Why silver investors should stay away from silver coins

There is nothing wrong with collecting coins if you ARE ALREADY A MILLIONAIRE. If you are not then you need to sell your coin collection right now to the highest bidders.

-Posted by Alejandro Guillú Mendoza

Introduction

This article tries to explain in a simple way to readers without a college degree in economics or finance some macro economic factors that are currently changing the global supply and demand of silver.

Ground rules

Silver coins ARE NOT INVESTMENTS. Silver coins are still minted by countries to satisfy the unlimited demand for numismatists around the world. When you acquire a silver coin you are not only paying for the precious metal itself but also for the graphic design and for the minting.

Countries make billions of dollars each year buying silver by the ton and reselling it as coins.

There is nothing wrong with collecting coins if you ARE ALREADY A MILLIONAIRE. If you are not then you need to sell your coin collection right now to the highest bidders.

The problem with silver coins is that you need to pay for insurance each year and that cost eats some of your profits.

If you want to invest in silver then you need to buy either a silver mine or the ETF SLV. There are other financial instruments for more sophisticated investors that I am not going to cover in this article. If you want me to write about them then drop me a line.

Does Apple buys a lot of silver?

Silver is the best conductor for electricity, and in some cases the cost is not as important and it is used instead of copper which is cheaper (i.e. for small, complex electronics). One easy way to predict if we will buy more technologically advanced things made with silver is to closely watch the global GDP. If the world is expanding then it is likely that we will build more expensive things made with silver.

You can read the World Economic Outlook published by the IMF.

If you want to invest in silver, then you need to keep an eye on the price of copper because this metal is used only because silver is too expensive. If the price of copper starts to rise too much, then some companies may just decide to switch to silver.

Obviously, this is just a theoretical point. In reality, Chile, Peru, Argentina, Brazil and Mexico won’t let that happen, and they will just lend billions of dollars to publicly-traded copper mining companies to keep the price of copper low.

Digital cameras for everybody

Silver nitrate has always been used for photographs, and over half of all the silver mined was used for this before the digital camera was invented. This number is getting smaller and smaller every year, and one day we won’t use silver nitrate anymore. That would increase the number of silver available for other industrial uses bringing down the price of silver in the future.

If you are a politician in a country with a very limited supply of silver, then you need to reduce the demand for silver nitrate in your country as much as you can with the expansion of access to digital cameras to the general population.

Let companies like Nikon, Olympus and Canon import digital cameras without paying any taxes.

Allow these companies to issue Visa, MasterCard, American Express, Discover, UnionPay and JCB credit cards to buy their digital cameras insured by the government.

More than 90% of the world’s silver is produced in Mexico, Peru, China, Australia, Russia, Chile, Bolivia, Poland, the United States and Canada. If these countries reduce their own consumption in silver nitrate, then they will have more silver for export.

As you can see, the price of silver is not really about finding more silver mines but about finding smarter ways to use LESS SILVER.

What is the Protect our Silverware Act?

Most people with silver jewelry, silverware or silver coins are wealthy, and they don’t lose any money every time a burglar enters their house because they’re reimbursed by insurance. The rest of us are hurt by the insurance companies because every time they write a check to pay for these crimes, they increase the bill for all of us.

If less silver is stolen then the prices we pay to protect our homes will be reduced over time.

It is a known fact that burglars only steal from you when you are not home. A very popular trick among thieves is to call everybody until you get an answering machine. I strongly suggest you to get rid of your answering machine and just reroute your old telephone to a cell phone answered by one of your employees in China, India, Indonesia, Brazil, Pakistan, Nigeria, Bangladesh, Russia or Mexico.

You can hire one on Elance for just a few cents per hour.

I propose a new law that will force any silver seller to register every silver buyer into a national database and each silver holder will be forced to hire a silver sitter when they are not home.

Let’s say that you are going to leave town for a few days on business. You call the Silver Police and they will send you an employee that will stay in your home for a few days until you return. Each silver holder will pay a “Silver Police Tax” each time he buys something made of silver to pay for this new Police Department.

This will reduce crime among families holding silver and will also reduce unemployment.

