But, bear in mind the following:
  • Buyers will pay a higher premium
  • Buyers will find they may have to wait extended periods of time for delivery after paying for their coins.
The US Mint may produce a few more of the 2009 Eagles yet before the close of the year. On the other hand, they may just be trying to regulate the rate at which they deplete the remaining supply. Since we are approaching the end of 2009, this isn't too alarming because 2010 is just around the corner; new allocations for the next year will be in place and they will begin minting the 2010 Silver and Gold American Eagles and the cycle begins again.

I do have a source of limited supply for circulated Silver American Eagles from time to time. These will have scratches or small dings, and perhaps need cleaning up if you want to get them in pristine shape… But the premiums are lower and they're still Eagles if you're a real American Eagles fan… If you're interested, drop me a note and I'll watch for the next stock available in these…

I do still have sources for obtaining Eagles after our current inventory is depleted; however, I, too, will be subject to these higher premiums; so if and when that time comes, I may need to decide not to carry them due to the price point we will have to charge for them. After all, my mindset is more of an investor than collector… and I will want to keep as much of the commodity on hand as possible and not waste precious resources on artificially inflated premiums. Having said that, if you still want Eagles, drop me a note or call, and I'll be happy to see what I can do… generally speaking, however, know that there will probably be minimum order volumes imposed upon me by my vendors…generally, those are 500 or more coins.
Is Silver's Salvation Upon Us? ~ Allan Seccombe
Is Silver's Salvation Upon Us?
Allan Seccombe
November 13, 2009

ADVANCES in technology, increasing focus on reducing human interaction with bacteria, and tracking goods and people are all good news for silver and the price of the industrial metal, which has lagged for so long, says Jessica Cross, CEO of VM Group.
 
Long regarded as the poor cousin of gold, the metal, which is mainly used in industrial applications as well as to make jewelry, has bright prospects, with off take in a spectrum of new products put at just below 350 million ounces by 2020 (see graph below), Cross argued in a presentation at the LBMA Conference earlier this month.
 
The silver price is currently trading around $17.30/oz, (TP Note: at today's pricing 11/23/09, make that $18.60 ) a level that it traded around in the first half of 2008 when it broke up to just shy of $21.
 
These two spikes were unparalleled, certainly since 1985, with the metal touching slightly north of $8.50 just once since then.
 
Looking at the history of the silver market, Cross said about two thirds of the mined metal is a by-product of other minerals like copper, gold and lead, making it difficult to determine a price at which silver production would fall in a natural supply and demand scenario. Being a by-product, the metal will come onto the market almost regardless what the price is for it.
 
One of the major users of silver, the photographic film sector, is being particularly hard hit as consumers turn to digital cameras. A graph of silver demand by the sector shows a steady decline since a peak above 200 million ounces in the early 1990s to well below 150 million ounces in 2009.
 
Another anchor on silver prices, which tend to take direction from the waxing and waning gold price, is that a lot of silver used in a range of applications - like photographic film, electronics and batteries -- tends to be recycled, bringing back about 400 million ounces a year of the metal to the market.
 
This metal appears to be in the  right place at the right time…
 
But the days of huge recycling could be drawing to an end, Cross said, pointing to a host of technological advances needing silver, including wound care, food hygiene and water, wood preservatives, textiles, solar panels and radio frequency identification tags.
 
"These new end uses for silver are set to pick up the demand slack left by the shrinking photographic industry," she said. "But, unlike photographic film, these end users do not generate vast amounts of recycled metal. In general... the metal is going to be taken off the market for good." Silver's time has come, she said.
 
"The change is coming about as a result of silver's unique properties as a biocide as well as is superior conductivity," she said.
 
"The interesting thing is that many of the world's worries and woes today are playing right into the hands of silver and this metal appears to be in the right place at the right time in a number of applications."
Radio frequency identification tags, used in identity documents, passports and stock controls, are growing in use. China, for example is spending $6B to install these devices in identity documents for all its citizens and in transport tickets, she said.
 
London-based metals consultancy VM Group estimates use of these tags will grow to more than 30 billion by 2020 from around seven billion now. Each tag contains about 10 milligrams of silver on average, absorbing nine million ounces of silver from the 2.3 million ounces currently.
 
Solar panels and mirrors could absorb another 50 million ounces by 2020 compared to 18 million ounces now. Wood preservative coatings could account for up to 100 million ounces a year as chromate copper arsenic, the existing wood preservative is phased out.
 
