Buy Silver Bullion Coins

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.

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.

James Turk
May 31, 2011
goldmoney.com

Silver is the volatile precious metal. For example, a few weeks before the collapse of Lehman Brothers in September 2008, it took 51 ounces of silver to buy one ounce of gold. At the height of the market turmoil one month later, it took 84 ounces of silver to buy that same ounce. What makes silver so volatile? The demand for silver is "elastic" -- to put it into economic terms -- while the demand for gold is "inelastic".

When demand is elastic, it means that people's preferences are changeable. An inelastic demand means that the item will be acquired regardless of its cost. As an example, the rising price of petrol and diesel fuel in recent years has hardly reduced the demand for it. Fuel consumption has not dropped as its price has risen. People are generally not price-sensitive, at least at present prices, though the demand for fuel may become more elastic at higher prices.

When problems of national currencies increase the demand for gold, it is in fact an increase in the demand for precious-metal-money. Silver of course meets this requirement, as it is a precious metal, and like gold, it too is money. Functionally, silver is a good substitute for gold. Both are tangible assets, and both are money that does not have counterparty risk.

Thus, any increase in the demand for precious-metal-money impacts both gold and silver. However, this increase in demand has a bigger impact on silver because of its elastic demand.
Demand is impossible to measure, but we can see the changes in respective demand for the precious metals by movements in the gold/silver ratio. Movements up and down in this ratio clearly show the ebb and flow of demand between gold and silver.
When people move out of national currencies and into precious-metal-money, money moves into both gold and silver, and the gold/silver ratio falls. Eventually, this flow reverses if people's confidence in national currencies returns. It does so when the monetary problems that caused them to flee the currency in the first place (for example, rising inflation, bank crises, or other problems) are solved. The impact on silver is greater than the impact on gold because the demand for silver is more elastic than the demand for gold, so the ratio rises.
While I am very bullish on the long-term prospects for gold, I am even more bullish on silver. Historically, the ratio of these two precious metals is about 16-to-1. Therefore, as both gold and silver climb higher in this current bull market as a safe haven from national currency problems, I expect silver to climb even faster than gold, with the result that the gold/silver ratio eventually approaches 16-to-1.

Gold and silver have both made something of a recovery after their sharp falls last week - the question is whether this can be sustained in the short term or whether we are due another fall.

Lawrence Williams
May 9, 2011
www.mineweb.com

NEW YORK
In a sign that much of the market feels that perhaps the sharp fall-off in the gold price - and also that of silver in particular - may have been overdone, the prices picked up a little on Friday to well above their low points, and carried on moving upwards Monday morning in Asian and European trade. Gold moved back above the psychological $1500 level, while silver rose by a bigger percentage- as might be expected following its huge fall in percentage terms - to back over $37.

As we have pointed out before here, virtually all the politico-economic factors which have moved the gold price higher and higher remain just as strongly in place - if not more so given the seeming escalation of the financial crisis in Greece, while one has a strong feeling that defaults in U.S. cities and States are not far away now, which could give another boost to the upwards spiral.

Despite the Eurozone problems, the U.S. dollar still looks weak against other major currencies as other Central Banks are seen as more likely to raise interest rates than the U.S. and some of the recovery so far today has been due to the dollar resuming a downwards path after a very minor recovery last week. Mexico's gold purchases in February and March (we don't know yet if the country continued purchases in April) should help underpin the price revival - while Asian buying seems to be continuing apace.

As to where the gold and silver prices go from here in the short term this is largely dependent on the U.S. market today to either confirm the rally or put an end to it. Ultimately though gold does look poised to continue rising, even though it can show weakness in the summer months - a view taken even by many among the more objective analytical community.
Silver is a bit more of a conundrum and will definitely remain much more volatile. There are hugely conflicting views on silver supply. The tendency has been for silver to rise faster than gold when the latter is on the up, and crash much faster and farther when gold falters. One has to doubt whether the gold:silver ratio will quickly get back to the low 30s given the number of speculators who have had their fingers burnt in the past week's dramatic fall. It is currently at 40 at the time of writing.

