Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

In Search of Silver

Commodities / Gold and Silver 2012 Feb 20, 2012 - 03:12 PM GMT

By: William_Bancroft

Commodities

Best Financial Markets Analysis ArticleIn this article about the silver price, Will Bancroft takes a look at what the last year has delivered for silver investors, and what the future of silver investment might hold. Read on for more on what Professor Roy Jastram called “the restless metal”.


Silver has been its normal restless self this last year, but holders of silver bullion might not feel adequately rewarded. The metal of the moon has witnessed soaring highs to within touching distance of $50/ounce, two vicious chops, but the silver price crucially sits only a few per cent higher than in February 2011. Volatility is part and parcel of silver investment, but silver investors have not been rewarded this last 12 months with the price appreciation they might have hoped for. The gold silver ratio now sits just below 52.

Why no gains in the silver price?

In early November 2011 we wrote an article about how silver might resemble a rocket ready for launch. So what happened to the Silver Rocketship? Was the ship not fuelled? Was the launch cancelled before the countdown?

We cannot know for sure, but silver investors are still waiting. And, while we wait silver is getting less air time and focus it seems. Maybe after achieving the headlines amongst the precious metals, silver is waiting for its golden big brother to lead the next leg higher in terms of price discovery.

Dr Stephen Leeb sees the precious metal complex just waiting for the right kick higher. When talking to King World News, Dr Leeb commented that “I think the world right now is extraordinary complacent and that complacent attitude could come to an end at any point in time. When it does, gold will begin to fly.  New highs will come very, very quickly and beyond that we will be in another leg of this bull market”. Dr Leeb is watching for the right spark to ignite the gold price.

It is true that sometimes gold leads and silver follows more erratically behind. For large parts of 2010 and early 2011 silver led gold. Some commentators wait for gold to move into a new trading range higher before the silver price will be able to push through technical resistance in the mid 30 dollars per ounce range. It would be good to see silver spend some time trading with conviction above $40/ounce. Last time silver ran at $50/ounce it went to fast and too early.

China in the silver market

Given China’s claimed role in silver price moves from $16/ounce to the price levels of today, it was interesting to see some recent market commentary about a recent lack of buying activity from China over the short to medium term. If you subscribed to the theory that China had been stockpiling silver, you might have taken Standard Bank’s recent findings as validation for your thinking and useful context for the stalling of silver’s potential up-trend. We know the aforementioned Dr Leeb has been talking about Chinese stockpiling of silver for some time.

Perhaps the Chinese had decided to draw down some of their inventory of silver bullion? Analysis from South Africa’s Standard Bank suggests as much, and that the silver price will not be able to push through $35/ounce until Chinese buying power returns to the market.

Familiar face to the silver market, Walter De Wet, Standard Bank’s London based strategist, commented that “as long as China does not import silver, the price is unlikely to rally on a sustainable basis”. Mr De Wet continued that their estimates suggest Chinese warehouses hold enough silver to supply industrial activity for 15 months, having risen from 12 months in 2011. This contrasts to Chinese stockpiles of only 4 months industrial demand in 2009. The takeaway is that Standard Bank believes Chinese silver stockpiles need to fall below 10-12 months industrial supply “in order for demand-pull pressure to build”.

This makes some apparent sense, and perhaps adds some context to the last year in the silver price. A large part of the bid has simply not been present in the market.

Walter De Wet adds some extra context finding that China’s new demand for silver “is not very strong at the moment” when one considers that the premiums that previously existed in the Shanghai market over the London silver price have subsided. These premiums at times reached $5/ounce in summer 2011, yet in February 2012 have been more regularly below 50 cents. Demand for physical silver bullion from China has clearly been lower, so the Chinese are now less willing to pay over the spot silver price to source silver bullion.

Where to next for silver?

If the up-trend in the silver price has lost its main stimulant in lack of Chinese participation over the last six to nine months, then perhaps silver’s price action is not as disappointing as first felt. Some market commentators have even been pleased with silver’s resilience in recent months of trading.

Silver investors with an understanding of this peculiar market understand silver’s moods and emotions. Holding a silver investment this last 12 years for a gain of over 650% has not necessarily been easy, but then neither was holding Apple shares over the last 13 years. Between February 1998 and February 2012 shares of Apple have appreciated over 85 times, from 5.9 to 502 dollars, but investors were tested by vicious corrections and some lack of direction in the share price that at times extended into the medium term.

Whilst the silver price bides its time, silver remains a legitimate part of a portfolio. Gold and silver can still be considered some of the most rational investment assets in this type of fracture financial environment. Precious metals are no one’s liability, and this attribute continues to make them stand tall. Silver is still underpriced in historical terms, and the gold silver ratio has some way to go before returning to the long term average of 15.

During Apple’s 85 times appreciation the period from February 2007 to February 2009 was one of these trying periods. We find some similarities for silver investors here, but if Standard Bank is right we should see a silver price on the move again later in 2012 when Chinese buying power returns to the market. No one, including ourselves, can tell you exactly when silver might begin to reward investors again but the fundamentals that got silver moving in 2000 are still there in force. We need to understand the nature of silver investment, and silver’s tricky and volatile nature, if this experience for investors is to be more educational and less frustrating.

Now a good time to load up on silver? Buy silver bullion quickly and easily using our next generation dealing platform…

Will Bancroft

For The Real Asset Company.

http://therealasset.co.uk

Aside from being Co-Founder and COO, Will regularly contributes to The Real Asset Company’s Research Desk. His passion for politics, philosophy and economics led him to develop a keen interest in Austrian economics, gold and silver. Will holds a BSc Econ Politics from Cardiff University.

© 2012 Copyright Will Bancroft - 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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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

6 Critical Money Making Rules