Silver price discussion and analysis

[ta2693]

Re: Gold Price - Where is it heading?

Dear All,

I am new here and I want to consult a question:

How can I invest in silver(except physical) in Aussie?

Many thanks.

PS: I am remember the price did reach US$540 since last March. Personally, I thing the bottom might be around US$600.

1 buy silver future contract
2 buy silver company shares
3 buy gold company shares whose price positive correlated with silver price

 

[eagleou]

Re: Gold Price - Where is it heading?

1 buy silver future contract
2 buy silver company shares
3 buy gold company shares whose price positive correlated with silver price

Thank you ta2693.

 

[genus]

Re: Gold Price - Where is it heading?

1 buy silver future contract
2 buy silver company shares
3 buy gold company shares whose price positive correlated with silver price

I'm new to precious metals trading also and understand I can invest through these 3 methods. But how do people buy and hold physical gold or silver bullion? What are the pro's and con's in holding physical versus said methods?

 

[rederob]

Re: Gold Price - Where is it heading?

I'm new to precious metals trading also and understand I can invest through these 3 methods. But how do people buy and hold physical gold or silver bullion? What are the pro's and con's in holding physical versus said methods?

None of the above give you "physical" metal to hold.
Bullion merchants are the way to go for physical ownership.
There are storage costs for "safe" holdings, but these are small compared to the value of the metals.
A better way to collect physical silver may well be through various silverware where there is intrinsic value to the article as well as upside through the metal content.

 

[Boyou]

Re: SILVER

Hi rederob, You seem to be pretty knoweledgable with regard to Silver..SO a question for you.
I have seen that Gold and Silver move in step with each other.Is this just an historical relationship or are there underlying fundamentals as to why they are linked?.

I am watching the POG and POS very closely as I have taken some shares in junior miners in both old and silver.

Cheers

 

[rederob]

Re: SILVER

Hi rederob, You seem to be pretty knoweledgable with regard to Silver..SO a question for you.
I have seen that Gold and Silver move in step with each other.Is this just an historical relationship or are there underlying fundamentals as to why they are linked?.

I am watching the POG and POS very closely as I have taken some shares in junior miners in both old and silver.

Cheers

Boyou
They both were "real money" for generations, so I guess there is a strong historical relationship.
More recently I think its useful to simply notice the correlation of movements, while price magnitudes are a different kettle of fish. For example, this year silver peaked in February and is still a dollar off that high. While gold peaked in April and is almost back at the same level.
Fundamentally there is a massive "above ground" supply of gold - mostly in bank vaults. While for silver the "above ground" stockpile is constantly drawn down because silver is an industrial metal, in the main, and has strong consumer demand.

 

[ducati916]

Re: SILVER

I posted this analysis on my blog during May, just noticed the Silver thread;

The supply and demand curves for silver as a commodity have had over the last fifteen years extended periods of deficits. This is partly due to the fact that silver supply is in large part a by-product of other metal production, or from scrap.

Silver Supply;
Silver is mined world wide, much as previously noted from polymettalic mines.
Approximately 530 million oz mined each year
Approximately 230 million oz year from scrap [mostly jewelry]

Total production:
Estimated mine production…………………….62 billion oz
Bars & Coins……………………………………..21 billion
Jewelry…………………………………………..20 billion
Fabricated products……………………………21 billion

Silver Demand;
On the demand side, the price for silver is economically insensitive. This is due to the following characteristics of silver;
*price increases in silver can be generally passed onto the consumer
*price increases in silver do not impact profit margins
*world has large inventories of silver [5000 yrs+]

The interesting story with silver, is in the same way as gold, silver is traded as a financial asset. Silver, like gold has during periods of history acted as money or a currency of trade.

Currently silver trades in financial asset forms;
*Physical
*Futures
*Options
*ETF’s
*Common shares of production companies

Volume of trades;
Circa 50 million oz/150 million oz per day
Circa 30 billion oz/year

During the 1990’s this was substantially higher.

The Gold/Silver ratio [basis of trades]
This ratio has through traders lore been mooted to exist and be a profitable way to trade the two separate commodities.

The ratio has varied through history from a low of 14/1 to a high of 100/1
The fluctuations are quite high. Silver has had historically a more volatile price.

