Trading and/or Investing in silver

If you did your homework and came to the conclusion that gold bull market is not over yet, and will continue to appreciate against the currencies it is measured, then silver is a leveraged way to play gold. This is because throughout history, silver follows the direction and outperforms gold in percentage terms on the way up. The downside is, it has an equal effect on the way down. It is widely referred to as gold on steroids, so trade and invest carefully!
Another thing to note is the gold to silver ratio. Currently 1 oz of gold is equal to 62 oz of silver. People that have studied history will know that this ratio will eventually need to return to 15. Ie 1 oz of gold is equal to 15 oz of silver. Silver has a lot of catching up to do and is undervalued when priced against gold given the historical ratio and deserving some thought when choosing between gold or silver.

Video link: Rick Rule talks about capitulation in the metals: May 21st 2013

http://www.kitco.com/news/video/show/Metals-and-Minerals-2013/311/2013-05-21/Gold-has-Maintained-Purchasing-Power-Rick-Rule-May-21-2013

Price of silver in the early 15th century- surpassed $1200 per ounce!!!

In the early 15th century, the price of silver is estimated to have surpassed $1,200 per ounce, based on 2011 dollars. The discovery of massive silver deposits in the New World  the succeeding centuries has been stated as a cause for its price to have diminished greatly.

Source:

http://en.wikipedia.org/wiki/Silver

Silver price in nominal USD vs Silver price inflation adjusted by CPI-U

When will Jim Rogers start buying gold again? [On Fox business]

Is the world about to run out of silver?

In the latest, May 2013 Silver Bullion Newsletter, Gregor Gregersen answers some questions regarding Bullion supplies:

Is the world about to run out of silver?

Ans: Not necessarily. The extreme silver tightness is for investment grade Silver Bullion as opposed to silver in general. Mints and refineries simply do not have enough manufacturing capacity to convert raw silver into coins and bars. Silver grains (used by industry) and rough 1,000 oz poured bars are still available.

Keep in mind however that futures exchanges normally hold less than 3% in physical reserves of their net long positions. So if a major investor or bank were allowed to take a large physical delivery we could easily see an all out scarcity or market cornering as occurred in the late 1970s when physical silver was bid up to almost 50 USD (250+ USD in today's currency after adjusting for inflation).

Silver chart: technical perspective [15th May 2013 5:54PM Singapore time]

Relationship between falling gold prices and mining- Alix steel speaks on "Bloomberg Surveillance." (Source: Bloomberg)

White line demonstrates the accumulation production all-in cash cost. That means how much it costs to produce an ounce of gold (plus re-investing etc).....and that is on the rise and is above the current gold price (demonstrated by the red line)

The commodities market

The commodities market became bullish in 1999. Based on historical precedent (happened in cycles of fifteen to twenty-three years), the commodity bull may run until sometime between 2014 and 2022, although there will be some setbacks along the way. In the 1970s gold at one point went up 600 percent before beginning to react. It consolidated and declined 50 percent over a two-year period, causing many to give up. It then turned around and rose 850 percent. That is how markets work. 
- Jim Rogers (Author of book: A gift to my children)

Gold and silver is currently consolidating and declining. Have you given up or are you still holding?

In-stock Inventory at Silver Bullion Pte. Ltd. [Updated 6/5/2013 10:06]

Based on the current inventory as seen in the above chart from silverbullion.com.sg, there aren't any available physical silver to be acquired at the current price (updated 6 May 2013 10:27PM) of USD23.91 [SGD29.50]. From the silver bullion bars range only the Perth Mint Silver Bar (1KG) can be pre-ordered with a 5 weeks wait period. The rest are sold out and no pre-orders available. Now if the prices were to go lower from here (say USD21.00, 19.00, 15.00?), who'd be able to get their hands on some physical silver given that it is unattainable even at current prices?

Now with that said, it would make no sense at all (if) the prices were to go lower from here because you'd think with this remarkable physical demand, prices should be going north. But the daily silver prices are determined by the COMEX. Most of what is traded in these contracts represents silver that does not exist. Effectively, the price discovery mechanism for silver seems to be broken. However, price management/manipulation can only be temporary because eventually, physical shortages will occur which will drive prices higher.

