Buy Silver Bullion Coins

By Jeff Clark  
Tuesday, January 10, 2012
 
The silver bear market is over

Silver bottomed two weeks ago at $25.65 per ounce. It happened during the
typically quiet period between Christmas and New Year's. If you blinked, you
probably missed it. But it happened. The price of the shiny metal fell to more
than 33% below its 200-day moving average (DMA) – thereby tagging the bear  market target we set last April.

But over the past two weeks, silver has bounced back 10%.
That's a big move – especially for such a short time frame. But it has gone
largely unnoticed. No one cares. No one is paying attention. It's as though all
the folks who were wildly bullish on silver early in 2011 have gone
away.

That, of course, is how bear markets usually end… quietly.

It's not the same with bull markets. Bull markets flame out in a spectacular, parabolic move higher in a rush of popularity… with calls for  insanely higher prices. Those were the conditions in the silver market last April.

Back then, we warned that the silver price had run too far,  too fast. It was trading 50% above its 200-DMA – a level that had signaled a top  for silver in the past. We suggested caution and patience. And we speculated  that silver could drop anywhere from 30% to 50% below its 200-DMA before finally
hitting a bottom. That's exactly what happened two weeks ago.

Silver dropped down to long-term support at around $26 per  ounce. It's still trading about 30% below its 200-DMA (the blue line). As you  can tell from the chart, silver typically doesn't get much more oversold than this.  In fact… except for the decline during the mass-liquidation event in  late-2008, this is as oversold as silver has been in the past decade.

But no one cares. No one sees an opportunity here. Everyone
seems to think silver's best days are behind it.

I can't say for sure that silver won't drift a bit lower from
here. But just as I was confident the action last April was a sign of a top for
silver and a time to be cautious, I am equally confident the action over the
past two weeks is the sign of a bottom.
 
Now is the time to buy silver. A new bull market is  beginning.

Best regards and good trading,

 Jeff Clark

Further Reading:

Last April, Jeff said silver – which was flying high from a meteoric rise in
just three months – was due for a "nasty correction." He advised readers to hold  off buying. Over the following two months, the metal fell 20%. Read his
prediction here: The Curse of the Silver Trade.

If Jeff's right and silver resumes an uptrend, shares of one company could be
a double in waiting. "I don't expect to make 800% returns," Brett Eversole
writes. "But we could easily double our money over the next few years… even if  silver goes nowhere. Our gains will increase if silver pushes higher." If you
like silver over the long term, this is a stock you need to own…







 

By Matt Badiali, editor, S&A Resource Report 
Saturday, December 3, 2011

Silver is an amazing metal… which is why it's likely to soar over the coming years…

You see, silver has more than 10,000 uses. It's one of the world's best
conductors of heat and electricity. Inventors filed more patents on silver uses than any other precious metal in the world. And when silver is used for most industrial and technological purposes, it is used up forever… It simply costs too much to try to recycle the tiny bit of silver from every cell phone or casino chip.

I'm not saying industry is going to use up all the world's silver. That
simply can't happen. But scarcity is a real issue.

Our rapid consumption of silver leaves very little to meet any uptick in
demand from investors. A spike in interest will send prices spiraling
higher…

Here's a breakdown of the silver market. The table below shows the
percentage of the total amount of silver consumed by each category over the past four years… 

Silver Supply Consumed By Sector 
 
Industry              2007           2008           2009         2010 

Photography        53%            54%            45%          49%
Jewelry                13%            11%             9%            7%
Silverware            6%               6%              7%            5%
Coins/Medals       4%               7%              9%           10%
Surplus/Investing 10%            11%            21%          12%
Total                   100%           100%         100%         100%

As you can see from the table above, only 12% of the silver supplied to
the market made it to bullion in 2010. That means only a little more than 100  million ounces of silver became bullion for the entire investing
world.
 
That's a tiny fraction to sop up all the investment interest  in the world.

Of that silver, about 43 million ounces went to exchange-traded funds like  the iShares Silver Trust (SLV) and the Sprott Physical Silver Trust (PSLV).   That means you could buy all the extra silver bullion for about $2 billion.  We could buy all the surplus silver bullion from the last four years for about $10 billion.