Historic Ratio’s:

Year…………………………..Ratio
1687-1777…………………14.5/15.5
1800-1900…………………15.0/17.00

1925……………………….29.7
1926……………………….33.1
1927……………………….36.5
1928……………………….35.3
1929……………………….38.8

1970……………………….20.5
1971……………………….26.6
1972……………………….34.7
1973……………………….38.2
1974………………………33.9
1975………………………36.5

1979………………………27.6
1980………………………29.6
1981………………………43.6
1982………………………47.2

1994………………………72.9
1995………………………74.8
1996………………………74.8
1997………………………67.9
1998………………………53.2
1999………………………55.9

2000……………………..55.9
2001……………………..61.9
2002…………………….67.3
2003…………………….74.2
2004…………………….61.3
2005…………………….61.5

% Changes in price [random years]
2003………………………Gold +12.5%………….Silver +35.9%
2004………………………Gold +7.0%…………..Silver +6.8%

Just as a point of interest, “The Wizard of Oz” was an allegorical tale depicting the political struggle between William J Bryan Vs W. McKinley in the US Presidential race and the issues surrounding the Silver Purchase Act 1890

At about this time there was available an arbitrage available between a Gold dollar, and a Silver dollar that could be bought for $0.60 [risk free profit of $0.40]

Major Holders of Silver;
Berkshire Hathaway [BRK.A]

Valuation;
There are three equally valid methods of valuing silver. The first is on a commodity basis, the second on a financial asset basis and the third on an aggregate ratio basis.

Commodity basis……………………………Value = cost of production
Financial basis………………………………Value = inflation hedge
Ratio basis ………………………………….Value = aggregate ratio over 5 yrs

Ratio value =……………………………….65.0
[$662.0 * 65 = $10.18] thus @ $13.0 overvalued
Inflation value =……………………………$5.38
Commodity value…………………………..[no value calculated yet]

With Silver closing at $13.003/troy oz I would say that silver is currently very overvalued on a fundamental basis [financial] and is in speculative territory.

After I have calculated the *production value* a slightly clearer picture might present itself.

The production value of one of the higher efficiency miners and an aggregate cost basis of some randomly picked silver miners gave a production value of;

Production value = $3.90
Investment value = $5.38
Ratio value = $10.18
Spot price = $13+

Some rather large differences in the prices

 

[bean]

Re: SILVER

Boyou
Fundamentally there is a massive "above ground" supply of gold - mostly in bank vaults. While for silver the "above ground" stockpile is constantly drawn down because silver is an industrial metal, in the main, and has strong consumer demand.

Yes all the gold mined in the world still exists...whereas silver has been used and gone.

POS well doing nicely just sitting under resistence US $13.40
So when POG next moves up expected silver to take that out.
And in % terms silver will advance at a quicker rate than Gold

 

[rederob]

Re: SILVER

ducati
I think your silver analysis is as useful as your views on BHP.
Just as BHP has doubled your price estimates and is still rising, I expect silver will do the same.
Yet again I find your contributions an excellent basis for going long on a contrary position.
Many thanks.

 

[Boyou]

Re: SILVER

Thanks rederob ,bean and ducati for the response.Really am chewing hard on all the historical info and analysis
Must say though,ducati ,that your final points re the value of silver have thrown me a bit!



"TheProduction value = $3.90
Investment value = $5.38
Ratio value = $10.18
Spot price = $13+

Some rather large differences in the prices"
__________________

Perhaps the market for precious metals defies logic and confounds figures?

Cheers :confused

 

[Enoch]

Re: SILVER

ducati

Just a quick note Berkshire Hathaway no longer owns silver. At the annual meeting last year Warren Buffet announced he had sold all of his silver.

In addition he mentioned that the investment was perfect, however, he sold too early. This suggests he sold before the price explosion up to $15 last year.

Interestingly the amount of silver he had was roughly the same amount which the Silver ETF was required to store. Maybe they did a deal?

Anyway I would like to know where the price of silver would have ended up if he hadn't sold and after the ETF announcement.

Much higher than $15 I bet.