Metals- Expiration calender, Futures Expirations

Expiration Calender - Futures Expirations Metals

Contract

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Mar

Mar

Gold

04/26

05/29

06/26

08/28

10/29

12/27

02/26

Silver

04/26

05/29

06/26

07/29

09/26

12/27

01/29

03/27

High Grade Copper

04/26

05/29

06/26

07/29

08/28

09/26

10/29

11/26

12/27

01/29

02/26

03/27

Platinum

04/26

05/29

06/26

07/29

10/29

01/29

Palladium

04/26

05/29

06/26

07/01

09/26

12/27

03/27

Mini-Sized Gold

04/26

05/29

06/26

08/28

10/29

12/27

02/26

Mini-Sized Silver

04/26

05/29

06/26

07/29

09/26

12/27

01/29

03/27

The closer it gets to the time of the contract's expiration, the more solid the information entering the market will be regarding the commodity in question. 

Is silver a better investment than gold? David Morgan on The Daily Ticker [Yahoo Finance]

Buying Silver Bullion in Singapore; [www.silverbullion.com.sg], Physical vs Paper.

I'm amazed to see that, Silver Bullion Singapore is currently Out of Stock of all their silver coin products and the Pre Orders is between 5-7 weeks. The demand for physical is remarkable! While the Silver Coin American Eagle 2013- 1 oz is not only out of stock but also no pre order is available, you can still acquire the Silver Coin Canadian Maple Leaf 2013 - 1 oz but seeing as it is currently out of stock, there is a 7 weeks wait after you make the pre order. To give some perspective regarding the price:
The silver spot price (last updated on their site:  28 April 2013 7:00) is USD23.96 (or SGD29.70). For a quantity of 1 or more (but not exceeding 500), the current price quoted is USD29.73 (or SGD36.85). That is a premium of USD5.77 (or SGD7.15) over spot (or 24% premium). Wow!!

The alternative is to trade or invest in silver through the UOB silver passbook account. This obviously has counter party risk but works well for someone who has confidence in UOB bank and would like to take advantage of cost saving and convenience (no need to worry about transportation, storage and theft of owning physical). Note that there is a minimum transaction limit of 10 ounces. To give you a perspective regarding pricing:
The current price quoted for 1 oz of silver at UOB purchased through silver passbook account (price last updated 27 April 2013) is SGD30.50. That is a relatively tiny spread of just SGD0.80! vs SGD7.15 for the physical!

Another way to look at it is, when you buy physical, the spot price needs to go up by a remarkable 24% before you break even. Really!? 

Some may say, if you don't hold it (the physical), you don't own it and hence are adamant in accumulating the actual physical metal. Fair enough. If you are in this camp, how about acquiring the Silver Bullion Bars as oppose to the coins. The premium is approximately USD3.62 (or about 15%) over the spot price. Silver Bullion in Singapore seem to currently have available the Perth Mint Silver- 1 kg and the Johnson Matthey Silver Bar- 100 oz, both of which are Out of Stock but you can lock in the current prices and arrange for pre orders.

To visit Silver Bullion Singapore website; www.silverbullion.com.sg

See Bloomberg article [Silver Slump Lures Buyers as Waiting Time Rises in Singapore; by Chanyaporn Chanjaroen- Apr 29, 2013]
http://www.bloomberg.com/news/2013-04-29/silver-slump-seen-luring-buyers-as-wait-time-rises-in-singapore.html

To open a silversavings passbook www.uob.com.sg/personal/deposits/savings/precious_metal.html

Economic principle

Lower commodity prices increase demand and curtail supply. This is because price decline does not cause companies (miners) to rush into increasing production and buying pressure increases to take advantage of bargain prices.