That's the same as the market value of the iShares Silver Trust today. If you  wanted to build another silver fund, you couldn't. There just isn't enough silver bullion out there to fill the order.

Even trying to amass that much physical silver would send the silver price soaring. It's a simple market fact… When there is more demand than supply, it drives the price up.

And the economic problems confronting Europe and the United States have increased interest in precious metals… Silver gained a colossal 174% from August 2010 to April 2011.

In May 2011, however, the price collapsed 31% in just four weeks. The bull market simply ran up too far, too fast… and the decline wiped out many highly leveraged silver traders.

As I showed you on Wednesday, this has temporarily dampened sentiment toward silver. The "big money" – commodity trading advisors, pool operators, and hedge funds – isn't interested in silver at all…

The current bottom in sentiment is a great signal for us to add silver
positions. The big money will eventually return to silver… The economic forces (namely Western debt) driving people away from paper money and toward precious metals aren't going away any time soon.

As those big traders come back into the market, they have the capital to tie up all the excess silver production in the world. Remember… you could buy all the extra silver production over the last four years for less than $10 billion. Those traders could invest far more money than that.

When they do, the silver market will tighten up, and the price will roar
upward. That's what we see EVERY TIME sentiment bottoms. When those big traders stop being bearish, they put enough money into silver to move its price. Sometimes it's 28%… Sometimes it's 405%… But it always goes up. (You can find the full story on that here.)

If gold and silver prices are nearly certain to rise over the next few years
(and probably rise dramatically), the simplest way to play that trend is to buy bullion… real, hold-in-your-hand silver coins.

And I recommend everyone do just that… Buy some silver and store it away.

Good investing,

Matt Badiali

P.S. If you've already built your bullion position… there's another way to
ride this trend to much larger gains than bullion is likely to offer. I just
completed a full report on the opportunity. I wouldn't be surprised to see every dollar you invest in this opportunity turn into $10 or more. Get the details here.
 
 
Further Reading:

 With investor sentiment momentarily negative toward silver (and just
beginning to turn back up), it's a great time to take a position in this
long-term bull market. Read more here: How the "Big Money" Could Push Silver 54% Higher in 2012.

"I don't expect to make 800% returns," Brett Eversole writes. "But we could easily double our money through shares of this silver company over the next few years… even if the price of silver goes nowhere."

In spite of 2004 and 2008 investigations determining no illegal activity in
the silver futures market, the CFTC says it has been continuing to investigate
the issue since late 2008.

 Dorothy Kosich
November 7, 2011
www.mineweb.com
RENO, NV

 The Commodity Futures Trading Commission has recently issued a one-paragraph  statement, announcing it is still pursuing an investigation into the possibility  of unlawful acts in the silver market.

 The investigation has been ongoing since September 2008. Since that time, the  commission has received a number of comments and letters asking the government  to investigate the COMEX silver futures market. Several complaints have asked  the CFTC to limit the activities of large banks in the silver market.

 "Since that time, the staff has analyzed over 100,000 documents and
interviewed dozens of witnesses and obtained expert advice," the CFTC said in a  Nov. 4, 2011, statement. "It has been a long, detailed, and thorough  investigation, and it continues in an appropriate and considered manner."

 On May 14, 2008, the CFTC said its investigation of trading activity in the  silver futures market covering the period 2005-2007 determined there was no  evidence of manipulation in the silver futures market for the period between  2005 and 2007. The investigation also found NYMEX silver prices tend to track  closely the price of physical silver. Finally, the CFTC determined "no  observable relationship between short-futures-trader concentration levels and  silver prices."

 However, in September 2008, the CFTC disclosed that another investigation of  silver markets was underway.

 For years, the CFTC has received complaints from silver investors claiming  the price of silver futures traded on the NYMEX has been manipulated  downward.

 In 2004, the CFTC issued a 2004 Silver letter in response to a large number  of metals analysts and commentators who expressed concern that the futures price  of silver was reportedly being manipulated downward as a result of reported  collusion by a handful of traders on the short end of the silver market.

