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Why I'm Buying Silver at $30 ~ Jeff Clark
February 24, 2011
Issue 92
Today's Gold/Silver Ratio: 42/1

Issue 97

Gold: $1409.60 / Silver: $33.38

Why  I'm Buying Silver at $30
Jeff Clark, BIG GOLD

The silver price has bounced 27% since January 28, a huge advance for a measly 16 trading days. It's already soared past its 2010 high and was selling for less than $16 this time last year, a double in 12 months. So, is it pricy? Or should we ignore the run-up and keep buying?

I've read a few articles that say we should expect silver to drop to the $25 level, and one pinpointed $22. Others, of course, see bullish tea leaves for the near term and believe it's headed higher. Of those that assert silver will decline, most believe it will be temporary, though one writer claims the bull market in precious metals is over (I think he's a holdout from the gold-is-a-bubble camp).

These authors could be right about a near-term decline, but I'm less concerned with what the price does this month or even the next few months, and more focused on where it's likely headed over the next few years. Caution: the chart ahead may cause excitement.
While there are lots of reasons to be bullish on silver, what everyone really wants to know is how high the price can go. Here's one hint, based strictly on historical price performance.

Silver rose an incredible 3,646% from the November 1971 low of $1.32 to its January 21, 1980 high of $49.45 (London PM fix prices). Our current advance, through February 4, is 596%. At $30, silver would have to climb over five times to match the last great bull market. If it did, the price would hit $160.89 per ounce (from its bottom of $4.295 on March 30, 2001).

You'll also notice silver has a record of outperforming gold in these two bull markets. In spite of the price dropping 26.9% in 2008 (while gold gained 5%), the metal has outrun its yellow cousin by 38.6% since their respective lows in 2001.

Gold advanced 2,333% in the 1970s; it's currently up 430%. If it matched the last run, the price would hit $6,227.26 per ounce, a return of four-and-a-half times the gold you buy today.

From solely a historical price perspective, the chart certainly suggests we've got a long way to go with both metals. The question is if the fundamentals support such price advances (show me a healthy dollar and no threat of inflation, and we'll talk), but my point for the moment is that there is an established precedence for the price of these metals to climb much higher. And just as important, to keep one's eye on the big picture.

So, yes, I'm buying silver at $30, in part because I think the potential for enormous gains is high.

However, I'll add that I'm not draining my cash account to do so. I think it's important for the precious metals investor to always be in the game, but given silver's volatility and the precarious nature of most markets right now, prudence suggests we keep some powder dry as well.
Let's say one of the soothsayers noted above is correct and silver temporarily falls to $25. If you snag it at that level, your endgame return would be 543%, vs. the 436% gain from $30 (excluding premiums and storage costs). That's more than another 100% gain on your original investment.

But how does one buy silver not knowing if the price will plummet or soar? For example, silver could take off from these levels, never to see $30 again, leaving those of you waiting for a sell-off out of the market. Or it could sink to $25, making investors who went all in now regret they didn't wait for a better price. Or it could trade sideways until, say, next fall, leaving both parties uncertain and on the sidelines.

In my opinion, there's a one-word answer to the question. It solves all dilemmas - it keeps you in the market, while simultaneously letting you buy at lower prices if that occurs. It lets you build your position bigger and bigger without the worry of whether you're getting a good price.
That one-word verb is, accumulate. Or in the vernacular made popular in the '80s by the financial planning community, dollar cost average. In other words, buy a little now, buy a little next month, etc., until you have a position sufficient in size to fight off inflation and any other economic woe we're likely to encounter over the next few years.

So my advice is, buy, hold, repeat. Because if our silver market ends up looking anything like that left bar in the chart, you may regret not having bought at $30, too.

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Quote of the Week                               

"The expense of our civil government we have always borne, and can easily bear, because it is small. A virtuous and laborious people may be cheaply governed. Determining, as we do, to have no offices of profit, nor any sinecures or useless appointments, so common in ancient or corrupted states, we can govern ourselves a year for the sum you [Englishmen] pay in a single department, or for what one jobbing contractor, by the favor of a minister, can cheat you out of in a single article."

Benjamin Franklin, 1778 

Other Articles      

China Embraces The Gold Standard
The New American
 

$400 Silver, Backwardation…
James Turk

Professor Antal E. Fekete
Silver Summit 2011

Kirsty Hogg

Silver Default Looms
Jason Hommel

Silver Can Double In A Week
Bill Murphy - GATA

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Eric Sprott
The Government Lied...
There is No More Silver!

Manipulation Fails
Metals Spike over $34

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Why Increased Demand for Silver Will Have a Leveraged Effect on Its Price ~ Jeff Clark, BIG GOLD
February 18, 2011
Issue 92
Today's Gold/Silver Ratio: 42.5/1

Issue 96

Gold: 1389.10 / Silver: $32.66

Why Increased Demand for Silver Will Have a Leveraged Effect on Its Price
Jeff Clark, BIG GOLD

How Much More Demand Can Silver Handle?

