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…
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.
The big money is tiptoeing back into silver.
Last month, commodity trading advisors, pool operators, and hedge funds — the “big money” — weren’t interested in silver AT ALL…
But as they move back into the market, silver prices could soar. Let me show you what I’m talking about…
Jason Goepfert created SentimenTrader, a service that tracks investor sentiment toward various asset classes. According to Jason, silver just bounced off its most pessimistic reading in four years.
The so-called “commitment of non-commercial traders” hit 10,352. That’s incredibly low. The last time sentiment numbers were that low was in August 2007. Six months later, the price of silver was 59% higher. It rose from $12 per ounce to $19 per ounce.
I went all the way back to 2002 and found that silver sentiment bottomed near 10,000 six times… On average, the price of silver rose 33% in the next six months and 54% over the next year. This chart shows the last four times it bottomed…
Here’s how the silver price performed after each of the last four times silver sentiment bottomed out…
The best return came after Bottom No. 2, which coincided with the US banking/credit crisis. Silver soared an eye-popping 405%, including its parabolic rise in 2010.
As those numbers indicate, silver is one of the most volatile assets in the world. Over the last year, silver has seen massive price swings, including an 81% rally and two 30% drops. That forced many traders to liquidate their silver holdings in order to meet emergency short-term requirements. (Plus, the debacle at commodity broker MF Global has scared many folks out of the market.)
But the long-term drivers of gold and silver’s uptrends are still in place. Enormous and growing Asian economies like China and India are getting richer…and they have deep cultural affinities for precious metals. Plus, the Western world has lived way beyond its means for a long time…the debts and liabilities it has taken on can only be paid back with devalued, debased money. This is bullish for “real money” assets like gold and silver.
With sentiment so 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.
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.
Regards,Matt Badiali ,for The Daily Reckoning
Matt Badiali is the editor of the The S&A Resource Report, a monthly investment advisory that focuses on the oil, energy, and mining sectors as investment ? from small exploration outfits to equipment companies to the biggest resource companies in the world. Matt also writes S&A Junior Resource Trader, which focuses on the "bloodhounds" of the mining and energy industries ? small old, copper, oil, diamond, and uranium miners ? and how to earn thousands of percent in the coming years.
Matt has a Masters in Geology from Florida Atlantic University. He's spent the last five years flying all around the world for Stansberry Research, digging up the best resource investments for our readers.
I like silver.
I just don’t want to buy it at the current price.
Price seems to be trending down. Why not wait to buy at a lower price later?
Would you rather own the dying currencies like the Euro or the dollar? You forget silver’s potential to go higher.
any guesses on the next high? 65-70 anyone?
sounds like someone is working to prop up their investment ….
You might want to recalculate that first chart.
That first chart is a doozy. Who did the math on that one?
You wrote ”
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.”
This activity had everything to do with the dishonesty of such players as the CME, CFTC, and Central Banks at the time of that knock down. All of these institutions have a vested interest to make sure that the price of silver be guided and regulated, and have been doing a pretty good job through the act of manipulation.
The irony to all of this dishonesty is that we really don’t know what the true value of silver is right now and haven’t in the last 40 years.
So yes- this reader strongly suggests getting real physical silver because the game playing can only go on for just so much longer.
if you do the math you will see that the column of 2007 contains 104 procent silver
Something is wrong there. What are we comparing ?
2012 will see a major dip in the metal. I believe it will rebound, however we could see silver as low as $20.00 an ounce before we see anything like $50.00 again. I like James Turk’s method of buying a little every month, but if it hit high 30′s I’d hold off for a wee bit to see if a spike up was the prelude to a major drop, (like in Sept. this year was).
“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.”
NONSENSE! The CME raise through the FED raised the margins on Silver form $6,000 to $42,000. The BULL market did run up to far it was just coralled by unscrupulous banksters.
The upside is that there is now no ceiling at higher levels in Silver because these positions have been wioped out!
If you want to insentive people to buy silver, you should be more honest and precise you idiot.
From that first chart only the 49% industrial is not recoverable, all other silver can and WILL return to the market
Leaving 500 million ounces available to be used as investment… thats A LOT of silver
But is the world central banks had at least the same amount of silver as they have GOLD there wouldn’t be enough silver for decades !
Because they own NOTHING of silver
So silver is STILL a good investment (or should I say protection against paper)
I own silver. However, there is a lot of turmoil in the world and if Europe gets worse, you could see another rush into the dollar, like 2008. Also, credit is still contracting, and with most of our money created by bank credit, this is deflationary. All I’m saying is know both sides of the argument before you buy.
Good luck getting your silver (or money) back from MF Global.
I looks like it paid to hold off a bit on buying silver. I plan to buy a little each month regardles what the price is as a hedge against the dollar.
I buy onn the “10 year plan.” Since I plan to still be around in 10 years (God willing), I buy and try not to worry about what happens “today”. If you just look at the long teerm, it’s not so unsettling.
Although, I won’t trade physical gold and silver due to insidious manipulation by power that to be, silver is the greatest investment we can make in this century for holder. The reasons are:
1. On going currency wars around the world – flooding with papers
2. Underground available silver (500 – 700 million oz) is much less than the underground available gold (10 billion oz).
3. Histrical ratio of gold and silver is 16:1 but now is 55:1. With reasons above, ratio will probably go closer to 10:1 or even less.
Combining above reasons, it is no brainer for silver to exceed $100 per oz and even $500 / oz or more. I am extremely bullish in silver.
Did everyone get out of silver in time?
I like boring, forgotten, ugly, washed-out, markets like the base metals as possible investments for the long-term future: aluminum, zinc, copper, nickel, and maybe even iron. If worse came to worse, and these metals just sat and did nothing for a few decades more, they would still provide an excellent inflation hedge and an ideal parking-place for money….. Common-sense would tell you that it would be hard to wash-out the price of metals that haven’t risen in price in decades. The cost of production, especially the cost of electric energy, would dictate the floor price of base metals…. Should the Fed raise real interest rates, the price of base metals would take a hit, but so would the price of everything else.
Trying to be as objective as possible, one strange and very rare metal, and a metal with the numerous industrial applications ( for example, in instrumentation, lighting, electronics, chemistry, medicine and dentistry ) is mercury. If the environmentalists and their EPA in the U.S. would have their wings clipped for once in the courts, mercury would go from negative valuation ( a liability to own ) to perhaps thousands of dollars per flask. The odd metal with the greatest investment potential ( if the EPA would be silenced ) is mercury, Hg #80 on the periodic table, and still known by some as “quick-silver”.
Of general interest, the last great mercury mine in the U.S. was at New Almaden, California, now a ghost town at the bottom of a steep canyon on the northside of the Santa Cruz Mountains and adjacent to the present-day Silicon Valley.
For those who enjoy history and might be curious, New Almaden, California is just a mouse click away.
If you are in the Santa Clara Valley (also known as the present-day Silicon Valley ), you can take a pleasent day-trip to the New Almaden ghost-town. Actually now within the city limit of San Jose, California, the ghost-town remains as remote as ever, and a relic from the mid-19th Century.
The old mining museum is the most interesting place to visit, next to the Casa Grande of 1854 ( now Club Almaden ). One might peruse samples of ultra-high grade mercury ore, also known as cinnibar. The highest-grade rock samples of cinnibar actually exhibit beads of bright silver (mercury) within and on the edge of the rock itself.
The best time of year for a day-trip to New Almaden is December or January, when the weather is cool and the rattlesnakes have retreated back into their holes for the winter.
With the U.S. now exporting oil for the first time since 1949, the U.S. paper dollar will be in short-supply and in demand. With 60% of Americans who are now facing retirement holding a net-worth (including their homes) of $25,000 or less, the U.S. paper dollar, not silver, is in short-supply.
Real estate in America now to rise in value? The bottom is now in place?
A fact to consider: There is 1.3 trillion dollars of bad real estate debt now in America and awaiting foreclosure…….. And just imagine what this real estate to be foreclosed is going to be worth with gsng-writing (tagging) on display, not to mention cement poured into the drains of the showers and sinks inside the homes?
And just imagine what a rise in lending rates might do to the values of these properties?
Think about the future to come…..
Eventually, economic reality and markets will collide -- unfortunately, the higher the market, the harder the fall.
How certain business practices wind up jacking up costs before sticking you with the bill.
The Japanese Nikkei fell flat on its face overnight.
BDCs are soaring while banks are suffering. Banks are still working through nonperforming portfolios while regulators continue to restrict them.
The quack policy that was good for stock owners in North America turned out even better for those in Japan.
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