 The allegation was that, because the consumption of silver had exceeded  supplies available from new production and recycling for many years, silver  futures prices should have been much higher to reflect the ongoing production  deficit.

 The CFTC staff also examined the relationship between NYMEX silver futures  prices and cash market silver prices to determine if NYMEX prices appeared to be  unusually or significantly out of line with cash prices.

 Staff analysis in 2004 found no evidence that a short-side manipulation was  in progress. The staff also concluded the gap between silver production and  consumption had been filled over the years by the drawdown of existing silver  stocks. While a production deficit existed, the staff found no supply  deficit.

 Note: "no evidence that a short-side manipulation," yet the investigation
continues.  Interesting.

India may be the world's top consumer of gold, with 66% increase in demand in 2010 to 963.1 tonnes, but analysts are urging investors to shore up on the white metal, expecting the gold to silver ratio to drop.
Shivom Seth
October 14, 2011
www.mineweb.com
MUMBAI

It is a buying opportunity for silver. The white metal, which rose at more than twice the rate of gold last year, should continue to outperform its more lustrous peer, say analysts. In the process, it has narrowed its long term gap with gold, known as the gold-silver ratio, although this is currently well above the level it fell to earlier in the year.
The gold to silver ratio measures the relative value of the two precious metals. The higher the ratio, the more expensive gold is relative to silver. On the other hand, the lower the ratio, the more expensive silver is relative to gold.

Analysts say the ratio, which was at 80 a year ago, had come down below half of this level with some experts suggesting it could come down further, implying one may be better off buying silver than gold.
"On a year-to-date basis, gold prices in the international markets have given returns to the tune of more than 16% while silver has slipped more than 3% during the same period. The white metal had delivered phenomenal performance in the January to May period this year, as it had jumped a whopping 22%. Gold, on the other hand, rose only around 8% in the same period," said Reena Walia, research analyst with Angel Commodities, a broking firm in Mumbai.

Gains in silver were not only backed by its safe-haven appeal, but also because it is a cheaper alternative amongst the precious metals pack and still has many of the same characteristics.
However, the rally in silver has been cut short sharply in the month of September when compared to gold, as apart from being a precious metal, silver also finds industrial applications.
"There was a lot of speculation. Fundamentals played a big role," said R Prasad, bullion analyst at investment, broking firm, Karvy Consulting. "Silver rose 7% in August, a performance which looks subdued in comparison with gold, but is not, considering it had risen 21% in April 2011," he said.

Walia added: "In February this year, the value of silver was the highest in five years since the gold to silver ratio fell to just above 45:1. It then went for a toss declining sharply during the year. It touched a low of 31.53 on April 28, much below the level of 34.89 that it had touched in 1980."
In this case, the ratio indicates that an ounce of gold could buy only around 31 ounces of silver as opposed to around 70 ounces in early June 2010.
Walia noted that during the year, silver prices increased sharply and had tested a high close to $50 per ounce. "The gold to silver ratio has been witnessing a decline since the end of January 2011 from an average of 47.80 witnessed in January 2011, to 41.72, witnessed in June 2011, even touching an average low of 35.25 in April 2011," she added.

Currently, the ratio has risen back above the 50 level. In September, it averaged 47, indicating that prices have taken a hit. The trend has been reversed exactly when the ratio hit a low of 31.53, she pointed out.
For many Indian investors though, gold continues to be the mainstay. Traders said that investment demand for gold in India jumped 78% to 108.5 tonnes in the three months ended June 30, marking the second highest quarterly increase on record.

They added that out of 55% of global jewellery demand, India accounted for 32%, while China contributed 23% for global bar and coin investment. India is presently the world's top consumer of gold, with a 66% increase in demand in 2010 to 963.1 tonnes.
Rajesh Jain, precious metals analyst with another investment firm said, "We have stepped into the fourth and the final quarter of this year. There is a lot of uncertainty and confusion over the state of global economic affairs and investors cannot take a logical decision."

