Best of the Week
Most Popular
1.BrExit House Prices Crash, Flat or Rally? UK Housing Market Affordability Crisis - Nadeem_Walayat
2.Stocks Bull Market Climbs Wall of Worry, Bubble? When Will it End? - Nadeem_Walayat
3.Gold Price Is Now On Its Way To All-Time Highs - Hubert_Moolman
4.Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - Harry_Dent
5.UK interest Rate PANIC CUT! As Banks Prepare to Steal Customer Deposits - Nadeem_Walayat
6.Gold and Silver Bull Phase 1 : Final Impulse Dead Ahead - Plunger
7.Central Bankers Fighting An Unprecedented Global Economic Slowdown - Gordon_T_Long
8.Putin Hacking Hillary for Trump, Russia's Manchurian Candidate? - Nadeem_Walayat
9.Stock Market Insiders Are Secretly Selling, Cycle Top Next Month - Chris_Vermeulen
10.Gold Sector - Is it time to Back up the Truck? – Mortgage the Farm? - Peter_Degraaf
Free Silver
Last 7 days
Post Yellen = Market Confusion - 28th Aug 16
Theresa May Instructs Police, NHS Gp's, Public Sector To Stop Racial Discrimination in Service Delivery - 28th Aug 16
Ignore Yellen and Buy the Dip in Precious Metals - 27th Aug 16
SPX Downtrend Should be Underway - 27th Aug 16
Unraveling the Secular Economic Stagnation Story - 27th Aug 16
The Precious Metals Sector and the Fed. . . - 27th Aug 16
Stock Market - All Is Calm, All Is Not Right - 27th Aug 16
Gold Junior Stocks Q2 2016 Fundamentals - 26th Aug 16
Buy Gold’s August Dip? Gold’s Monthly Sweet Spot In September - 26th Aug 16
The IMF’s Internal Audit Reveals Its Incompetence and Massive Rule Breaking - 26th Aug 16
Commodities Are the Best Bargain Now—Here’s What to Buy - 26th Aug 16
Why I Left Canada and Became A Citizen of the Dominican Republic - 26th Aug 16
The GLD vs GOLD - 26th Aug 16
Can Stocks Survive Without Stimulus? - 25th Aug 16
Why Putin Might Be on His Way Out - 25th Aug 16
Bond Guru Gary Shilling - The Bond Market Rally of a Lifetime - 25th Aug 16
A Zombie Financial System, Black Swans and a Gold Share Correction - 25th Aug 16
OPEC’s Output Freeze: What Has Changed Since Doha? - 25th Aug 16
Merkel Prepares For a Deliberate Crisis While White House Plans For a Disastrous Succession - 24th Aug 16
Suspicious Reversal in Gold Price - 23rd Aug 16
If Trump Can’t Pull Off a Victory, Expect a Civil War - 23rd Aug 16
Ceding ICANN and Internet Control to Globalists - 23rd Aug 16
How to Spot an Oversold Stock Market - 23rd Aug 16
Gerald Celente Sees Worst Market Crash, New Military Conflict, Gold Spike to $2,000/oz - 23rd Aug 16
EU Olympics Medals Table Propaganda Includes BrExit Britain - 22nd Aug 16
BrExit Win's Britain Olympics Success Freedom Dividend, Economy Next - 22nd Aug 16
Stock Market Top Forming, but Slowly - 22nd Aug 16
(Really) Alternative Banking Systems - 22nd Aug 16
Vauxhall Zafira Fires - Second Recall Issued - Inspection Before Bursting into Flames? - 21st Aug 16
Will the Stock Market Bubble Pop Regardless if the FED Never Raises Rates? - 21st Aug 16
US Government Spending - 3 Big Stories Not Being Covered – Part III - 21st Aug 16
Silver Analysis - 20th Aug 16
SPX New Highs, Correction Next? - 20th Aug 16
Housing Bubble - The Marginal Buyer Holds The Pin That Pops Every Asset Bubble - 20th Aug 16
Gold Miners Q2 2016 Fundamentals - 19th Aug 16
Which Price Ratio Matters Most in a Fiat Ponzi? - 19th Aug 16
Big Policies, Bigger Failures - 19th Aug 16
Higher Crude Oil’s Prices and USD/CAD - 19th Aug 16
Here’s Why You Should Look for Dividend Stocks and How - 19th Aug 16
Deglobalization Already Underway — 4 Technologies That Will Speed It Up - 19th Aug 16
These 6 Charts Show Why the Average American Is Fed Up - 18th Aug 16
SPX Easing Lower - 18th Aug 16
Low / Negative Interst Rate’s Legacy - 18th Aug 16
The 45th Anniversary of The Most Destructive Event In Modern Monetary History - 18th Aug 16
USDU - An Important Perspective on the US Dollar - 17th Aug 16
SPX Completes Wave 1 Decline - 17th Aug 16
How to Quickly Spot Common Fibonacci Ratios on a Chart - 17th Aug 16
When Does a Forecast Become a Trade? - 17th Aug 16
Kondratiev Wave - The Financial Winter Is Nearing! - 17th Aug 16
Learn "The 4 Best Elliott Waves to Trade -- and How to Trade Them" - 16th Aug 16
Stock Market Bears Turning Bullish At New All Time Highs - Time to Get Worried? - 15th Aug 16
Job Seekers Sacrificed to the Inflation Gods - 15th Aug 16
A Look At Commodities and Financial Markets Trading Week Ahead - 15th Aug 16
Stock Market New Top Forming? - 15th Aug 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

How to Trade Elliott Waves

The Slippery Slope of Sliver

Commodities / Gold and Silver 2011 Oct 24, 2011 - 02:49 AM GMT

By: EconMatters

Commodities

Best Financial Markets Analysis ArticleSilver has taken some serious beatings lately, but there seems to be a renewed optimism in the market place towards the white metal as Bloomberg reported that

"Investors for now are getting more bullish. As well as adding to ETP [Exchange-Traded Product] holdings, they are also buying bullion coins, with the U.S. Mint selling 4.46 million ounces of American Eagles in September, the most since January.