For those of you who care most of the companies other than BSG/CDE, perhaps Macmin with proven and probable silver reserves are located outside of Australia. This is of course those companies whose primary focus is silver (i.e. excluding the Base metal plays such as RIO and BHP which produce silver as a byproduct to the other metals)

ReaderRob I agree with you big gains may be ahead for Silver particularly since most of the silver ever mined has been used in industry and unrecoverable. Potentially this could make silver perhaps an even better play than its big brother Gold.

In addition research is continually finding new uses for it all the time particularly in the area of water purity, medicine ect. Their even putting silver particles in socks under underware to assist people avoid such fungle infections as Tinea and of course Jock Rot.

Not to metion the potential silver has with electro conductivity.

Short term maybe silver might come back, long term it will probably do well.

Best regards to all those who have accumulated silver assets.

"Its the honour of kings to search out a matter."

Enoch

 

[ducati916]

Re: SILVER

et al

I hadn't realized that BRK.A had sold the silver investment, thank's for the update/correction. [I originally posted the analysis in May on the blog, thus some information is a little out of date]

The variability in prices demonstrates the variability in investment, speculation, inflation and production values that of course will all fluctuate as the varient conditions change.

Thus, dependant upon your classification and timeframes, silver could be a buy or sell.

jog on
d998

 

[rederob]

Re: SILVER

et al
The variability in prices demonstrates the variability in investment, speculation, inflation and production values that of course will all fluctuate as the varient conditions change.

Thus, dependant upon your classification and timeframes, silver could be a buy or sell.

jog on
d998

ducati
How wise.
Things change.
And we can buy or sell.
Shall pass on these pearls of wisdom...... over time.

 

[Enoch]

Re: SILVER

ducati

rederob

You might already know of this website. If not this is it.

www.silverstrategies.com

Check it out.

Interesting silver chart at the bottom. It shows short term i.e. 2-3 months
a possible lower silver price.

As discussed and as per my previous post long term 2-3 year time frame gains are likely.

"It's the honour of kings to search out a matter"

Regards
Enoch

 

[bean]

Re: SILVER

POS well doing nicely just sitting under resistence US $13.40
So when POG next moves up expected silver to take that out.
And in % terms silver will advance at a quicker rate than Gold

Mentioned this july 24th and look what happened it went down shortly after but its sitting back near there again.

Was that the low in the US gold and silver Indexes last night?

 

[Boyou]

Re: SILVER

Just got Compareshares newsletter in my inbox.

Interesting explanation regarding Silver's lag behind POG

http://www.compareshares.com.au/zeal19.php


Cheers Ya'll

 

[bean]

Re: SILVER

With the POS breaking out investers will be looking for silver companies/shares.

BHP biggest producers in Aust, however a large rise in POS will really do very little to there share price.

PURE silver plays in Aust
Count them on one hand. So when money is looking to find silver companies.

May 2006 when POS last at these prices
Macmin Silver (MMN) silver was in the .40's
Yesterday .25
At the moment I believe its the only PURE silver producer in Aust.

A few explorers like MAR, CQT, SVL.

Some goldies also have a bit of silver.

 

[bean]

Re: SILVER

The silver rocket has hit town up about 3.5% last night and up another 3.5% so far today

 

[Flying Fish]

Re: SILVER

With the POS breaking out investers will be looking for silver companies/shares.

BHP biggest producers in Aust, however a large rise in POS will really do very little to there share price.

PURE silver plays in Aust
Count them on one hand. So when money is looking to find silver companies.

May 2006 when POS last at these prices
Macmin Silver (MMN) silver was in the .40's
Yesterday .25
At the moment I believe its the only PURE silver producer in Aust.

A few explorers like MAR, CQT, SVL.

Some goldies also have a bit of silver.

I don't understand mmn. I believe there production costs go up with rising aussie, so maybe not a good bet???

what about bsg,

 

[bean]

Re: SILVER

I don't understand mmn. I believe there production costs go up with rising aussie, so maybe not a good bet???

what about bsg,

Yes but so does all commodity producers.
But they are the only true silver play producer.
The silver market is so small that very few companies.
Money looking for a safe haven moves to Gold then also silver.
Money going into silver has to go somewhere.
And there is not many silver shares for that money to go into.

Nothing wrong wrong with BSG they have silver and I did mention some goldies have silver.