Adding that precious metals, which are largely considered as the safest form of investment, "have taken a beating as investors not only shunned riskier investments but also sold off their holdings in their most preferred investments, which is gold. This has created havoc in the global markets as all asset classes have given a negative performance," Jain added.
At the current level, Walia notes that the ratio indicates that prices could witness a reversal again, "as it has hit a high of 56.75 and one could say that at these lower levels, buying could emerge."

SILVER HOT
 
However, the current scenario is not supportive of a rise in silver prices as market sentiment remains choppy and with the downside in base metals, silver too is feeling the heat.
At the current ratio, one ounce of gold can buy around 53 ounces of silver. The broking firm has advised their clients that the gold to silver ratio will be in the range of 40 to 50 during the year.
Walia noted that spot gold prices declined almost 12% in September and in the same period, spot silver lost 33%, taking its cues from copper which on the LME fell 28%. "Since global economic growth forecasts have been downgraded, demand for base metals has become a major concern and this factor has influenced silver prices to a large extent," she added.

While the ratio is an indicator of how prices have moved over time, analysts maintain that it is only one of the several factors that should be considered while taking an investment decision. "There is still a lot of interest in silver here," said Raj Venkateshia of ScotiaMocatta, a division of Scotiabank, the largest seller of precious metals among banks in India.
Analysts are of the opinion that governments in many places are rapidly embracing gold as a security mechanism, especially since the value of the US dollar foreign reserves has drastically fallen over the past decade. Rising physical demand from Asia, especially from India has also supported the yellow metal prices, Angel Broking has said in a note to its clients.

Gold touched an intra-day high of $1691 and closed at $1676 on Wednesday. On the MCX (Multi Commodity Exchange), Gold December contract rose around 0.8% and touched an intra-day high of $549.85 per 10 grams on Thursday.

With Sprott planning to buy another $32 million worth of silver, is the price going to take off again, or continue its pattern of a nervous advance alongside any gold price increase?

Lawrence Williams
August 19, 2011
www.mineweb.com

LONDON

It is interesting to look at the price movement patterns for gold and silver of late. Normally if gold is on a tear, silver jumps up, as one commentator described it, like gold on steroids. Likewise when gold falls back silver is prone to plunge. But we have seen none of this in the past two or three weeks when gold has moved up and down quite drastically. Initially silver remained virtually unmoved while gold fluctuated wildly - unusual behavior for ‘poor man's gold'. And only now, with gold reaching for, and achieving new records, has silver been seemingly reluctantly dragged up along with it and at long last appears to be shaking off its stuttering performance. Does this change in behavior mean a rerating is taking place?

Perhaps not yet. Silver investors are naturally nervous, particularly following the sharp fall in their favored precious metal at the beginning of May - a fall so severe that it may have seen some new investors in the metal withdraw from silver forever. It is taking time to get over this setback but in recent days seems to be recovering its luster - and there is one move apparently under way which could drive silver very rapidly to big new highs.

Pre-eminent silver bull, Eric Sprott, has told King World News that he will be selling a further 2 million shares in the Sprott Physical Silver Trust which will make available another $32 million which will be used to buy physical silver to that value. Sourcing the 800,000 ounces or so of physical metal may put a squeeze on the market if some silver analysts are correct, and this could cause the silver price to accelerate- and along with gold's spectacular surge could drive silver back to the $50 level and higher very quickly. Sprott himself affirms strongly that he believes the silver price should be over $100, although this would suggest a 16:1 gold:silver ratio which, if it comes, may still be a way away yet timewise. The current gold:silver ratio on this morning's prices with gold at $1860 and silver at $41.30 was 45 - if silver does indeed start to accelerate this may come back down to below the 40 level short term (which would put silver at above $46.50 at an $1860 gold price) and then, if Eric Sprott is correct in his basic assessment , the ratio would gradually move downwards, and the silver price move upwards faster than that of gold in percentage terms.

