Gold and Precious Metals – Price Outlook Symposium

The first annual Gold and Precious Metals – Price Outlook Symposium (GOC2014) organized by Bursa Malaysia Derivatives Berhad is a one-day event that leads discussions on important factors driving and influencing the future prices of gold and precious metals.

Organised by: Bursa Malaysia & CME Group
Date: 28 June 2014
Time: 9:00am – 7:00pm
Venue: Hotel Istana, Kuala Lumpur

GOC2014 provides an excellent platform for you to gain valuable latest insights into the gold and precious metals market that are crucial for making any trading or investment decisions.

Speaker lineup for this year’s symposium include:

  • Mr Albert Cheng, Managing Director, Far East, World Gold Council
  • Mr Cameron Alexander, Manager, Precious Metals Demand Asia, GFMS Thomson Reuters
  • Mr Ermin Siow, President, FGJAM & Executive Director, Poh Kong Holdings Berhad
  • Mr Sunil Kashyap, Head of ScotiaMocatta & FX Asia, Scotiabank
  • YBhg Dato’ Sia Hok Kiang, Chairman, Malaco Mining Sdn Bhd
  • Mr Jeffrey Tan, SEVP, Product Development, Bursa Malaysia Derivatives Berhad
  • Mr Gordon Cheung, Executive Director, Precious Metals/Global Commodities, China Merchants Securities (HK) Co Ltd
  • Mr Benny Lee, Managing Director, i2Matrix Sdn Bhd
  • Mr Gregor Gregersen, Chief Executive Officer, Silver Bullion Pte Ltd

You can book your ticket with 5% discount using discount code DFGOC2014 from: BuySilverMalaysia.com

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook specifically written with a Malaysian’s context for silver investment. You will learn different strategies, practical tips and tricks for investing in silver. Click here to find out more.

Silver Price Fixed Ends in August 2014

For the past 117 years, silver price has never been on a truly free market. The price has always been fixed by 3 players: Deutsche Bank, HSBC and Bank of Nova Scotia.

The London silver fix is currently set by three banks over the phone at noon in London. It’s used by the entire silver market, including the Canadian mint, precious metal miners, jewelers, your local silver dealers and of course investors like us.

The price fix is based on deals between their clients and obviously did not take you (a retail investor) into consideration.

However, situation will change in August 2014 because Deutsche Bank is going to withdraw from such practice. This will leave HSBC and Bank of Nova Scotia to be the remaining player to “play” with silver price.

deutschebank-silver

It takes a lot of funding to manipulate silver price. Without financial resources from Deutsche Bank, the remaining 2 banks find it unsustainable to continue fixing silver price.

Deutsche Bank started pulled the plug on its global commodities trading business since December 2013. They cut 200 jobs and it becomes the first major bank to exit the once lucrative sector due to toughening regulations and diminished profits.

Deutsche Bank did not completely stop their activity on silver in December 2013. The bank resigned in April from its gold and silver fixing seats. Their silver price fix activity will only completed stopped in 14th August 2014.

What is the impact after August 2014? Silver market is not going to collapse.  silver price will face a market-led adjustment. There will be more uncertainty. But that also means a more transparent silver price driven by demand and supply. The fundamentals of silver has become more important than before. Watch this video to learn more about the fundamentals of silver

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook specifically written with a Malaysian’s context for silver investment. You will learn different strategies, practical tips and tricks for investing in silver. Click here to find out more.

Listen, Silver: We Need to Talk

Jeff Clark (Senior Precious Metals Analyst) wrote a letter to Silver last week in a fun way, and Silver answered back. Here is their exchanged emails:

Dear Silver,

Happy anniversary. It was on April 25, 2011 that you hit $49.80 per ounce in the New York spot market.

Today, three years later, you sell for around $20, nearly 60% less.

Is your bear market almost over—or are these low prices here to stay? Your price has lagged gold this year, so your normal volatility is lacking. How much longer will you be stuck?

Jeff Clark, Silver investor

Here’s Silver’s polite response:

Dear Mr. Clark,

I have good news for you. While some investors have lost interest in me and my price is at 2010 levels, things will soon change.

I put together this historical chart for you, and I hope you’ll share it with your fellow silver investors. It shows every major bear market over the past four decades. The black line represents what’s taken place from April 2011 through last Friday.

Of the seven prior bear markets, four lasted longer and three were shorter. Four declined less than today; two were about the same; and only one was significantly deeper.

If I were to match the two longest bear markets, my price would stay down until this October. If it matched the other two longer bear markets, it would end this summer.