Silver futures surged today to a new 31-year high of $42.80 per ounce. Silver is up 146% since NIA declared silver the best investment for the next decade on December 11th, 2009, at $17.40 per ounce. All we need is for silver to rise by another 15.5% and silver will reach its all time high set in 1980 of $49.45 per ounce.
 
Keep in mind, silver's high of $49.45 per ounce in 1980 would equal about $140 per ounce in today's dollars adjusted to the consumer price index and about $400 per ounce in today's dollars adjusted to the real rate of price inflation. Despite silver's huge gains in recent months, we have yet to see silver rise by $2 or more in a single day. When we start to see a true "silver mania" with investors around the world rushing out of their U.S. dollars and panic buying silver, we expect to see silver gain by $5 to $10 in a single day on more than one occasion.
 
Back in February of last year when silver dipped to below $15 per ounce, we sent out an alert saying, "NIA believes this is a once in a lifetime entry point for those wishing to go long silver at a bargain basement price". NIA suggested silver call options in February of last year that ended up gaining over 1,000%. NIA's latest silver stock suggestion is currently up 175% from our profile price.
 
In NIA's top 10 predictions for 2010, we predicted a major decline in the gold/silver ratio, which was 64 at the time. The gold/silver ratio declined in 2010 down to 46, and in our top 10 predictions for 2011, we predicted another major decline in the gold/silver ratio and projected for it to decline this year to 38. NIA has been the most bullish organization in the world on silver, yet recent gains in the price of silver have surpassed even our short-term expectations. The gold/silver ratio is now down to 35 and we believe it will decline to at least 16 this decade, and possibly as low as 10.
 
The artificially high gold/silver ratio of the past century will be looked back at as an anomaly caused by the silver price suppression scheme of the Federal Reserve, which was in cahoots with Bear Stearns and now JP Morgan. NIA's President Gerard Adams exposed this scheme in NIA's critically acclaimed documentary 'Meltup', which has now been viewed by over 1 million people with an overwhelming 96% of its viewers giving it a thumbs up, a world record for an economic documentary. According to Mr. Adams, the Federal Reserve chose to bail out Bear Stearns and not Lehman Brothers, because Bear Stearns was the holder of a massive naked short position in silver that they were on the verge of being forced to cover.
 
It is not a coincidence that Bear Stearns failed on the very day silver reached its then multi-decade high of $21 per ounce. Bear Stearns was on the verge of being forced to cover their naked short position, which could have sent silver from $21 per ounce to $50 per ounce overnight. By bailing out Bear Stearns and allowing JP Morgan to acquire Bear Stearns' assets with the promise to cover any losses derived from them, JP Morgan was able to continue managing the silver short position and orchestrate a manipulative take down in 2008 from $21 per ounce down to $8 per ounce.

 
Only ten times more silver has been produced in world history than gold and from the years 1000 to 1873, a period of 873 years, the gold/silver ratio remained between 10 and 16. In fact, the Coinage Act of 1834 defined a gold/silver ratio of 16. The gold/silver ratio started to rise after silver was demonetized in 1873. Despite silver being demonetized, we saw the gold/silver ratio return to 16 on three occasions during the past century: in 1919, 1968, and 1980.
 
It was only ten months ago in June of 2010 that the gold/silver ratio was 70. With the gold/silver ratio now at 35, it means that silver investors have seen their purchasing power double over the past ten months, while those with their savings in U.S. dollars have seen their purchasing power decline by 20%. That's right, forget about NIA's silver call option that gained over 1,000% and forget about NIA's most recent silver stock suggestion that is currently up 175%; the simple act of following NIA's most basic suggestion of getting rid of your U.S. dollars and buying physical silver means that over the past ten months, your purchasing power has doubled while non-NIA members with U.S. dollars lost 1/5 of their real wealth.
 