But, some gold analysts are predicting a sharp correction in the yellow metal which they feel would be a natural result of what some see as an over-rapid rise in the metal price. If this happens will silver stay put - as it did during the last short-lived correction in the gold price of a couple of weeks ago - or revert to its old pattern of turning down much faster than gold in a declining gold price situation?

Even if this is the case, the true silver bulls would just see this as a great buying opportunity in what they view as a long term upwards bull market in precious metals within which category they see silver as the potential star performer. But it could well be a bumpy ride.

Tim Kiladze
August 18, 2011
www.globeandmail.com
Eric Sprott, the perennial gold enthusiast, has his sights set on a new precious metal.

Mr. Sprott's charitable organization, The Sprott Foundation, is selling two million units of its gold holdings and using the money to buy silver.
The move comes as gold veers close to $1,800 (U.S.) per ounce, and less than a week after Mr. Sprott had declared the metal "the investment of the last decade" in an interview with GoldMoney Foundation. "I think silver is going to be the investment of this decade."

Since the commodity boom kicked into high gear last fall, Mr. Sprott has been touting silver's merits. To demonstrate his conviction, he set up and invested his own money in the exchange-traded Sprott Physical Silver Trust, which buys silver bullion and stores it at the Royal Canadian Mint. Investors in the trust can cash in their units, or take delivery of silver in physical form if they wish.

He also launched a Silver Bullion Fund that enables investors to speculate on the metal's market price, but without the physical redemption option.

Until Wednesday, though, Mr. Sprott was still committed to gold, as its price rose to new highs. It could be that he is simply cashing in on a rapid rise in the price of Sprott Physical Gold Trust units, which are up 21 per cent since July 1, and of which he personally holds six million units, separate from the foundation's holdings.

On Wednesday, Mr. Sprott said his comment about silver does not mean he is abandoning gold altogether. "Anything I said about it being the resource of the last decade was not to suggest that it wasn't going to do well this decade," he said. "It's just I think silver will do better."
He bases that conviction on supply constraints: The amount of gold already mined is about 100 times greater than silver, yet for each dollar invested in gold, another dollar is currently being invested in silver. "By definition, you can't keep buying it at 1-to-1 and have the price stay the same" when the supplies are so different, he said.

Moreover, the price of gold is trading about 45 times the price of silver. Historically, the ratio has been about 16 times and Mr. Sprott thinks the two metals will move back in line with that ratio.

But not all silver assets are on equal footing. Mr. Sprott has been selling some of his own units in the Physical Silver Trust. In the past month, Sprott-related funds have sold about $23-million of his Silver Trust units, and earlier this spring they sold $34-million. Mr. Sprott said he is simply taking advantage of the trust unit's 20-per-cent premium to the fund's net asset value. (The premium has shot up since the fund was introduced last fall because of heavy retail demand, which means investors are paying more than the underlying metal's value per unit.) He is reinvesting the proceeds in other silver investments, including the Silver Bullion Fund.

Asked if investors in the Physical Silver Trust should be alarmed that he's cashing in, Mr. Sprott said "Anybody can do it any time they want to," and added that his sales are "all in the public domain," because he must report them to the U.S. Securities and Exchange Commission.
He also doesn't apologize for shifting more of his attention to silver, and is still touting his gold trust to retail investors who think economic turmoil will send bullion prices higher. "I think silver will outperform gold this decade, so why wouldn't I position myself, position our accounts, that way?"

Although the foundation announced that it would reinvest its money in the silver sector, it is interesting that it did not specifically say where it would invest, either in Sprott Physical Silver Trust, or the metal itself. But if you look at Sprott's recent selling activity, it's clear that money will go into the metal. In the past month or so, Sprott has sold about $23-million of the Silver Trust units. That comes on the heels of sales this spring worth about $34-million of the trust's units.

The sales have been pointed out by blogger ' kid dynamite.' While he acknowledges that Sprott is reinvesting the money back into silver, he points out that the Silver Physical Trust currently trades at about a 20 per cent premium to the net asset value. By exiting, Sprott captures that premium and then buys the metal at fair value.