....Combined assets in ETPs rose 4.8 percent to 17,515 metric tons since mid-July, equal to almost nine months of mine production, the data show. 


Money managers raised bets on higher prices for the first time in more than a month in the week ended Oct. 11, Commodity Futures Trading Commission (CFTC) data show. The net-long position gained 1.3 percent to 11,573 futures and options contracts."  


According to the median in a Bloomberg survey of 11 analysts, the metal may average $38 an ounce this quarter and rise to a record $42 by the final three months of 2012, which would imply about 18% and 33% gain respectively from the current price level.  China industrial usage, and investment demand partly due to U.S. Fed's record low interest rates, are cited as the primary reasons to be bullish on sliver.

But not everyone buys the China growth story with silver.  Morgan Stanley, for example, is pouring cold water by predicting output from mines will rise 1.4 percent this year, accelerating to 4.5 percent in 2012, and that the global oversupply of silver will persist until at least 2016.  Barclays also echos a similar bearish outlook for silver believing "the fundamentals still look very weak,” and expects the metal to average only $27 in the fourth quarter of next year, implying a 1% loss from the current level.

Bloomberg further pointed out that historically, silver has not performed well during crisis as the metal slumped 24 percent during the 2008 financial crisis, the most in almost a quarter century, while gold rose 5.5 percent.  So sliver, although considered as part of the precious metal family, may not preserve asset values as much as people tend to think if we head into a double dip recession or if some kind of crisis erupts.

Many investors, using gold as a benchmark, believe silver is an attractive alternative investment to gold as it is cheaply priced relatively to gold with the recent pullbacks.  Moreover, silver could still benefit from China and investment demand.

However, technically speaking, whenever you see two gigantic vertical Niagra-Falls-size drops, with several sizable mini drops in between--all within a 6-month time--on the price chart (below), without the justification of a far superior return, it is a sign that you would be much better off elsewhere in terms of risk / reward.

The chart below compares price performances of Gold, Silver and Dow Jones U.S. Gold Mining Index.  As the chart illustrates, silver would give you a lot more sleepless nights (EMS probably needs to be on standby as well) than Gold or the stocks of gold miners..  

Chart Source: stockcharts.com

Furthermore, based on market fundamentals, the recent data coming out of China suggest the world's growth engine is still fighting inflation and is definitely slowing down.  While we see a very low probability of a China Crash Scenario, this downshift will most likely weaken the demand side of the investing thesis for silver

We got a lot of flak when we warned physical sliver investors in April that the metal was at the bubble stage, and the pitfall of following the futures market actions.  At the time, based on the market condition and valuation, we concluded that,
"This is the epitome of a bad investment. You’re supposed to buy low and sell high, not the other way around. Remember, you are an investor not a trader if you’re buying the Physical Silver Coins. Thus you have to be a “Value Investor”. And I am here to tell you there are no ‘Values’ in the Physical Silver Market, or any other Silver Market for that matter." 


Now fast-forward six months later, the price of silver has tanked almost 32%, whereas Gold has held up a lot better -- up 7.65% in the same period.  Silver coins, which represent the physical market, were as high as around $52 in April, and now it's at the $32 range, a 58% plunge, even worse than the spot silver.  So what that means is that some investors could be $20 underwater on each silver coin if they got in around the peak.

Currently, the valuation of silver may have improved from the bubble level six months ago; nonetheless, due to the uncertainty in the broader market and economy, the sector market specific thin liquidity, ridiculously high volatility and margin requirements, we maintain our rating that silver remains an ultra speculative / risky investment option that investors should stay away from.

We have written at length here, , regarding the pros and cons and potential pitfalls of investing in the silver market, and strongly caution investors against even engaging in that market -- Let's just say even if you were an Olympic skier, you would not want to ski on that slope.

By EconMatters

http://www.econmatters.com/

The theory of quantum mechanics and Einstein’s theory of relativity (E=mc2) have taught us that matter (yin) and energy (yang) are inter-related and interdependent. This interconnectness of all things is the essense of the concept “yin-yang”, and Einstein’s fundamental equation: matter equals energy. The same theories may be applied to equities and commodity markets.

All things within the markets and macro-economy undergo constant change and transformation, and everything is interconnected. That’s why here at Economic Forecasts & Opinions, we focus on identifying the fundamental theories of cause and effect in the markets to help you achieve a great continuum of portfolio yin-yang equilibrium.

That's why, with a team of analysts, we at EconMatters focus on identifying the fundamental theories of cause and effect in the financial markets that matters to your portfolio.

© 2011 Copyright EconMatters - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Nancy
25 Oct 11, 04:39
silver is manipulated, your analysis is meaningless

Looking at silver "charts" without analysing underlying currency fundamentals or even the fact that silver and also gold have been manipulated is flawed.

Your view of "money" and value is very narrow. There will be decreasing value in fiat. Where are all those high wealth individuals choose to put their wealth their money..(paper, electronic blips?)!


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife