Buy Silver Bullion Coins

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."

Friday, February 11, 2011
www.goldcore.com

Gold and silver are higher against all currencies (except the Canadian dollar) in the wake of the worse than expected trade deficit number ($40.6 billion). Sterling and euro are particularly weak against gold and the US dollar today.

Silver backwardation continues and while spot silver is at $30.09/oz, the March 2011 contract is at $30.07/oz and April at $30.01/oz. Incredibly, the July 2012 contract is trading at $29.93/oz and the December 2013 contract at $29.91/oz.

Backwardation is when the market quotes a lower price for spot delivery or a more nearby delivery date, and a higher price for a distant delivery date in the futures market. It indicates that buyers are concerned about securing supply in the future and are willing to pay a premium for spot delivery. It suggests that silver bullion in volume is difficult to buy and that the physical market is stressed and becoming less liquid.

Silver in USD -- Long Term
Backwardation starts when the difference between the forward price in the futures market and the spot price for physical delivery is less than the cost of carry, or when there can be no delivery arbitrage. This is generally because the asset is not currently available for purchase or is increasingly illiquid. It can end in default, failure to make delivery, and in sharply higher prices.

Backwardation rarely happens in the gold and silver bullion markets. Since gold futures first started to be traded in 1972 (on the Winnipeg Commodity Exchange), there have only been momentary backwardations of a few short hours.

The extent of the backwardation in silver is unprecedented. It suggests that retail investment and industrial demand internationally is very robust and the small silver bullion market cannot cater to the level of demand for refined coin and bar product.

This is not surprising considering the massive increase in demand, especially from Asia and China in recent months. In China alone, demand increased a huge four fold in just the last year to 3,500 tonnes.

Investment demand for silver both as a store of value and as a hedge against inflation continues to surprise the bears. Many buyers in Asia have experienced stagflation and hyperinflation.

The demand is also very strong on the industrial side where the increasing range of industrial applications is leading to very significant demand that the silver market does not appear to be able to accommodate at these prices.

Solar energy demand has risen massively from a near zero base and Barclays estimates that this equates to more than 800 tonnes of silver being employed in cells in 2009, which translates to about 8% of silver industrial demand and 4% of global silver supply.

Barclays estimates that silver usage in solar panels could more than double and reach 2,000 tonnes by 2012. This would consume 7% of global silver output.

This is just the solar energy sector. There remains a huge range of industrial applications for silver. While demand from the photography sector has declined, demand from the medical, solar energy, water purification and many other sectors continues to rise significantly.
Importantly, this silver is consumer and because tiny filaments are used, most of this silver will not come back into the silver market. A small amount may, but only at dramatically higher prices.

Those with concentrated short positions in the silver market (as identified in the CFTC investigations), such as JP Morgan, will be very nervous about the extent of this demand. Any effort by them to extricate themselves from these substantial short positions may lead to the squeeze that has been anticipated for months.

This means that silver’s nominal high of $50/oz will likely be seen soon rather than later. As we have been saying since 2003, the long term inflation adjusted high of $130/oz remains a viable long term price target.