Conclusion

I believe these 10 countries will enact new smarter laws to keep the domestic supply of silver very tight and will also increase silver exports to other least developed countries with more loans to small businesses exporting jewelry and mirrors and other clever measures like a silver stamp that you can use to ship any item made of silver to an eBay or Amazon buyer in another country.

Top 10 silver price predictions for 2013

Where have all the silver bulls gone? Price predictions for the white metal are all over the board in 2013.

Posted by Alejandro Guillú Mendoza.

Many people around the world want to know the answer to the question, “Where is silver going?”

I invested several hours browsing the Internet searching for answers to save you time and money (because time is money, after all). Have another financial question? Drop me a line. Please don’t ask me where your lost kitten is or why she left you. Ask me about topics that can make you money, like silver!

Here are my findings on the latest silver price predictions for 2013, 2014 and beyond. The prices are sorted from low to high:

1) $26 Barclays according to CommodityOnline

Barclays believes strong production growth in mining will knock silver prices down and keep them low in 2013. “We expect it to grow to 25.2kt in 2013, with the slowdown in output from Australia and Europe being offset by strong growth across South America and Asia. We expect modest growth from the major producers, with Mexico retaining its pole position.”

2) $30-$32 Neil Meader (Head of Precious Metals Research and Forecast) according to Forbes

“For the moment, we would expect to see a continuation of the price volatility that we’ve seen of late.

“The unknown for the longer term is inflation.”

“It would be wrong to assume that a year-on-year price fall automatically presages an end to the multi-year rally; that occurred in 2009 and yet prices (based on the annual average) then more than doubled in just two years.”

3) $31 Deutsche Bank

The bank lowered its forecast last month 16.5% to $31 according to Fox because the demand for stocks over commodities is rising and the growth in the United States of America is improving. The 2014 forecast was also significantly reduced.

Excluding major banks currently in the red. Deutsche Bank is the fifth least profitable major bank in the world with barely $400 million in profits. It appears they are no longer qualified to give financial advice to anybody. Perhaps they should hire me. I can easily turn a profit of $40 million. I am just a regular guy. They have 100,000 employees.

4) $33 HSBC

The bank increased its target for silver from $32 based on four factors driving prices higher: industrial demand, investor appetite, strong coin and bar purchases and a bottoming out of jewelry demand according to the Wall Street Journal.

“Greater industrial silver consumption is one of the most compelling arguments in favor of higher prices.”

5) $34.10 BNP Paribas

The bank reduced its silver 2013 forecast a few months ago to $34.10 from $39.05 according to Reuters.

6) $35 Morgan Stanley

Morgan Stanley is very bullish on silver and selected the precious metal as one of the Top Picks for 2013 according to BusinessWeek.

“Gold, silver and corn will outperform other raw materials next year as a weaker dollar and rising investor demand bolster precious metals while supply curbs aid grains.”

7) $38 Commerzbank according to the Wall Street Journal

Silver is “establishing itself as a precious metal with an industrial character, setting itself significantly apart from gold.”

8) $40.25 Michel O’Brien

Silver To Gain 29% in 2013 – Analysts, Traders and Investors.

“The silver market remains a very small market and this continuing global investment and store of value demand should lead to silver reaching a real record high, inflation adjusted, of over $140/oz in the coming years.”

9) $50-$60 Ge Christenson according to SilverSeek

“This is not a prediction based on wishful thinking and hope, but a best estimate based on rational analysis of data stretching back to 1975.”

“Silver (and gold) will continue to rise, doubling every 3 – 4 years, until our government manages to tame the deficits, the borrowing, and the inevitable inflation.”

10) $91 Equity Management Academy

Silver Doctors started recently in 2011 and they are visited by over 750,000 each month. The video analysis by Steve Roy is only 9 minutes long.

This was the highest forecast I could find at the time of this writing – a time when, admittedly, silver prices are extremely low. It’ll be interesting to see which of the predictions above come the closest to the truth by the end of the year.

The real reason 2013 Silver Eagles hit an all-time high in January

The U.S. Mint probably isn’t the best gauge of market demand for silver. It’s too easily overwhelmed by demand, and that pushes sales forward into months when demand could otherwise have been low.

Because the silver investment market is so small, it’s particularly vulnerable to hype. That’s exactly what the commodities research firm CPM Group thinks is happening now as investors trumpet the “incredible” demand for silver coins in January. While the U.S. Mint did announce all-time sales records for 2013 silver eagles in January (with 7,498,000 coins sold), CPM Group argues that’s just a hold-over of pent-up demand from earlier in the winter.

“All of this talk about a shortage of silver is irrational and not supported by readily available market data,” CPM Group says in its latest report.

Specifically, the company cites worries over the Fiscal Cliff in November and December as driving up demand for American Eagles. Since the Mint sold-out of coins in both November and December, that demand rolled forward into January driving sales up to record levels.

CPM Group’s been painting a pretty bleak picture of silver prices going forward. The commodities research firm believes prices will head lower over the next decade (through 2022) rather than higher as most silver price prognosticators would have you believe.

I’m not ready to make that assumption, but there are lessons to be learned from CPM Group. Mainly that the U.S. Mint isn’t the best gauge of market demand for silver. It’s too easily overwhelmed by demand, and that pushes sales forward into months when demand could have otherwise been low.

Silver will surge 400% through 2016, Williams says

A British fund manager looks for silver prices to peak in the third quarter of 2015.

Ok. I’ll admit I’m not entirely sure who Ian Williams is. This UK article describes him simply as “a City-based asset fund manager.” Still, he’s rather brazen in his predictions for the white metal.

Silver is destined to enter a “sustained bull market” in the coming weeks. Mr Williams believes the price of silver will increase fivefold between now and 2016, with a peak expected in the third quarter of 2015.

Good news for silver bulls if Mr. Williams can be trusted. More at livecharts.co.uk.

Four reasons to be bullish on silver in 2013

Global Resource Specialist Peter Krauth of Money Morning believes silver prices could hit $54 an ounce in 2013. Here’s why.

Global Resource Specialist Peter Krauth of Money Morning believes silver prices could hit $54 an ounce in 2013. Here are four reasons why he’s so bullish on the metal:

  1. An expected normalization in the gold-silver ratio
  2. President Obama’s prediliction for money-printing
  3. Hard asset investor demand as paper currencies continue to slide
  4. Growing industrial demand

More at ETFDailyNews.

Gold and silver bubble will ‘dwarf’ the Internet bubble

It’s probably the best risk-reward situation right now as the gold and silver markets have ever seen in terms of the equities.

One of my favorite quotes in recent news came from Bill Murphy founder and chairman of the Gold Anti-Trust Action Committee (GATA). In an interview (that I highly recommend) with Jim Puplava of the Financial Sense Newshour, Murphy argued that the price of gold and silver have been successfully manipulated for decades.

The debt crisis that’s plaguing the U.S., Europe, Japan and other countries will eventually lead to so much money-printing, though, that continuing to suppress the price of precious metals just won’t be possible. That’s when we’ll truly see a tremendous climb in prices.

“When the public comes in here in our tiny gold and silver markets, it will be a bubble, and it will dwarf what the Internet did except it will be real for a long period of time,” Murphy said. “And that’s coming.”

That’s good news for gold and silver stock holders, but it will likely be bad for everyone on the outside looking in. Since Murphy’s certain we’re nearing the tipping point for inflation (especially after the Fed signaled that QEIII is coming on Friday), he looks at buying mining shares as a no-brainer.

“It’s probably the best risk-reward situation right now as the gold and silver markets have ever seen in terms of the equities,” he says.

Related

Silver outperforms all other precious metals in August; Where do metals prices go now?

Silver rallied more than 4.5 percent to give it as a solid lead as the top-performing metal in August. It could be a leading indicator that now’s the time to move into gold and silver mining stocks.

When Federal Reserve Chairman Ben Bernanke said the Fed “will provide additional policy accommodation” to bolster the US economy on Friday, metals prices sprinted higher in an end-of-the-month surge. Silver rallied more than 4.5 percent to give it as a solid lead as the top-performing metal in August.

Precious Metals Gains, August 2012

Metal Monthly Gain
Gold +4.5%
Silver +12.6%
Platinum +8.5%
Palladium +6.6%

The moves propelled gold to a five-month high while silver’s sitting at a four-month high. Still, leading analysts seem to think the best is yet to come for metals as quantitative easing looks to be more imperative.