Over the past 40 years, there has been no bear market that would extend my low past this October.

Or my low may already be in.

Either way, I think it’s safe to say that I’m close to the end of my down cycle. In fact, the historical data say the opportunity to buy me at $20 or less will soon be unavailable.

Let me relay some other data to you that also signal current prices can’t last too much longer…

The US Mint (Still) Can’t Keep Up with Demand

The sharp drop in my price in 2013 unleashed a wave of pent-up demand for silver coins. Look at the response from investors.

The question this year is if those record levels could continue to be supported. The first quarter is over, so I can tell you the answer…

The US Mint sold 13,879,000 ounces of me in Q1, 2.4% less than the 14,223,000 sold in the first quarter last year. Here’s the monthly breakdown:

  2013 2014  Gain/Loss
Jan. 7,498,000 4,775,000 -36.32%
Feb. 3,368,500 3,750,000 11.33%
Mar. 3,356,500 5,354,000 59.51%

January’s 36% decline from the prior year looks big, but it’s not what you think: the Mint didn’t begin sales until the end of the second week of the month. The monthly total thus reflects only 2.5 weeks of sales.

And March sales were the fourth-biggest month ever. Add in April’s sales figures and the US Mint is now on pace to exceed 2013 totals.

It’s clear that your fellow investors think my price will go higher.

Silver ETFs Have Net Inflows (Again)

You might remember that silver ETFs’ holdings were largely flat last year, unlike the mass exodus seen in gold funds. The pattern is continuing this year.

Holdings in my exchange-traded products (ETPs) have risen 3.5% year to date, an additional 17.5 million ounces. In fact, the net purchases by silver ETPs have totaled $354 million YTD, the largest influx of all commodity ETPs!

Meanwhile, gold-backed ETPs have seen sales of 500,000 ounces, about a 1% drop.

Jewelers Love Low Prices

Low prices for me have led to increased silver jewelry purchases.

As just one example, the UK reports that silver jewelry sales jumped 40.4% in February, to 351,791 items.

India Just Won’t Stop Buying

India imported 5,500 tonnes of me last year, 180% more than 2012. Imports comprised 20% of all global demand.

Last month’s silver imports were 250% lower. This was mostly due to the recent increase in import duties, and the fact that six banks got permission to import gold, which would soften purchases of me. This could partly explain why my price has struggled.

But as long as politicians keep gold restrictions in place, Indians will keep buying me.

China: More Silver for Solar

Chinese imports of me rose drastically in February, up by 75% month on month and 90% year on year to 358 tonnes, the highest since March 2011. Though lower the following month, March imports were up 16% year over year.

China’s solar industry is growing explosively. In 2009, it represented about 0.2% of the global market; this year, it’s estimated to be one-third.

It’s interesting to note that my price rose in February and fell in March, which suggests that Chinese demand affects my price, too.

Supply Sources Are Concerning

So far, suppliers have managed to meet demand. However, there are dark clouds on the horizon…

  • Very little excess supply is expected this year, as production is projected to remain flat, and demand for me shows no signs of letting up.
  • Solar power accounted for 29% of added electricity capacity in America last year. “More solar has been installed in the US in the past 18 months than in 30 years,” says the US Solar Energy Industries Association. “Eventually solar will become so large that there will be consequences everywhere.”
  • Supply from recycling will probably be weak, because it’s not cost effective to recover every tiny bit of me from cellphones or prescription eyewear or casino chips. One report says that Americans threw away 130 million cellphones last year, containing over 46 tonnes of me.
  • Several major base-metals mines are expected to be depleted over the next several years. The problem is that two-thirds of me is a byproduct from base-metals operations—if their output falls, there will be less of me, as well.
  • The Silver Institute says that demand for industrial products made from me continues to grow.

No Regrets

As I look at your current situation from a historical perspective, I see a lot of catalysts that will catapult my price higher in the near future. It seems rather clear that as demand continues to grow, supply tightens, and my role as money grows more substantial, I will trade at much higher levels in just a few short years.

In fact, I offered to bet my cousin gold that I will outperform him before this cycle is over. He declined to take the bet.

The clock is ticking. Don’t set yourself up for regret when my price leaves $20 in the dust.

Your friend,
Silver

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook specifically written with a Malaysian’s context for silver investment. You will learn different strategies, practical tips and tricks for investing in silver. Click here to find out more.