The numbers for silver demand are starting to make some market-watchers nervous. The U.S. Mint sold over 6.4 million silver Eagles in January, more than any other month since the coin's introduction in 1986. China's net imports of silver quadrupled in 2010, to 122.6 million ounces, roughly 13.7% of global production. Meanwhile, mine production can't meet worldwide demand; the only way demand gets fulfilled is from scrap supply.

That is some very hungry demand. Which raises the question, how long can this pace continue?

This is important for various reasons, starting with how demand contributes to price. If demand falls off, our investments could, too.

While I've discussed the concern regarding the lack of supply before, which has its own implications for the silver market, let's focus on investment demand. Frankly, is there room for it to continue to grow? After all, how long can investors continue to set records?

There are a number of ways to measure this - the amount of money available to invest, its percent of total financial assets, its contrast to demand in the last bull market, etc. - but I think the bottom line to answering the question is to compare the biggest silver investments to some popular equities. If they rival that of the stocks we always see on the news and analysts constantly talk about and every fund manager wants to own, then it might be reasonable to assume demand could be nearing its pinnacle.

So how do the world's largest silver ETF and one of the biggest silver producers compare to the more fashionable equities?

The largest silver ETF, iShares Silver Trust, has net assets of $9.6 billion (as of February 4). This pales in comparison to the more popular stocks trading in the U.S. In fact, SLV has roughly 3% the market cap of Apple. It would have to grow over 43 times to match Exxon Mobil.

Pan American Silver, the largest pure silver producer trading on a major U.S. exchange, has a market cap of $3.72 billion. This is 4.7% the size of McDonald's. The market cap would have to increase more than 53 times to match Walmart. It is over 62 times smaller than Microsoft.

This isn't to suggest SLV and PAAS will match the market cap of these other companies, but clearly the masses are still demanding much more of them than the biggest of silver's investment vehicles.

So how much more demand can silver handle? As much as it takes to make it the household name I'm convinced it will be before this is all over. When SLV is a favorite of fund managers. When Silver Wheaton is a market darling of the masses. When Pan American is Wall Street's top pick for the year.

Imagine what those bars on the right will look like when most everyone you know is talking about poor man's gold. The rise could be breathtaking.

Remember that silver rose over 3,646% from trough to peak in the last precious metals bull market; it's up about 630% in our current run. A return matching the 1970s advance would push the price to $152. This price level is further supported by the fact that this is about where it would be when inflation-adjusted for its 1980 peak.

When you look at the potential growth in market cap of the world's biggest silver investments, it becomes easy to view any downdraft in price as nothing but a buying opportunity. I know I do.

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Quote of the Week                               

"If workers struggle for higher wages, this is hailed as 'social gains,' if businessmen struggle for higher profits, this is damned as 'selfish greed.'"

-Ayn Rand  

Other Articles      

Gold Climbs, Silver Touches 30-Year High Amid Inflation Concern
Bloomberg

Silver Prices Hit 31-year High As Coin Sales Rocket
Los Angeles Times

The Rally in Gold and Silver is Not Over Yet
SafeHaven

Egypt: Placebos, Protests and Precious Metal Breakouts
SafeHaven

Silver Still Looking Good!
MarketWatch

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How To Sound/Tone
Test for Pure Silver

Other Tests for Silver

1. Weight - 1 oz of pure .999 silver should weigh 31.1 grams

2. Sound - Pure silver has a 'ring' to it when you strike it with another metal object, or drop a handful of coins together

3. Dimensions: a Silver American Eagle should be 40.6 mm in diameter and be 2.9mm thick.

4. Magnet: If there's iron in the item, a magnet will be drawn to it. A magnet will not be drawn to silver.

5. Tarnish: Pure silver will tarnish over time, especially if you handle it. Sometimes it will get 'milky' spots on it.

6. Use an acid test kit - 'Google'
'precious metals test kit' to find a vendor.

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The Rarest Earth ~ Ted Butler
February 11, 2011
Issue 92
Today's Gold/Silver Ratio: 45/1
Issue 95

The Rarest Earth
Ted Butler

Those who keep up with business news will have no doubt read about the recent developments in the category of minerals known as rare earth elements (REE's). These are minerals that are vital to modern industrial applications, ranging from lasers, batteries, alternative energy, and superconductors to all sorts of important high-tech applications. There are 17 minerals classified as REE's with exotic names like scandium, yttrium, lanthanum, cerium, and praseodymium. Don't worry, this is not a technical discussion and this will probably be the only time I write about rare earth elements.

Actually, these minerals are not all that rare, in the strictest sense of the word. Many are quite abundant in the earth's crust. What makes them rare is that they are generally not concentrated in ore bodies offering economically feasible extraction. The first rare earth mineral was discovered around 1800, in a village in Sweden named Ytterby, and several REE's are named after that village. Up until about 1950, most rare earth production came from India and Brazil. In the 50's, South Africa was a big producer, then California took the lead from 1960 through the 1980's. Then, China came to be the dominant producer by far, and currently produces 97% of world production.