There were no estimates of the amount of silver that could be used in plasters and bandages, which use silver for its anti-bacterial properties. These properties also feed into the clothing and textile sector where body odors and bacteria are eliminated.
Silver is also used in water purification devices and to store food. It could take up around 95 million oz by 2020.
 
"Superimpose this good news on the tonnages of silver that have gone into the ETFs (silver-backed exchange-traded funds) and you have an underlying strength within this market to justify its current price strength," Cross said.
 
The gold:silver ratio is expected to narrow. At current prices you can buy 64.4 ounces of silver for the price of a single ounce of gold.
 
"The current market conditions indicate that gold has become overpriced and silver has become underpriced, suggesting there will be a shift in assets from gold to silver," said Jeffrey Lewis, who edits Silver-coin-investor.com.
 
"Since 1970, the ratio of the number of ounces of silver you could buy with one ounce of gold has run as high as 80:1 and as low as 20:1, with a mean of 54:1. Today's ratio is moderately higher than 54:1; in fact, the ratio is nearing 64:1, suggesting that there will be a correction in either the price of gold, or silver will advance to make up the deficit," he said.
 
A Bull In A Silver Shop ~ Mogambo Guru
A Bull In A Silver Shop
Mogambo Guru
October 5, 2006

…Well, maybe not all buying is drying up, as silver market analyst, Ted Butler, reports that in the last 10 months, "
some 150 million ounces of silver can easily be documented to have been bought by investors. Undocumented purchases would add tens of millions more ounces."
 
In fact, when you add it all up, "Investment demand for silver this year is running at a full 25% of world mine production and over 20% of total production (including recycling). This is a remarkable historical turnabout."
 
Thus, it is easy to see why Mr. Butler is "bullish beyond belief for silver", since this kind of demand means that "In silver, the documented 150 million ounces bought in the first ten months of this year is equal to 15% of all the silver bullion equivalent thought to exist!" Wow!
 
More than one-seventh of all the silver bullion "thought to exist" in the whole world was suddenly bought up in less than a year, and yet the price of silver has been pounded down to less than 20 bucks an ounce? No wonder I am so bullish on silver!
 
He also notes that the gold/silver ratio is at more than 80, which is "one of the biggest differences in history."
 
And not only that, but since there are 4 to 5 billion ounces of gold in the world versus only 1 billion ounces of silver, that means that "the total dollar value of all the gold in the world is worth 300 to 400 times more than all the silver in the world (80 times 4 or 5)".
 
… In dollars and cents, the dollar value of all the gold in the world is about $4 trillion, while the value of all the silver in the world is but a laughably low $10 billion! Where do YOU think the most profit potential lies? Me, too!
 
Speaking Silver's Language
Mogambo Guru
October 5, 2006
 
Everybody knows that I can always be counted on to go ballistic about silver being such a Screaming Freaking Bargain (SFB) because of (according to the most recent Official Mogambo Count (OMC)) more than a dozen very good reasons, which is a lot of reasons, and that at $17-and-change per ounce spot, silver is loudly saying, "Buy me! Buy me!" although obviously not in the literal sense, nor (perhaps less obviously) in the "voices in my head" sense, which shows I am responding to therapy and why everybody is so pleased with me.
 
One of the reasons for my bullishness and bullheadedness about silver is the large short position, which is the number of ounces already sold (opening the short position) but which have not been bought yet (closing out the position), which means these shorts are going to get clobbered if they have to cover their short position by buying silver at a higher price than they sold it.
 
So I was very interested when Ed Steer's Gold and Silver Daily reports says that the commodity futures market report shows that bullion banks' "silver net short position now stands at 213.6 million ounces…about a third of world silver mining production…all held by 'four or less' bullion banks."
 
He characterizes this as "grotesque beyond description", which I guess it is, since it is hard to even imagine such a thing, which implies that these "four or less" banks are so stupid that they would be short silver when the fundamentals are so compelling that my throat is bloody and raw from screaming, "The fundamentals of silver are compelling!"
 
And this is even ignoring the headline "Gold & Silver Market Alert - Buy before the Breakout!" from Julian Phillips at Goldforescaster.com, which reflects my sentiments exactly.
 
In gold, the situation is similar, in that Mr. Steer says, "The bullion banks' net short position now stands at 211,342 contracts… 21.1 million ounces. This is well over 25% of world gold production. This is also grotesque beyond description".
 
Suddenly I see an opportunity to hide my rising excitement and get a quick laugh! So I said, "This means it is NOT 'beyond description' when it is perfectly described by silver, which is also 'grotesque beyond description' and which can be described as 'like gold'! Hahahaha!"
 