“We took the amount of debt owned by major countries that is going to have to roll over in the next three years,” Jim Puplava of the Financial Sense Newshour said recently. “Over 50 percent of US debt is rolling over, 50 percent of Japanese debt, German debt, (etc.), and none of these countries – whether it’s the United States or Europe or Japan – can afford a spike in interest rates. So you know sooner later we’re going to get multiple forms of quantitative easing.”

More quantitative easing means higher inflation and higher precious metals prices as the value of global currencies retreat. That really has me taking a closer look at gold and silver stocks. Many of them have been trending up over the past three months, but they’re still trading below where they were a year ago.

Let’s take a look at a small-cap silver mining stock like Great Panther Silver Ltd. (AMEX:GPL). One year ago, shares stood at $3.19. As of Friday’s close, they were trading at $1.97. If prices return to last year’s levels, that would be a gain of nearly 62 percent.

“When the public comes in here in our tiny gold and silver markets, it will be a bubble, and it will dwarf what the Internet did except it will be real for a long period of time,” Bill Murphy founder and chairman of the Gold Anti-Trust Action Committee (GATA) Jim Puplava in that same interview. “And that’s coming. … It’s probably the best risk-reward situation right now as the gold and silver markets have ever seen in terms of the equities.”

Related

Silver prices set to surge higher

Bernanke didn’t say the Fed “may” stimulate, he said the Fed “will” stimulate. That was all it took. Gold and silver prices were off to the races.

Silver prices rocketed higher on Friday thanks to hints from Federal Reserve Chairman Ben Bernanke that QE3 could be around the corner. Prices for the white metal traded in a narrow range around $30.70 an ounce Wednesday and Thursday in the run-up to Bernanke’s speech.

Early Friday, prices started climbing and they didn’t stop until the markets closed. By the end of the day, silver was up to $31.74 an ounce – a gain of 4.58% in a single day of trading. The actual quote that had traders salivating is (in typical Bernanke fashion) vague:

“Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” he said (per IBD).

Bernanke didn’t say the Fed “may” stimulate, he said the Fed “will” stimulate. That was all it took. Shares in gold and silver mining stocks were off to the races. Majors like Silver Wheaton (NYSE:SLW) rose 5.2 percent and Silver Standard (NASDAQ:SSRI) climbed 7.9 percent. Some small-cap miners did even better with Great Panther Silver (NYSEAMEX:GPL) rocketing up more than 11 percent.

“My friend Eric Sprott of Sprott Asset Management is one of the smartest men I’ve ever met in my life and a real detail guy – and he thinks silver is going to go well above $100, and you might even be able to pick a number for silver,” Bill Murphy founder and chairman of the Gold Anti-Trust Action Committee (GATA) said in a recent interview with Financial Sense. “I think … people that are willing to do their homework and be patient and accumulate these cheap gold and silver shares will make fortunes in the years ahead.”

Of course, anytime there’s a run-up in gold and silver prices, it doesn’t happen smoothly. Since precious metals act as a barometer of the wider economy, political changes and economic numbers can cause large price swings. When prices are on the rise, though, it can happen violently. And it looks like we could be in the midst of another big upswing.

Related

Have silver prices finally hit the turning point?

The pop in silver prices on Thursday felt different to me, and I went long silver for the first time in months. Here are four reasons why I think silver prices could be due for a sharp upturn.

Since topping out around $35.50 an ounce late in February, the price of silver has done little except fall. Sentiment in the precious metals market seems to be hovering at multi-year lows with investors shunning the metal for riskier assets. That is until late last week.

The pop in silver prices on Thursday felt different to me, and I went long silver for the first time in months (buying shares in ProShares Ultra Silver ETF – NYSE:AGQ). Why? Here are four reasons why I think silver prices could be due for a sharp upturn:

1) QE3. We thought Operation Twist buried our chance to see further monetary easing out of the Federal Reserve. Don’t give up hope just yet. The metals bounced hard on Thursday after meeting minutes from the latest Federal Open Market Committee gathering held hints that further quantitative easing is still a potential option if the U.S. economy remains sluggish. Another round of QE would likely ignite a surge in commodities across the board.