CME Margin updates

CME Group Margin Changes Effective CLOSE of Business on 4/16/13

	Previous Initial	Previous Maintenance	New Initial	New Maintenance
10 Troy oz Gold (MGC) – spec months 1-13+	$594	$540	$704	$640
10 Troy oz Gold (MGC) –hedge months 1-13+	$540	$540	$640	$640
COMEX Gold (GC) – spec months 1-13+	$5940	$5400	$7040	$6400
COMEX Gold (GC) – hedge months 1-13+	$5400	$5400	$6400	$6400
COMEX miNY Gold (QO) – spec months 1-13+	$2970	$2700	$3520	$3200
COMEX miNY Gold (QO) – hedge months 1-13+	$2700	$2700	$3200	$3200
COMEX 5000 Silver (SI) – spec months 1-13+	$10,450	$9500	$12,375	$11,250
COMEX 5000 Silver (SI) – hedge months 1-13+	$9500	$9500	$11,250	$11,250
COMEX miNY Silver (QI) – spec months 1-13+	$5225	$4750	$6188	$5625
COMEX miNY Silver (QI) – hdge months 1-13+	$4750	$4750	$5625	$5625
eMini Silver (6Q) – spec months 1-13+	$2090	$1900	$2475	$2250
eMini Silver (6Q) – hedge months 1-13+	$1900	$1900	$2250	$2250

Re-evaluation of accumulation zone for silver

Given gold sliced through the 1350-1370 zone effortlessly, perhaps due to the margin related selling as the CME is raising gold and silver margins, we may have to expect silver to plummet more from the current level. Accumulation zone may arrive if silver goes down further between the 15 to 19.4 levels (this is not a prediction). Being a silver bull, I don't like giving an ugly picture but have to be realistic. As you witnessed yourself, silver can drop more than 3 dollars a day (-12%+) in a single trading day so from the current level of 22.63 (3:09:48 GMT), it doesn't seem hard to drop down further to the 19 dollar level. Based on the weekly chart of silver, I see a lot of support at the 15 dollar level so I'm crossing my fingers that this level will hold.

Having said that, after speaking with a multimillionaire investor who has invested multi millions in both physical and gold & silver savings account (paper), he told me that his thoughts were the following:
If you are a long term investor (without margin), and given you have done your homework and have the conviction that your investment vehicle (ie gold & silver) is ultimately going to much higher levels; than what happens in between for him is like as if it never happened. He bought gold because of world's central banks printing money and devaluing their currency, which will eventually lead to inflationary environment and gold (and silver) is a great store of value. For him nothing has changed.

Liquidation continues with 100+ dollar down day in gold and 3+ dollar down day in silver. Absolutely stunning!

Chart from Kitco mobile app.

Healthy correction in the precious metals

According to, Monty Guild (www.guildinvestment.com), "The Chinese and other wise buyers will add aggressively at 1350-1370, which would be approximately one third correction from 2002 bottom to 1900 top." FULL ARTICLE

If you are looking for a good entry point for silver to go long position; perhaps a good time to do that is when gold indeed targets 1350-1370 zone. Seeing as the current trend is Up for the gold:silver ratio, let's assume a ratio of 63 (from the current level of 57) when gold is 1350. This would mean a price of 21.40 silver. 

Although I don't particularly like seeing silver being smacked down from the 49.00 (and some change) high, the more experienced and wise investors like Mr Jim Rogers may view this as a healthy bull market correction or pull back. To give an example, in 2008, silver fell an impressive 55% from peak to trough.

See the brilliant chart below by Investment Score Inc. ,by:Michael Kilback

Silver will do well in an inflationary environment.

When the Continuous Commodity Index (CCI) is tracking lower (ie. deflationary) silver can not shoot sharply higher. This is because as trader Dan Norcini explains, "SILVER thrives in an inflationary environment. It will not perform in a deflationary environment."

Silver price manipulation on the COMEX

"Every day, silver (and gold) investors are subject to whatever daily pricing the big COMEX paper hangers decide to dictate, irrespective of what the real supply/demand fundamentals would suggest." Theodore (Ted) Butler from the article, The Good, Bad and Ugly

Ted Butler provides the perspective that, "As debilitating and painful as the ongoing silver price manipulation has been, if the manipulation didn't exist, neither would the prime reason for buying silver."

He continues, "Therefore, I can't rule out further silver price stabs to the downside before a dramatic and final resolution to the upside because both stem from the same cause- the manipulation."