Well, I am laughing at my own joke and having a wonderful time when I looked around and noticed that nobody else appreciated my little joke about circular reasoning, which, upon reflection, I admit is pretty bad, and I am pretty embarrassed about it.
 
I don't know why I thought it was funny, except for maybe it's these new pills that are supposed to keep me from screaming my guts out in fear about the coming collapse of the dollar and the attendant horrific rise in consumer prices that destroys America and plunges us into a post-Apocalyptic nightmare. And, parenthetically, they work pretty well, too, except for the catatonia and the, you know, drooling.
Mr. Steer sees my embarrassment and starts talking about how many of the owners of futures contracts in gold and silver said, "We want our metals!"
 
People with inquiring minds want to know, "How much gold and silver was delivered so that we can maybe see if the Mogambo Who Thinks He's So Hot (MWTHSH) is actually turning out to be right about gold and silver going so much higher in price because the despicable Federal Reserve is creating so much money and credit that inflation in consumer prices is guaranteed, which would be indicated by a rising price for silver!"
 
Well, it turn out that "The final totals for August are as follows… gold 5,728 contracts [572,800 ounces] and silver 91 contracts [455,000 ounces]", which doesn't seem like a lot, but what in the hell do I know?
So, I report these things without knowing what they mean because I am pretty stupid and I am just in it for the money, so all I can ever see is the obvious, especially when it is pointed out to me, which he apparently does when he says it means, "August was a big month for gold deliveries…but not for silver. September is a big month for silver deliveries…but not for gold."
 
I still don't know what it means, but a big buying of gold and silver every other month is plenty enough to keep their prices rising and demand growing, which is Another Good Reason (AGR) to buy gold and silver beyond the obvious good reason that they always soar in value and price when the government is acting so irresponsibly, or when the Federal Reserve is acting so irresponsibly, but especially when both of them are acting irresponsibly, like now!
Silver Makes Sense For Gold Investors ~ AMEInfo.com
S&GS Notes: Today (at this writing) the spot price of gold is at $1103.80 and spot price of silver is at $17.59. Doing the math… this represents a ratio of 62.75 to 1. If silver were to maintain or return to its historic ratio of 16 to 1, it would be priced at $68.99 today. So, as you can see, buying silver at prices of even $25 or $30 would be a great buy… let alone our prices of $23, $21.50, and $20.50…

Silver Makes Sense For Gold Investors
from AMEInfo.com
September 10, 2006

If you are convinced by the gold bull case, and the gold price trend is still up according to chartists, silver is not only a logical diversification, it could prove an even more profitable investment. Let us review the relationship between these two metals in general and the silver-to-gold ratio in particular.

Silver behaves much like gold in times of financial crisis and is often spoken of in the same breath under the portmanteau of precious metals. But the best reason for gold bugs to diversify into silver is something called the gold-to-silver price ratio.
 
Now the long-term historical average gold-to-silver price ratio is 16. But this relationship does sometimes get rather out of kilter. Like today when gold is at $610 an ounce and silver hovers around $12 an ounce. And not at $38 as its long-term gold-to-silver price average would suggest.
 
This has happened because silver presently has no perceived monetary role, while the moment a financial crisis is at hand people look for quasi-currencies and silver is a longstanding currency of last resort from ancient times.
 
Monetary role
What that means is that in historical terms silver is cheap in relation to gold. Even more importantly it means that in a financial crisis silver is likely to close this gap and then move in line with gold. In short, silver will outperform gold.
 
Let us say that gold moves to $2,500 an ounce by the end of next year, which is a figure at which options are now being struck. If silver followed gold upwards and regained its historic relationship, then silver would be $156 an ounce, up 13-fold on current prices while gold would be 'only' up four-fold.
Highly successful investor Chris Weber has written an excellent report on this subject. He notes the gold-to-silver ratio has reverted to 16 during other major crisis periods of modern times: World War II; the early 1970s; and in 1979-80 when gold hit its all-time high.
 
Crisis time?
 
Of course, for this to be correct, then you have to agree with the assumption that another major financial crisis is around the corner. Will the US housing downturn precipitate an October crash in US stocks anticipating a recession in 2007? Will problems in Iran cause an oil price spike and a collapse in global stock markets?
 
This is admittedly a bit gloom laden. But why not hedge your bets and prepare for the worst? Then you will be a winner whether your other investments come off nicely or not.
 
It has to be said that Chris Weber is one of the most successful general investors known to the financial community, and that he is long on silver. This is not another fund manager who places your money and takes his commission while you bare the risk. It is a strategy to win whatever happens!