Silver, like gold, has historically been recognized as real money and a store of wealth. The opportunities expected to arise from investing in silver now, however, are even more pronounced than those of gold. Because silver has not received the same attention as gold in the media, fewer investors know about it. This is beginning to change, but silver is still very early on in its bull market, as compared to gold, which has progressed further in the second phase of its bull market. Furthermore, banker manipulation of the silver market has caused this asset class' price to be extremely suppressed, as the silver market suffers more from this market manipulation than any other traded commodity.Bart Chilton, commissioner for the US government's Commodity Futures Trading Commission, explained that their regulatory body has been examining the issue of market manipulation for more than two years: "I have been urging the agency to say something on the matter for months," Chilton was quoted as saying. "The public deserves some answers to their concerns that silver markets are being, and have been, manipulated."
Chilton was unambiguous about his belief that manipulation had occurred in the silver market: "I believe that there have been repeated attempts to influence prices in the silver markets," he said. "There have been fraudulent efforts to persuade and deviously control that price." [1]
In the long run, this market manipulation will only allow prices to reach greater heights, as investors are allowed to purchase larger amounts of silver at exceedingly low prices. This is causing the already small global silver inventory to be depleted at an alarmingly fast rate. Eric Sprott, Chief Investment Officer at Sprott Asset Management, alluded to this shortage of physical silver when speaking about his attempt to gather the 22,298,525 ounces of silver bullion allotted for his physical exchange traded fund:
Frankly, we are concerned about the illiquidity in the physical silver market. We believe the delays involved in the delivery of physical silver to the Trust highlight the disconnect that exists between the paper and physical markets for silver. [2]
Wall Street banks such as JP Morgan are manipulating the silver price on behalf of the Federal Reserve to artificially prop up a continually depreciating dollar. Lower silver prices cause investors to collect greater amounts of physical metal, which is expected to inevitably cause a short squeeze (i.e. a physical metal default). This, in turn, would bring about an actual divide between paper and physical silver prices. These free market forces are expected by analysts to reach unimaginable prices once the banks are forced to go out into the market and buy the silver which they must deliver to those who request physical delivery. Once investors hear about this short squeeze, more and more of them will demand delivery of their physical metals which do not actually exist, which would send the price even higher.
There are other reasons why the global silver rate is becoming depleted. Gold is normally hoarded, while silver is hoarded and consumed. Because no other metal surpasses silver in terms of electrical conductivity, there are literally tens of thousands of industrial applications presently being used for this metal. Silver also has other types of applications related to other industries due to its excellent reflective and anti-bacterial properties. However, the amounts of silver used per application are so minimal, that it becomes impossible to recycle silver from any particular unit. For example, when a computer, cell phone or CD is thrown out, the minute amount of silver that existed in each product cannot be recovered; it is lost forever. Consequently, in the last century, approximately 90% of global silver inventory has been consumed and depleted forever. This leaves a final 1 billion ounces of silver approximated to exist on the face of the earth, which industry and investors are currently competing to buy up. The global race has begun.
The world has witnessed "a structural deficit in silver for more than 60 years, beginning with World War II and lasting up until very recently." [3] Furthermore, most of the silver which is easily accessible in the ground has been taken already. Industrial demand alone is increasing at about 18% per year, as new industrial applications keep emerging. Moreover, investor demand continues to increase at a staggering rate. The following graph shows how investors reacted in 2010 immediately following only the announcement by the Federal Reserve that they would be printing up more money and purchasing more American bonds (QE2); debt which other nations and institutions no longer wish to buy: [4]
As a result of the industrial depletion which has taken place, only about 10% of global silver reserves remain. All governments and central banks in the world have dumped their silver on the market over the last 70 years, and the majority of this silver has been consumed and depleted. No known government stockpiles of silver exist anymore in the world, even though gold is still stockpiled by central banks around the world. Because the demand for silver is exceeding supply, the arbiter must be price, especially when considering that there is only approximately 1 billion ounces of global silver supply left. At the present low price of $40 per ounce, it would not take many billionaires to enter the market and buy up the remaining global supply of silver, which analysts expect would send the price of silver to astronomical heights.
Indeed, so much silver has been used up by industry that there is now actually more gold in the world than silver. This is truly an astonishing matter when one realizes that there are approximately 12 ounces of silver in the earth to every ounce of gold. This is what is termed the 'natural ratio' between gold and silver. The 'monetary ratio' has historically been approximately 16 silver ounces to one ounce of gold. Yet at our present time, quite incredibly, there is actually more gold on the earth than silver. The economic laws related to supply and demand cannot allow this present situation to persist; there must be a market correction, and this is, in fact, starting to occur at this present time. In fact, the present silver to gold monetary ratio is close to 50 to 1; that is, 1 ounce of gold can be bought with approximately 50 ounces of silver, even though there is more gold than silver available to investors. Silver experts state that the ratio must come down to its historic monetary ratio, which is around 16 silver ounces to every 1 ounce of gold. And because there is actually more gold than silver on the earth at this time due to industrial consumption, there are those silver analysts who argue that silver might one day reach parity with gold (1:1) or even become more expensive than gold.