Buying the metal ties back to Mr. Sprott's recent comments about being bullish on silver. In the GoldMoney interview, he pointed out that the physical amount of gold above ground is about 100 times greater than silver, yet people are buying the two metals on a 1-to-1 basis. That means the price of silver has to go up, he argues.

Plus, gold is trading at about 45 times the price of silver. Historically, the ratio has been about 16 times and Mr. Sprott thinks we will get back in line with that number.

But he isn't sure of the timing. "When it actually happens, I don't know," he said in the interview.

Greg Hunter
August 8, 2011
www.usawatchdog.com

I have thought about this economic collapse title for months. I held onto it and figured I would know when the right time was to put it out there. Today is the day. Watching mainstream media (MSM) this weekend, you would think a one notch downgrade to America's debt doesn't really matter. For example, former CNBC anchor Erin Burnett said Friday night on CNN the downgrade was "already priced into the market." The panel spoke as if the first U.S. debt downgrade in history was no big deal. To that I say, positively absurd!

The gold market must think the same thing I do because when the Asian market opened, the price of the yellow metal shot up more than $27 an ounce, which is another all-time high. At around 1:30 am today it was up $50 and ounce another all-time high! I don't know where gold will close in the U.S. market, but I think it is safe to say gold (and silver) prices are going much higher. On the other hand, stock prices are headed much lower. I'll be shocked if the Dow doesn't end 300 points lower today. I wonder if the Plunge Protection Team (aka the Presidents Working Group on Financial Markets) will step in front of this runaway locomotive.
China also thinks the U.S. debt downgrade is a big deal and a big negative future trend. CNBC reported yesterday, "The man who leads one of China's top rating agencies says the greenback's status as the world's reserve currency is set to wane as the world's most powerful policy makers convene to examine the implication of S&P's decision to strip the United States of its triple "A" rating. In comments emailed to CNBC, Guan Jianzhong, chairman of Dagong Global Credit Rating, said the currency is "gradually discarded by the world," and the "process will be irreversible." (Click here for the complete CNBC story.)

There are those, this week, that said the downgrade of the U.S. credit rating will be a "wake-up call" for Washington politicians. Some pundits claim this might pull both parties together, get something done for the good of the country, and finally deal with the immense problem of debt spending and entitlements. I think this will end up becoming a battle cry for both Democrats and Republicans in the 2012 election. Both are blaming one another for the downgrade. Yesterday on "Meet the Press," Senator John Kerry (D) trotted out some new partisan language and called the S&P action on U.S. debt a, "Tea Party downgrade because a minority of people in the House of Representatives countered even the will of many Republicans in the United States Senate who were prepared to do a bigger deal." Speaker of the House John Boehner (R) said this weekend, "Unfortunately, decades of reckless spending cannot be reversed immediately, especially when the Democrats who run Washington remain unwilling to make the tough choices required to put America on solid ground."
 
The political sniping over the weekend signals that both parties know the economy cannot be fixed anytime soon, let alone before the 2012 election. So, the blame game is what we will be stuck with as the American economy continues to sink. Forget about the "Select Committee" of 6 Democrats and 6 Republicans getting any deficit reduction deal. The fight over spending cuts and tax increases is stuck in a feedback loop. That is part of the reason why S&P cut the credit rating of the U.S. Nothing is going to get done on the debt, at least not before the country goes off a financial cliff. In cutting U.S. debt, S&P also ultimately cut the value of the dollar. Almost all borrowing costs at all levels will rise, and the dollar will sink right along with the slowing economy.

Economist John Williams of Shadowstats.com has been warning for months about a sudden dollar sell-off. According to Williams, $12 trillion liquid dollar assets are held outside the U.S. (dollars and Treasuries). If the holders of these assets throw in the towel and cash out, there could be a severe dollar sell off. That could spike inflation, cause interest rates to surge and eventually plunge the country into a hyperinflationary depression, according to Williams. A special Shadowstats.com report put out yesterday said, "Lack of confidence in the U.S. dollar has been pushed to a new and more dangerous nadir in the last two weeks. Dollar selling has been exacerbated by the contentious and virtually meaningless debt deal negotiated by the President and Congress, by Standard & Poor's downgrading the rating on U.S. Treasuries to "AA+" from "AAA," and by mounting market recognition of the ongoing U.S. economic and systemic-solvency crises. Pending still is the Fed's move to QE3.
 