Due to booming world demand, production has strained to keep pace. This was recently exacerbated by China's new export restrictions, due to falling ore reserves and environmental concerns. This sent the price of rare earth elements soaring by hundreds of percent, prompting a world-wide effort to ramp up production. However, you just don't flip a light switch and begin new mine production. It can take years to develop a mine and begin production. In the meantime, industrial consumers must compete for available supplies by bidding up the price. This is the essence of the law of supply and demand.

Since I'm not a REE expert why am I writing about them? The answer has to do with silver. Silver shares many characteristics with the rare earth elements and there is a lot to learn from them in our analysis of silver. In fact, the purpose of this article is to make the case that silver is the rarest of all the rare earth elements.

One of the common characteristics between silver and the rare earth elements is that many REE's are mined in conjunction with other minerals, the same as silver with its by-product mining profile. Mining for both tends to concentrate on the easiest to exploit properties first. Consequently, the remaining properties tend to be lower-grade and more expensive and difficult to develop. Both silver and REE's have seen the emergence of China as the chief producer of each. (In the case of silver, the production reliance includes the processing of scrap material not mined in that country.) Silver production from China is nowhere near 97% of world production, as it is in the rare earth elements, but it still is significant. Environmental issues and restrictions inhibit the production of both silver and the REE's. And with both, higher prices don't automatically guarantee immediate new production. For instance, last year on an 80% increase in silver price, the mine production of Peru (the world's largest miner) declined 7% or 12 million ounces. That's a million silver ounces less per month than from a year earlier. Recently, the price of REE's skyrocketed, due to China's sharply curtailed exports. Should any major silver producing country sharply restrict the export of silver, the price would soar.

Read The Rest of the Article ...

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Quote of the Week                               

"The scarce and valuable commodities such as copper, lead, zinc, uranium, gold, silver, platinum, and palladium just to name a few are limited. These are the basic building blocks for all the goods and services we desire in modern society. You can't have a car, a house,
a cell phone, a refrigerator, a simple bar of soap, etc. etc., without them.
"

-Greg McCoach    

Other Articles      

Why Every Hard-Working
American Should Be Loading Up On Silver

Jeff Clark, BIG GOLD

7 Reasons Why Silver Will Make You Rich
J. Edwards

Are Precious Metals Still a Good Buy?
Lakshimi Capital

1-oz Silver Coin Sales Shatter U.S. Mint Records
Mineweb

Why Governments Will Buy Silver
SilverStrategies

About Coin Cleaning

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Silver Shortage This Decade, Silver Will Be Worth More Than Gold
Future Money Trends

 

 

 
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Sound Money ~ Pending Legislation - 6 States to date
February 4, 2011
Issue 92
 
Issue 94

SGS Notes: We've been seeing a lot more on this issue lately across the news articles…and we get asked about this a lot… so this week we're focusing in on the various pieces about Sound Money.

Sound Money Pending Legislation - 6 States to date

Here is a list of 6 states (4 in the last month) and (2 states today) that have pending legislation to authorize the use of gold and silver to settle debts with its citizens and to provide them the legal means to avoid the devaluing of the dollar by having a parallel currency in light of massive bailouts and to protect them in the event of the dollars failure.
New Hampshire (they started this in 2003)

Bill currently mired in their State Legislator's Commerce Committee:

http://www.goldmoneybill.org/goldbill.pdf

Indiana Senate Bill 0453 Authors: Walker, Kruse
Date Chamber Action
01/14/2009 S Authored by Senator Walker
01/14/2009 S First reading: referred to Committee on Tax and Fiscal Policy
01/27/2009 S Senator Kruse added as coauthor

Current version: http://www.in.gov/legislative/bills/2009/PDF/IN/IN0453.1.pdf

Read The Rest of the Article ...

ACH Debit Now Available             

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Special Orders____                              

For those wishing to purchase quantities of 100 rounds or more, we have the ability to do custom divisible coins with the following Obverse designs: Morgan, Buffalo, Walking Liberty, Honest Value & Constitution.

Custom Special Orders require payment via wire or ACH transfer, and are priced at discount. We suggest that you collaborate with friends and relatives to do a group order so you can take advantage of the special pricing and custom minting. Please call or email us if you want to take advantage of this opportunity.

New Shipping Policy                               

Since the 2010 holidays, we are seeing an increase in delivery incidents with our shipping vendor. For this reason, all FedEx shipping will be requiring ‘Indirect Signature’ upon delivery. Indirect Signature can be obtained from anyone at the delivery address, a neighbor, HOA manager, etc. This is not meant to present an inconvenience, but to ensure that if a loss occurs, it will be covered by the shipping vendor.

Quote of the Week                               

"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium."

-Murray N. Rothbard   

 

Other Articles      

Utah Could Use Gold Under Sound Money Act
By: Alex Newman

Virginia Eyes Switching Off Dollar
Kelly O'Meara

Money in North American History: From Wampum to Electronic Funds Transfer

Gold Money Bill Site
Many Links, Articles, Resources

Obama Needs Your 401K to Balance His Budget
By Bob Adelmann

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Why Gold & Silver
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Hans Bocker,
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Role of Gold In
Next Financial System

Hans Blocker

 
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