2) Too far, too fast. Silver prices have crumbled more than 11 percent in the past three weeks. The drop last Wednesday was extreme with the metal shedding $1 an ounce in a single day of trading. A plunge that large feels like concession selling. And we all know when we see concession selling: right before the start of a recovery.

3) The bull market in precious metals is still intact. While we don’t always like to admit it, silver prices generally follow gold’s lead. Sometimes, it can feel like it’s the other way around since the silver market is so much smaller than the gold market, but we’d be kidding ourselves to say that silver prices aren’t extremely dependent on what the price of gold is doing.

And gold’s been flirting with important psychological levels lately. For one thing: last week’s lows (hit on Wednesday) coincided with a 20 percent drop from last year’s highs (per Forbes). That key technical level seemed to awaken a lot of the sleeping bulls who promptly piled back into the metal. After all, a 20 percent drop is considered the cut-off for the transition from a bull market to a bear market. Had gold continued dropping (and particularly if it would have fallen below $1,500 an ounce), you could have taken it as a sign to sell your metals and head for the hills. Until we get that confirmation, though, I’m leaning to the bullish side for gold (and therefore silver, too).

4) The Grecian plot thickens. The primary reason I think last week’s low in silver prices was a turning point is this: fears that Greece would leave or get booted from the Eurozone were still at a fever pitch. For the past month or so, problems in Greece have been amplifying, and I think that’s a big reason the price of precious metals have fallen.

Investors didn’t want a “safe haven”, they wanted cold, hard, highly-liquid cash. Indeed, some €700 billion reportedly left Greek banks in a single day last week. Last Thursday and Friday marked the first two days gold and silver prices have climbed in the face of the fears of a default in Greece. That could be a sign investors are betting the EU will announce new stimulus or that they’ve accepted the fact that a collapse in Greece is unavoidable. Either way, the rise in precious metals – despite the bad news out of Greece – was enough to turn me bullish on precious metals (at least for now).

Three signs silver prices have further to fall

While we’re certain the 12-year bull market in precious metals isn’t over, we do think there could be more pain for silver investors in the near-term. Here’s why…

A month ago, an ounce of silver was worth $33. Today, that same ounce is worth $29.50 – a drop of more than 10 percent. While we’re certain the 12-year bull market in precious metals isn’t over, we do think there could be more pain for silver investors in the near-term. Here’s why:

1) The Gold/Silver Ratio. The gold:silver ratio has been trending up since early March, and that trend probably won’t stop until the ratio re-tests January’s highs around 57:1. Why? Because swing and momentum traders themselves help cause the fluctuations in the gold:silver ratio. So long as the ratio is showing a clearly defined trend, and it’s not nearing any key resistance levels (or psychological barriers), those swing traders are going to short silver. Check out the steady upward climb in the gold:silver ratio:

[Source: Seeking Alpha]

2) Long live the dollar. The greenback can’t seem to do anything wrong. That’s despite explosive growth in True Money Supply (or the sum total of all the cash, deposits and notes that are floating about in our economy). Just check out this chart from Mises.org:

During ordinary economic times, you could expect the yields on U.S. bonds to spike in the face of such aggressive monetary easing. Instead, the dollar looks stable compared to the financial situation across the pond.

The Eurozone “is on a path that leads to eventual dismantling,” Peter Tchir of TF Market Advisors wrote in a note to clients on Monday (per IB Times). “Greece restructured debt, made different rules for different holders, and yet, the new bonds trade at 20% of par.”

Investors are telling the Eurozone countries that they no longer believe there’s a way out. That threat of a Eurozone breakup has bought the dollar some street cred that it probably shouldn’t have – and that’s bad for silver prices.

3) Even die-hard silver bulls are losing some of their excitement over the white metal. “While I do remain very bullish on silver, I must also admit that for the first time I can envision a scenario in which silver does not reach $100,” writes Simit Patel at Seeking Alpha. His reasoning? Gold will likely outperform everything (silver and stocks) if the equity markets remain soft.

Of course, all of the arguments above have me thinking that now might be the perfect time to buy silver. I’m not alone either. Check out my recent post Why Eric Sprott believes silver prices will triple to $100 an ounce in 2012. Just remember that if you do buy, though, you need to be able to hold onto the metal in the face of near-term weakness. Prices may be higher in three months, but what happens between now and then might not be pretty.

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