The Federal Reserve can claim all they want that there is no inflation, but as we write this article we are eating Ben & Jerry's ice cream that we just bought at Quick Chek for $5 a pint. Three years ago, the same pint of Ben & Jerry's ice cream at Quick Chek cost us $3. Three years ago, one ounce of gold would have bought 295 pints of Ben & Jerry's ice cream and it still buys 295 pints of Ben & Jerry's ice cream today. Three years ago, one ounce of silver would have bought 5.7 pints of Ben & Jerry's ice cream and today it buys 8.5 pints of Ben & Jerry's ice cream.
 
Americans with their savings in U.S. dollars can today only afford 3/5ths of the ice cream that they could have bought three years ago, but those with their savings in gold have maintained their purchasing power, and those with their savings in silver have greatly increased their purchasing power. NIA is 100% sure that the gold/silver ratio will decline to at least 16 within the next few years, and that will mean those with silver will once again more than double their purchasing power. Considering that the gold/silver ratio overshot to the upside and was as high as 100 in 1991, we fully expect it to overcorrect to the downside and possibly reach a low of 10 this decade. That would mean a more than tripling of ones purchasing power from the current ratio of 35.
 
When silver rose to $49.45 per ounce in 1980, the government said that the rise was due to the Hunt brothers "cornering" the silver market. The truth is, silver reached $49.45 in 1980 due to the massive inflation that was created by the U.S. government during the 1970s, and the Hunt brothers were used as a scapegoat. The Hunt brothers were accumulating silver in order to protect themselves from a collapsing U.S. dollar, just like NIA has been encouraging its members to do in a countless number of articles and videos over the past two years.
 
When the Hunt brothers were accused by the U.S. government of "cornering" the silver market and trying to manipulate silver prices higher, they only owned a concentrated long position of approximately 100 million ounces of silver. JP Morgan today has a concentrated naked short position in silver of approximately 122.5 million ounces, but the U.S. government doesn't seem to have any problem with it.
 
The problem with the Hunt brothers' strategy of accumulating such a large concentrated long position in silver is that after silver prices rose, their position was simply too large for them to ever sell without causing silver prices to crash. With silver reaching $49.45 per ounce in early 1980, the world was about to lose confidence in the U.S. dollar, which would have caused an outbreak of hyperinflation. In a desperate attempt to save the U.S. dollar and prevent hyperinflation, the CBOT raised margin requirements and limited traders' positions to only 3 million ounces of silver futures. The COMEX also limited traders' positions to 10 million ounces of silver futures. Not only that, but the COMEX and CBOT only had a total of 120 million ounces of silver in inventory, and the COMEX was likely going to default from futures contract holders requesting physical delivery. The COMEX was forced to go into "liquidation only" mode, ending all silver futures contract buying.
 
Combined with the Federal Reserve rapidly rising interest rates, silver prices began to plunge and the Hunt brothers were hit with massive margin calls. On one single day in March of 1980 when the Hunt brothers were forced to liquidate a large part of their position, silver lost 1/3 of its value, declining by over $5 to $10.80 per ounce. That represented a total decline of 78% from its high two months earlier.
 
NIA has been receiving a countless number of emails asking if now is the time to sell silver, and if silver could crash by 78% once again like it did in 1980. The fact is, while the Hunt brothers' 100 million ounce concentrated silver position was on the long side, JP Morgan's 122.5 million ounce concentrated silver position is on the short side.
 
While the Hunt brothers' long position was impossible to sell without causing silver prices to crash, JP Morgan's naked short position is impossible to cover without causing silver prices to explode to the upside. Being that the CFTC was so quick in 1980 to support the position limits that were then imposed by the CBOT and COMEX, NIA believes it would only be fair for the CFTC to mandate similar position limits today. This is unlikely to occur because the U.S. government believes JP Morgan's silver manipulation to be a good thing, since it is giving the phony appearance that the U.S. dollar still has purchasing power. The free market will ultimately win in the end and silver prices will soar through the roof to where they belong based on supply and demand fundamentals.
 