The dollar's back is close to being broken. Despite near-term interventions and extreme volatility, the heavy dollar selling that follows will be highly inflationary. . . &#34

The kind of impact we are going to have will not be like flying into the side of a mountain. It will be the kind of crash that skids over land, clipping trees and buildings until the plane ends up wingless in a smoldering heap. I just hope the fuel tanks don't ignite when the long rough ride is over.

Gold hit $1600 in London this morning and silver $40, although both fell back thereafter. But the barrier has been breached which would seem to be paving the way for further rises ahead.

Lawrence Williams
July 18, 2011
www.mineweb.com

LONDON
Gold cracked the $1600 barrier, albeit briefly initially, this morning in London, while silver moved back up through the $40 mark as the safe haven aspects of the precious metals began to take hold once more on perhaps the increased understanding by the whole investment community of the global economic perils ahead. Whether this $1600 level can be returned to, and increased, through the day - and in the U.S. - obviously remains to be seen, but the fact remains that a psychological barrier has been overcome. Past patterns suggest that the metals may trade at close to this level and either make a substantial breakthrough, or consolidate at just below.
Silver back through $40, and the further small fall in the gold:silver ratio (GSR) to a fraction below 40:1 does seem to be a further indication that investor interest in this metal is again coming to the fore with the April fall-off quickly being forgotten. But silver's reputation as the ‘devil's metal' as far as investment is concerned should act as a cautionary warning, but as long as gold stays strong silver downside is small. But if gold should see even a temporary fallback then the corresponding drop in silver could be sharp.
Silver's proponents point to the increasing uses of the metal in such spheres as biocides and water purification as being a major positive factor, but it is both speculative and safe haven investment that is the driving force here - industrial usage is currently only a minor part of the silver equation. As Rhona O'Connell points out in today's article on Mineweb - see Comex silver longs bound higher - but much of it is short covering extraneous technical commodity market factors may well be distorting the picture here as well.
The European debt crisis is definitely not going to go away and if one of the more vulnerable European economies is actually allowed to default (and one does not see how some kind of default can be avoided for Greece) then the knock-on effects on the other crisis hit countries and the banking system as a whole, could be dire. The emergency funding for Greece that was recently agreed appears only to be sufficient to postpone the inevitable and we could be looking to an autumn of ever escalating financial meltdown. If Greece defaults then one finds it difficult to conceive that Ireland and Portugal would not follow suit almost immediately, and then the pressures on the much more significant economies of Italy and Spain would be close to overwhelming. European banks would crash like ninepins and with the interconnections within the global banking system many non-European banks would collapse as well.
There is a sideshow in the U.S. at the moment too which is helping gold as Democrats and Republicans are playing a game of brinkmanship over the U.S. debt ceiling. If agreement can not be reached on raising the ceiling, and failing a Presidential bending of the rules, the U.S. itself could go into technical default in two weeks' time and the psychological financial repercussions of this could also be enormous. One suspects that a compromise will be reached at the 11th hour, but if intransigence on the part of the parties involved means that this drags on beyond the deadline then the effects on the financial system could be worse than the Lehman Brothers collapse.
Governments and central bankers are aware of the perils ahead and one suspects that they will somehow manufacture a solution that will ward off the seemingly inevitable, although whether they can do so to the satisfaction of the credit ratings agencies remains to be seen. Ratings downgrades lead to higher interest rates being applied and at current debt levels the amounts involved in resultant increased payments just make the likelihood of pulling out of the downward spiral almost impossible.
These are difficult - indeed exceedingly dangerous - times for the global economy and whether or not the politicians and central bankers can bring us back from the brink has to be questionable. In such times of uncertainty gold is likely to maintain its historical pattern of being the investment choice to preserve wealth, however anomalous this may seem in this day and age, and silver will likely follow suit on gold's back.