Silver Price Jumped on Disappointing Economic Data

A positive growth outlook last year prompted the Federal Reserve to start cutting stimulus (money prinitng) in December 2013. Then, in 29th January 2014 Fed said it will cuts another $10 billion of its monthly bond buying from $75 billion to $65 billion. However upon slowing down on stimulus package, economy did not continue to shine.

Silver prices jumped the most in almost four months on 5th Feb as a reaction to the slowing U.S. economy.

jumped

According to Bloomberg, approximately $3 trillion has been erased from equities globally in 2014. Emerging-market currencies (including Ringgit) is weakening and expansion in China is slowing.

The down turn in equities and disappointing economic data are pushing more investors to safe-haven assets such as gold and silver.

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook specifically written with a Malaysian’s context for silver investment. You will learn different strategies, practical tips and tricks for investing in silver. Click here to find out more.

Silver GST

Goods and Services Tax (GST) will be implemented with effective from 1 April 2015. GST rate is fixed at 6%. How will this affect your silver investment?

First of all, will GST be applied on silver? The answer is a clear YES, regardless whether you buy silver bar, silver coin or silver round.

Mr. Nur Hilmy Ahmad from Nubex Sdn Bhd (one of the largest gold and silver dealers in Malaysia) wrote to Jabatan Perlaksanaan GST and got a firm replied that GST will not be exempted from GST.

nubex silver gst

Is there any exception on products and services that do not need to pay GST? Yes there are…

According to NBC Group, GST is imposed on all goods and services produced in the country including imports. However, certain basic foodstuff likes rice, sugar, flour, cooking oil, vegetable, fish and meat, eggs and essential services such as health and private education, public transportation, residential property and agricultural land are not subject to GST.

GST will also not be imposed on piped water and first 200 units of electricity per month for domestic consumers and Transportation services such as bus, train, LRT, taxi, ferry, boat, highway tolls as well as education and health services are exempted from GST.

However, silver is NOT categorized into any of the above.

When your dealer(s) charge extra 6% on your silver purchase from 1 April 2015, they did not pocket the 6%. They are merely collecting in on behalf of the government.

So, do you buy more silver now (without GST) to avoid paying GST on silver after 1 April 2015?

That will depend where you think silver price is heading.

  1. If silver price rises much higher over the next few years, it is definitely a good idea to stock up more silver now to enjoy additional 6% profit;
  2. If silver price remains unchanged between $19/oz and $20/oz over the next few years, it is still a good idea to buy a few more ounces for 6% saving;
  3. If silver price drops more than 6% from current spot price, it will be wise to hold your purchase. A sample illustration as following: Current silver spot price is $20. If silver price drops 10% (more than 6%) next year, the effective cost for buying 1 oz of silver will be $19.08 even included GST ($20 – 10% + 6%). In other words even GST has been imposed, if silver price dropped more than 6%, you will still be paying a lower price compare to buying now without GST.

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook specifically written with a Malaysian’s context for silver investment. You will learn different strategies, practical tips and tricks for investing in silver. Click here to find out more.

Top 3 Reasons Silver Rise in 2014

For investors who have invested in silver, surely you are aware that 2013 is one of the worst years for silver market. 2014 could be the year for silver price to rebound and here is the top 3 reasons:

1. Mining Cost

During the 3rd quarter of 2013, silver mining costs averaged $21.39/oz. In the past 2 months, silver has been fluctuating below $20.40 which is below mining cost.silver_60_day_o_usd

If it costs more to mine silver than the market is willing to pay for, eventually the producers will stop producing silver. A logical question to ask is why would someone spend RM1.00 to produce a product that can only be sold for RM0.90?

Ironically, this is what exactly happening in silver market. These are the type of situation value investors dream of because it allows them to purchase silver at a great discounted price. Such environment (below production cost) cannot last for long time because it does not make sense to produce anything to sell it for lower than production cost. Eventually silver supply will be cut, then scarcity, and eventually silver price will jump.

2. Technically oversold

The bull market of silver started at the end of 2001. From $ 4.02 to recent all-time high of $48.42 (increase of 1,104%). Several significant corrections took place. The most severe one was in 2008 when the silver price dropped by 57% then to jump 441% to a new all-time high.

silver-long-term

As shown above, silver price is in an oversold position. The situation is worse than in 2008 or in 2001. Such positions have always been followed by strong upward movements. After 2008, silver rose 441%. Some precious metals (gold and silver) shares even jumped 2,800%!

However, do not get overly excited with shares profit. Gold and silver stocks are more volatile than the real gold and silver. During uptrend, the profits soared higher; during downtrend, the losses would also be more significant. If you are new to precious metal investment, it is best to buy the metal itself than to buy the companies that owns the metals. It is hard work to select the right companies and to monitor them. You need to know the company management and understand their long term plan. That potentially makes your silver investment more complicated than necessary.

