The Silver Shine: Why I'm Buying

Discussion in 'Silver' started by pug, May 20, 2013.

  1. pug

    pug Member

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    At the risk of repeating myself (and everyone else) there's a few things to be said here as we watch silver spot sell off again today more than 3%.


    1) silver spot - paper contracts at COMEX:

    Silver is currently retesting the April low of $20.25 for the July 2013 contract.
    http://www.marketwatch.com/investing/future/silver <-- view the 3 mo chart

    The double bottom reversal is the most common chart formation.
    http://www.investopedia.com/university/charts/charts4.asp

    I'm betting we will see a run up after this double bottom forms.


    2) Physical bullion is NOT the same thing as paper contracts on COMEX. Taking delivery of 1000oz through COMEX would add a sizeable premium to spot price. Again the true price of physical silver is NOT spot. What many of us are seeing is a physical price that is about 10-15% higher than spot for minted bullion. I believe this in effect makes COMEX electronic trading more volatile than the physical price. (Also if you're good at the game, you might be able to find an individual who is freaking out and willing to dump their bullion at spot!)


    3) No matter how much $ the central bank's print, you still have the same number of OZ of physical silver.
    Central banks are printing unprecedented amounts of bills. Last I checked this was 85 billion monthly in the US, and Japan is trying to double the money supply in 2 years. So remember, that although the dollar's value is manipulated, this doesn't change the physical number of actual oz of silver you have in possession.


    4) Right now many of us are watching paper spot drop 3%+ today and think, "crap my silver stack is now worth less".
    You have many oz of silver in your possession, and you're thinking... damn the price went down and I could have gotten more for cheaper, had I not bought so much earlier in previous months/years. Hey we all love a good deal, and to strike when the price is at an all time low. Who has a crystal ball to predict these things perfectly? Anyone?


    5) Silver is trading at about 60:1 to the gold price. More accurately the world silver supply puts it closer to 10:1 the gold price. I understand this historical average has been more like 16:1. Regardless, this means that either gold prices will have to tank dramatically relative to silver, or silver just has to go up. I don't think 60:1 can last long term.


    6) At the rate it is being mined, underground supply can last about 22 years (based on USGS figures) Many analysts have projected that past 2018 the world production of silver will have peaked. Fundamentally supply will not be able to meet demand for more than a couple decades ahead. Silver is being consumed by industry at a dramatic rate. Increasingly industry will need to turn to available above ground supplies of recycled silver and bullion in order to meet demand. Consider that the stock market took about 5 years to break even from the peak in 2008. Consider that 2018 is not very far away and yet people are rapidly selling silver contacts. This fundamentally does not make good sense, and suggests to me that market sentiment is overly bearish on the precious commodity.


    7) There are increasing numbers of analysts who are showing that silver is now trading at or below the true 'all in' total cost of production. Ignore 'cash costs' cited by mining companies to attract investors as these figures are misleading as they do not include essential business expenses like borrowing interest, tax, office costs, advertising, environmental fees, exploration expenses, and administrative expenses.


    Feel free to add anything important....

    #8 anyone?
     
  2. menotcrimex

    menotcrimex Member Silver Stacker

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    Yes the oversold paper ruling the physical price while physical silver and gold is in HUGE demand. Bear Paper market and Bull physical market...speaks volumes...manipulation!

    Without trying to derail your good supportive thread does anyone know how much silver the Chinese / Asia market is compared to Gold? Physical that is.

    Cheers

    Edit: I just found this on Kitco News...keeping in mind I find most of Kitco news total BS, imho

    Market Nuggets: Standard: Silver Could Face Selling Into Rallies, Return Below $20 Monday May 20, 2013 9:54 AM

    Standard Bank says silver could "suffer from selling into rallies in the foreseeable future," perhaps returning to the $20-$15 range from September 2009 to September 2010. Silver breached support at $22 an ounce overnight, falling as far as $20.303, basis spot, the weakest level since September 2010. It has bounced sharply since, however, to $21.684 as of 9:47 a.m. EDT. Standard says it considers silver's supply/demand fundamentals to be weak, estimating that above-ground inventory in China is as high as 18 months of fabrication demand, up from four months in 2009. Further, Standard expresses concern that silver exchange-traded fund liquidations have not been occurring with gold meaning "potential that could come through if the price remains under pressure," Standard says. The bank reports that gold ETF holdings are down 17% year-to-date, while silver ETF holdings are up 1%.
     
  3. Pirocco

    Pirocco Well-Known Member

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    It appears as true to me.
    The silver ETF stocks did indeed not drop with the gold ones.
    Since the ETF's didnt absorb the new supply anymore since mid 2011, when their stocks stabilized (at least in terms of the huge increasings in the years earlier), and US Mint and others sales didnt increase as to replace the disappeared ETF demand, that's all newly mined/recycled silver not having found sellers at the seen price levels.
    And since the QE dollars weren't spent, there were no big general price increasings, and thus, in terms of purchasing power it's all profit there, ready to be grabbed. Hedging against inflation without inflation is bound to end like that. Those that bought silver over the past couple years, and didnt sell yet, should hold and buy more as to average down. If they don't, they risk being frontrunned a second time. If you wait to buy until everything silver related appears flowerish with bees in the sun, then you just have been frontrunned.
    My own speculation was 200% inflation due to 200% more dollars, so I used a tripled bottom price of 2008 as max price to stack, as to sit on a good starting point for a next dollar creation&spending round. But as discovered a year later, those dollars weren't spent. In meantime some grabbed the profit I and others gave them by buying at tripled prices (some even at 5folded prices) and at the moment my stack sells for 30% less back to dealer. But ohwell, at another moment it sold for 30% more (most of loss of back to dealer is due to tax) and I think that the chances that the silver price rises as to decrease this loss, are bigger than with a bank account.
    If the silver price would be driven to $15 or $25 in september, still no hair on my head would think of selling. Only when I dont have the choice. I didnt go into silver to return disappointed to a bank account. No, it's my independence, freedom and control.
    In the light of above, I see every further price drop as very positive, since I'm stacking more then. I don't get those that want higher prices. They can't be stacking for sure.
     
  4. menotcrimex

    menotcrimex Member Silver Stacker

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    Some are All in and purchasing little bits at lower prices
    Won't make their cost averaging that much lower....so they want higher prices soon....patience is the key.
     
  5. TreasureHunter

    TreasureHunter Well-Known Member

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  6. mmissinglink

    mmissinglink Active Member

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    Here's another take on silver price....http://seekingalpha.com/article/1461451-silver-potential-whipsaws-ahead?source=email_macro_view&ifp=0
     
  7. johnmorris

    johnmorris Member

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    Seems ebay physical holding well above market silver price.
     
  8. Holdfast

    Holdfast Well-Known Member Silver Stacker

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  9. smeagol

    smeagol New Member

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    everyone calls the bottom... lol

    i remember the last time we got to around $26ish people were calling the bottom as promising that silver will never ever be cheaper that that ever!

    there won't be a bottom until the bulk of the paper contracts are wiped out... when nobody wants silver anymore... thats contrarian investing. I think this episode is still to come... time will tell :)
     

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