It is important to spread the word about NIA to as many people as possible, as quickly as possible, if you want America to survive hyperinflation. Please tell everybody you know to become members of NIA for free immediately at: http://inflation.us

The last time the gold:silver ratio stood below this level was in February 1998 just after silver rallied 33% in 5 weeks, much is the same in the current situation but, investment demand is much higher.

Rhona O'Connell
March 8, 2011
www.mineweb.com
LONDON

The last time the gold:silver ratio stood below 40:1 was in February 1998, just after silver had staged a 33% rally in five weeks, while gold had gained just 4% over the same period (which commenced at the start of the year). The contraction in the ratio over the period was from 48.4:1 to 38.1:1.

This time, some thirteen years on, the gold:silver price ratio is trading at between 39:1 and 40:1 and a similar contraction has taken exactly the same length of time. This time however, gold and silver are trading at over $1,440 and $36, while back in 1998 they were at $300 and just over $7.

So where are the similarities and the differences between then and now?
This time the silver price has bounded up as a result of a sustained belief (whether right or wrong) in gold's upside on the back of prevailing geopolitical and inflationary concerns. Both gold and silver are already in sustained bull markets, while in 1998 the change in ratio marked the start of a shift in sentiment, albeit one that was buffeted by subsequent external events.

Silver investment can often exceed that of gold for more than one reason: a) the history of silver's higher volatility over gold, prompting professional activity with a view to gearing up on returns; b) silver's lower unit price, which attracts some smaller-scale investors who want exposure to precious metals because of inflationary fears in particular and who don't necessarily have enough wealth to invest in the yellow metal to any meaningful level; c) in the United States in particular, silver has a long-standing investment tradition. This is because of the period when the dollar was on the gold standard and private individuals were prevented from holding gold, so they used silver as a substitute.

Twelve years ago; professional attitudes were probably the driver.
At the start of 1998, gold was starting to stage a recovery after a long period of uncertainty, characterized by intermittent announcements of large-scale central bank sales that unsettled market sentiment; this was augmented by increasingly heavy mine hedging and these two fundamental elements, combined with anti-inflationary fiscal policy, had kept gold prices under some pressure.

What was different about the start of 1998 was the putative formation of the European Monetary Union, which gave the markets a degree of comfort and reduced the expectation of official sector sales. (This, of course, was latterly to be stymied by the announcement in May 1999 by HM Treasury in the UK of the proposed disposal of up to 40% of UK gold holdings; sentiment then changed substantially as a result of the institution of the first Central Bank Gold Agreement in September 1999). Investors started to return to gold and silver was a natural beneficiary of the change in sentiment.

The differences between now and then. Nothing, in terms of industrial demand
Over those five weeks in early 1998 the net long speculative silver position on COMEX rose from 8,813t to 9,500t, a gain of almost 700 tonnes or 8%. This time around the shift has been from a net long of 6,710t to 8,780t, a gain of 2,070t or 31%. but from a much lower base.
Interestingly enough, silver fabrication demand in 1988 was just over 26,000t; in 2010 it was very close to the same level, suggesting that the market itself is not much deeper than it was in the late 1980s. In fact, on the basis of LBMA clearing figures, the December 2010 daily average clearing rate was just below 100M ounces, less than one-third of the clearing numbers for end-1997.

The structure of the demand side has changed with industrial demand fluctuating, but photography and jewellery+silverware falling substantially. Coin demand, by contrast, has been growing steadily.
... but plenty in terms of investment

Sustained retail demand has helped the rise in silver's price in recent months, reflecting the continued awareness at the retail level of the "affordability" of silver by comparison with gold. This has been particularly marked in the Far East, where silver bars have been scarce and commanding high premia, while India and the Middle East have also been strong buyers.