3. Asia Demand

India and China continue to be the largest buyers of gold and silver in the world.

indian-silver-trader

In 2013, India government has made several attempts to slow down demand for gold. India government increased import taxes to 10% for gold bullion and 15% for gold jewelry. That has resulted Indians to move their attention to silver. Between Jan and Sep 2013, silver imports to India totaled more than 4,000 tonnes, already more than whole year of 2012. Silver imports jumped 40% from 241 tonnes (in Sept 2013) to 338 tonnes (in Oct 2013).

photovoltaics-chinese

When China government is urbanizing 250 million citizens, that will require a lot of copper and other commodities. The government continues to source for renewable energies, which means an enormous push for photovoltaics and physical silver. Enormous demand for physical silver will be required by photovoltaics that will come from China and Japan.

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook written with a Malaysian’s context for silver investment. You will learn different strategies, practical tips and tricks for investing in silver. Click here to find out more.

Silver Had A Terrible Year 2013

Silver had a terrible year in 2013. Silver price felt 36% in 2013. It started off with $30.11 and closed at $19.41.

year-2013

PricewaterhouseCoopers (PwC) conducted a survey on investors’ expectation on silver price for next 12 months in 2014:

  • 53% said they expect the price to increase
  • 38% expect it will remain at current levels
  • 9% predict a further decline in price.

Download the full report by PwC.

Silver is a multi-purpose metal. It acts as both a currency and an industry commodity for investors. Silver has a wide-range of applications such as jewelry and medical equipment. The price of silver dropped 36% in 2013. Starting the year around $30/oz and felt to $19/oz. Silver hit an inflation-adjusted record of just under $50 in April 2011. Oversupply of paper silver is partially to blame for the drop in silver price in 2013. Its correlation with gold as a store of value for some investors has contributed to its price depreciation in recent months.

Also, be sure to check out last week article: Top 3 Silver Investment Recap in 2013 >>> http://silverinmalaysia.com/top-3-recaps-silver-investment-2013/

In investment investors do not expect to make money right after putting in the capital. There will be up time and there will be down time. Apparently 2013 happens to be one of the bad year for silver.

If you have been holding on your purchase and wondering if this is the right time. Remember that you are getting a 36% discount compare to those who have invested 12 months ago.

In fact, if you use a longer time frame back to April 2011 when price was almost $50, you are now getting a 60% discount!

year-2011-now

Is now a good time to invest? Will price drop further? Unfortunately I do not have the crystal ball and I could not predict the future. All I could do is show you the facts and you have to make the decision.

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook written with a Malaysian’s context for silver investment. You will learn different strategies, practical tips and tricks for investing in silver. Click here to find out more.

Top 3 Recaps Silver Investment 2013

2013 has came to the end. Silver price has not been particularly exciting this year. Here are the top 3 events worth noticing:

1. April Price Drop

On 12th April 2013, silver price broke support at $26. $26 has been a strong support in the past. When silver price broke a strong support, the support will then become a strong resistance in the future. During this drop, some investor got panic because a strong support is broken. Most investors took this opportunity to buy silver at a discounted price.

support

2. American Silver Eagle coin sales created new record high

American Silver Eagle (ASE) coin sales is a good indicator to gauge investment demand for physical silver. The coin has a beautiful design yet the premium is relatively low among the other coins. That made ASE became a highly demanded silver coin in the world.

In 2013,  American Silver Eagle coin sales has created all time high sales record. Despite bearish silver price movement in 2013, physical demand for American Silver Eagle coin remained strong.

coin

3. 2014 silver price outlook

Technically, silver market is not over by looking at the major uptrend lines. The fundamentals continue to build in a favorable way for silver. The facts remain that gold is moving to China and India at rapid rate, Germany only received a fraction of their gold back. It will take another six years before the New York Federal Reserve will finish their delivery.

2014 will be a rebuilding year for silver to regain strength but not significantly. This is due to the ongoing currency debasement and the coming economic crisis. It is usually wise to buy when the markets are quiet and when investors are pessimistic.

Silver price is expected to be traded between $19 to $26. It might take several attempts to to break $26 before hitting $30 mark. However, it is always possible that something could take place to shift market sentiment overnight.

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook written with a Malaysian’s context for silver investment. You will learn different strategies, practical tips and tricks for investing in silver. Click here to find out more.