Presently, silver is boldly outperforming gold as free market forces are beginning to correct these aforementioned imbalances, as can be seen in the following annual percentage gains for 2009 and 2010:[5]
| Year | Gold | Silver |
| 2009 | 25% | 57.5% |
| 2010 | 30.7% | 81.9% |
Projected Profits from Investing in Silver:
The following is an estimate of what types of silver prices and gains we could possibly see in the coming years. This will be expressed in terms of the silver to gold ratio: [6]
Silver's Price Range with Gold at $3,000
a) Gold @ $3,000 using the gold:silver ratio of 47:1 puts silver at $63.83 b) Gold @ $3,000 using the gold:silver ratio of 22:1 puts silver at $136.36 c) Gold @ $3,000 using the gold:silver ratio of 14:1 puts silver at $ 214.29
Silver's Price Range with Gold at $5,000
a) Gold @ $5,000 using the gold:silver ratio of 47.1 puts silver at $106.38 b) Gold @ $5,000 using the gold:silver ratio of 22:1 puts silver at $227.27 c) Gold @ $5,000 using the gold:silver ratio of 14:1 puts silver at $357.14
Silver's Price Range with Gold at $10,000
a) Gold @ $10,000 using the gold:silver ratio of 47:1 puts silver at $212.77 b) Gold @ $10,000 using the gold:silver ratio of 22:1 puts silver at $454.55 c) Gold @ $10,000 using the gold:silver ratio of 14:1 puts silver at $714.29
To conclude, there is no accurate way of knowing exactly how high silver will rise in price in the coming months and years. As the current financial crisis continues to worsen, billions and even trillions of dollars can conceivably be trying to enter the silver market, which consists of at most, only 1 billion ounces. For this reason, nobody can be certain what sorts of prices will be witnessed. In this type of scenario, it would not be impossible for prices to eventually reach the thousands of dollars per ounce, especially when considering the fundamentals for silver which have been outlined here.
Contact info@myglobalinvestments.com to find out how you can position yourself to be on the right side of this massive global wealth transfer in a secure and Sharia compliant manner with G.I. Metals DMCC.
____________________
[1] Garry White and Rowena Mason, HSBC and JP Morgan Accused of Manipulating Silver Market, The Telegraph, November 8, 2010.
[2]CNW, Sprott Physical Silver Trust Updates Investors on the Delivery Status of its Silver Bullion Purchases, January 10, 2010.
[3]Ted Butler, Berkshire Asset Management, The Coming Investment Boom in Silver (accessed January 24 2011); available from http://www.berkshireassetmgt.com/archives/390; Internet.
[4]The Wealth Cycle Principle, When Bernanke Speaks, Silver Listens (accessed January 24 2011); available from http://wealthcycles.com/blog/2010/11/10/when-bernanke-speaks-silver-listens; Internet.
[5]Jeff Clark, Casey Research, How High Will Gold Go in 2011? (accessed January 24 2011); available from http://www.caseyresearch.com/articles/3963/-how-high-will-gold-go-in-2011/; Internet.
[6]Lorimer Wilson, Munknee (accessed January 24 2011); available from http://www.munknee.com/2011/01/historical-goldsilver-ratios-suggest-silver-could-reach-200-heres-why/; Internet.
[2]CNW, Sprott Physical Silver Trust Updates Investors on the Delivery Status of its Silver Bullion Purchases, January 10, 2010.
[3]Ted Butler, Berkshire Asset Management, The Coming Investment Boom in Silver (accessed January 24 2011); available from http://www.berkshireassetmgt.com/archives/390; Internet.
[4]The Wealth Cycle Principle, When Bernanke Speaks, Silver Listens (accessed January 24 2011); available from http://wealthcycles.com/blog/2010/11/10/when-bernanke-speaks-silver-listens; Internet.
[5]Jeff Clark, Casey Research, How High Will Gold Go in 2011? (accessed January 24 2011); available from http://www.caseyresearch.com/articles/3963/-how-high-will-gold-go-in-2011/; Internet.
[6]Lorimer Wilson, Munknee (accessed January 24 2011); available from http://www.munknee.com/2011/01/historical-goldsilver-ratios-suggest-silver-could-reach-200-heres-why/; Internet.
All information on this website is for educational purposes only and is not intended to provide financial advise. Any statements about profits or income, expressed or implied, does not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold MinKL Invest harmless in any and all ways.
No comments:
Post a Comment