The ratio; a life of its own and an important indicator
As a result the ratio has to some extent taken on a life of its own and been traded as an outright entity in the bullion markets. Now at 13 year lows it is not in uncharted territory, but is certainly oversold.
While the markets remain bullish about the outlook for gold on the back of sustained inflationary and geopolitical fears, silver is likely to continue to attract attention. The outright price may make silver unattractive for fresh bull positions, but technically-driven and momentum trades may yet see prices higher if the political situation is not resolved with a minimum of further trauma. Silver has frequently been the leader among the two "precious metals" because of its lower unit price and higher volatility; the ratio can therefore be regarded as a similar leading indicator. In fact it is probably one of the most significant indicators in terms of precious metals market sentiment and, so, when it comes to looking for guidance, the chart should be watched closely for signs of reversal. Even stabilization would be significant; a bounce might well trigger stops.

Eric Sprott believes that silver is likely to be the investment of the decade and could easily get to $50 per ounce by the end of the 2011

Marc Davis
February 8, 2011
VANCOUVER B.C. (WWW.BNWNEWS.CA )

Silver promises to become the next big buzzword among investors in 2011 and beyond, according to one of the investment industry's most prescient and successful experts on precious metals.

Eric Sprott is the founder of the Toronto-based investment firm, Sprott Asset Management LP. His renowned hedge fund, Sprott Hedge Fund LP, is heavily weighted in precious metals and has generated an estimated 23% annualized return over the past decade. Other similarly oriented funds under his stewardship have also been stellar performers in recent years.

He's now so bullish on silver that he launched the $575 million Sprott Physical Silver Trust in November of last year as he believes that: "Silver will be the investment of the decade."

"I think that silver could easily get to $50 this year," he tells BNWnews.ca.
This all bodes especially well for publicly traded companies that are already mining silver, he says. Likewise for ones that are developing primary silver deposits or gold deposits with plenty of silver as a byproduct.

"If the price of silver continues to go up, silver stocks are going to perform even better," Sprott adds.

Meanwhile, Sprott says the big catalyst for surging silver prices in the coming years will be exponentially increasing investment demand, which is already beginning to overwhelm existing silver supplies. The mining industry only produces around 800 tonnes of silver per annum. This is a relatively inelastic supply, regardless of silver prices, he adds.

As household investors are becoming increasingly jittery about the debasement of the U.S. dollar and other major currencies, they are loading up in record numbers on silver bars, coins and silver-denominated exchange traded funds, Sprott says.

However, there's also a quantum shift in investment demand taking place among big players in the precious metals market, including India (which is aiming to increase its imports by about 77 million ounces per annum), and of course China.

"China's net imports of silver were 112 million ounces last year. In 2005, they were net exporters of 100 million ounces," he says.
"That's a 200 million ounce shift in an 800 million ounce annual market that seldom ever grows because production hardly ever goes up. So where's it all going to come from? We don't know."

In fact, silver promises to outshine gold over the coming years, Sprott says. "Silver is the poor man's gold. Gold has had a great run for the past 11 years. But I absolutely believe that silver will outperform gold this year. Currently, there's more investment dollars going into silver than into gold."

Such a game-changing scenario should recalibrate the gold to silver pricing ratio in silver's favor, thereby eventually restoring it to its traditional level of about 16 to 1, he says. "It's the easiest call of all time."

"Silver as a currency always traded in a ratio of around 16 to 1 compared to gold, when it was a currency in the U.S. and the U.K. The current ratio is 48 to 1. If we go back to a 16 to 1 ratio, the implied price for silver would be $85.62 (per ounce)." he adds.

"On that basis, if gold goes to $1,600, then that would value silver at $100. And we certainly think that gold is going to $1,600. In fact, I'm willing to bet that this ratio will overshoot on the downside. It might even get to 10 to one."

The only reason why silver is still trading at a 48 to 1 ratio to bullion's spot price is that its price is being "manipulated" by big banks, Sprott says. That's because they don't want precious metals to become a popular alternative currency to Fiat money (currencies that are not backed by hard assets).

"Then there's also a huge short position out there on silver," he adds.
But time is on silver's side, he says, as the sovereignty debt crisis deepens in Europe and a continued policy of quantitative easing in the U.S. continues to undermine the value of the greenback.