Did Silver Price Drop

The Federal Reserve announced last Wednesday (18th December) it would start to taper the aggressive bond-buying program from $85 billion to $75 billion a month beginning in January 2014.

In layman terms, it means Federal Reserve is suggesting they are going to slow down money printing because the economy is recovering. They are going to print less of $10 billion each month starting January 2014.

Silver price has dropped as a reaction to the announcement:

silver-price

Some investors who have been waiting for the perfect time to buy silver have decided to make a move to purchase silver. However they are surprised that silver price did not significantly dropped in their final purchase price (in Ringgit).

The reason is because when Fed announced US economy is recovering (by tapering QE), that also means USD will be strengthen. Unless Ringgit was still peg to USD, a strengthen USD basically means a weaker Ringgit.

Exchange rate went up to as high as $1 = RM3.2970 last week

usd-myr

Ideally when silver price drops, investors would be able to buy silver with lower cost. However, during this drop (driven by strengthen US economy), USD value went up and have off set the final purchase cost in Ringgit.

Compared to other investment class (such as shares in KLSE or property in Klang Valley), silver has an additional variable which is currency exchange rate. When you approach your local silver dealers, some will factor USD/MYR exchange rate into final selling price while some would not. A lower silver spot price in the international market does not always guarantee a lower silver price in Malaysia.

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook written with a Malaysian’s context for silver investment. You will learn different strategies, practical tips and tricks for investing in silver. Click here to find out more.

Pay First, Send Later

One of the most cost effective methods to purchase silver is purchasing from online sellers. Precious metal online sellers could range from a company that has a physical setup (office), to someone who someone who sells silver as a part time job – running it at the comfort at his bedroom.

If you recently started buying silver online, you might have a question in mind. Should you pay the seller first? Or the seller should send you the product (silver) first?

Pay first, send later

Either way there are risk to both parties.

If buyer pays first, buyer is putting his money at risk. What if the seller disappears after collecting the money?

If seller sends first, the seller is putting his silver at risk. What if the buyer disappears after collecting the silver?

It is really a chicken and egg situation.

If the seller has a website (eCommerce) that can receive order, the transaction becomes easy and clear cut. When a visitor visits a website, he sees a products that he would like to buy, he clicks on the “Buy” button, enter his details and confirm the order. He can perform the payment online within the website. The payment gateway would typically be direct debit (such as Maybank2U, CIMB Clicks, etc), iPay88, PayPal and offline bank deposit.

In this case, as long as the payment is not received, the seller would not ship out the silver. In fact, if the buyer has selected offline bank deposit as the payment method and did not pay within certain period of time, the order will be voided. This period of time varied for different sellers. The period could be anything in between 2 hours till the next few days.

There is another type of seller that do NOT have an eCommerce website to facilitate the transaction.

This type of sellers are usually individuals. They usually place their margin a little lower, to attract buyers who look for lowest selling price.

If you are buying from individual sellers, there are rooms for negotiation – especially when you are buying large amount of silver. The communication is often done through private message, SMS, email or even phone call. This is where things started to get interesting.

Some buyers would demand seller to ship out the product before depositing the full amount. A minority of sellers would agree to this practice while most would not.

The standard transaction process is always the buyer pays for the silver he wishes to purchase. Then seller would ship out the silver. There is no such rule as “Send first, pay later”. Online transaction is always “Pay first, send later”.

There might be an exception if both the buyer and seller has established a trusting relationship and the seller is willing to bear the risk.

Personally I have done it a few times with seller whom I have been buying from for a long time. I needed the stock urgently. The seller offered to send the stock before receiving the full amount. In return, I offered to maxed out my online transfer limit as deposit and then paid the remaining with cheque on the next working day.

This example is an exception case. Most of the silver transactions I had is still “Pay first, send later”.

The standard policy for silver transaction is “Pay first, send later”. This happens in both eCommerce platforms and individual sellers. If this is the first time you are buying silver and wondering whether the seller should send first, or you should pay first, the answer is “Pay first, send later”.

However, if you feel “Pay first, send later” is a risky move, you can consider the following:

  1. Only buy from reputable online sellers
  2. Only buy small quantity to “try” out a seller
  3. Request seller for COD (Cash on Delivery) instead of online payment and postage.

I will discuss more on COD (Cash on Delivery) on next week post.

Silver Malaysia eBookPractical Guide For Investing Silver In Malaysia is an eBook specifically written with a Malaysian’s context for silver investment. You will learn different strategies, practical tips and tricks for investing in silver. Click here to find out more.