American Silver Eagle Out of Stock Again?!

Last Wednesday (5th Nov 2014), the U.S. Mint announced they are temporarily out of stock for the world famous coin American Eagle. This is primarily due to low spot price for silver and tremendous demand for physical silver bullion.

american silver eagle 2014 out of stock

U.S. Mint said they will further announce when additional inventory will become available for sale, but did not provide specific details.

The similar out-of-stock incident also happened in year 2012 and 2014. (Click on the year link to the articles).

We know the price of silver has came down tremendously. But what good does it do if the producer is not selling any silver to the public? What is the point of low price if investors cannot get physical silver in their hands?

Paper silver might be an alternative for investors. However bear in mind that a big portion of silver demand came from industrial demand. Industrial means physical silver. You cannot give a stack of silver paper (contracts) to the manufacturers in China to produce iPhone 6 and solar panel!

The consecutive years of temporary out of stock from U.S. Mint basically is suggesting they are running their minting operation on a very thin level of available raw silver. They are unable to cope with a suddenly spike of demand, which happened in the last few weeks.

This is not the first time such happens. Does it mean they have not learn from the past years? Or does it means they are unable to secure larger amount of available physical silver for production?

Till date the sales for American Silver Eagle coin is as following:

sales

It feels really weird to me that silver – a limited precious metal on earth that have strong industrial application and investment demand is facing downtrend in price. Silver price movement is definitely not aligned with demand.

Again, silver is a finite resource on earth. One coin alone (American Silver Eagle) eats up average 40 million oz of silver each year in the past 4 years. When silver is used in industrial application, it is gone forever.

I’m wondering, how long more can the trend of low silver price yet strong demand continue?

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 hit $15 mark

Last Friday, Bank of Japan decided to increase its QE (quantitative easing) program for another 10 trillion Yen – from 70 to 80 trillion Yen. The amount is slightly under $100 billion dollars per year.

Traditionally QE program has the effect of boosting precious metal (such as gold and silver) price. However, silver price further dropped to $15 mark last Friday. This is in line with the descending triangle pattern we saw early October.

silver-price-friday

This is a clear sign that market movement is no longer driven by fundamental. It is driven by sentimental. The market is looking for any reason to sell silver. Regardless good news or bad news. A bad news is a bad news, a good news is also a bad news.

The fundamental of silver is showing there is a large deficit in physical silver supply.

The annual production of physical silver is approximately 25,500 tonnes. To put this into perspective:

silver-cube

Silver had a physical supply deficit of 103 million oz in 2013. In layman term if your salary is RM3,000/month and you spend RM4,000/month, you have deficit of RM1,000.

In physical silver case, here is how the deficit happens:

physical-silver-deficit-2013

At current silver price ($15 – $16), most of the primary silver producers are already selling silver at a loss. Simple due to it takes more to produce silver than it can be sold for. Imagine a product take RM100 to produce but can only be sold for RM80. How many manufacturer would want to continue producing?

The following are some of the primary silver producer and their cost for producing 1 oz of silver:

production-cost

The number shows it simply doesn’t make sense for miners to continue producing physical silver.

Silver is not like trees that can be replanted back, or fishes that can be grown back. When 1 oz of silver is used up, it is gone forever. The total physical silver demand has been pretty constant for the past 10 years.

30072845-14127913664152102-SomaBull_origin

The demand for physical silver are not reducing for the past 10 years. The Silver Institute forecasts that silver demand will continue to rise over the next few years:

forecast

With the strong demand from both investment demand and industry demand, can silver price continue to stay below production cost?

In the short term, anything can happen. That includes silver price doing lower than $15. Silver price dropped below $9 during the 2008-2009 financial crisis but spike up to almost $50 in 2011. Silver is a long-term investment that definitely requires your patience.

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.

New Low in Silver since 2010

Silver price hits new low since year 2010. The trend for silver price is bearish (potentially moving lower) as you can observe from this chart:

silver-short-term

According to Investopedia, this is known as descending triangle. The descending triangle is recognized primarily in downtrends and is often thought of as a bearish signal.

decending

If we zoom out and take a look at the longer term of silver price movement, the similar pattern can be observed as following:

silver-long-term

During this period, many investors took advantage of the low price to buy physical silver.

Take the one of the most famous silver coins – American Silver Eagle, the sales for 1oz coin in 2nd half of 2014:

  • July – 1.9 million oz
  • August – 2.0 million oz
  • Sept – 4.1 million oz (breakdown as following)
    • 1st to 25th Sept : 1,700,000 oz
    • 26th Sept : 700,000 oz
    • 29th Sept : 350,000
    • 30th Sept : 1,357,000 oz
  • Oct – 2.5 million oz (at the point of writing this), where
    • 1st and 2nd of Oct : 1,650,000 oz

If we put this into perspective, from 26th Sept to 2nd Oct (5 business days) there are total of 4.1 million oz of American Silver Eagle sold. That is just for 1 coin!

2014_American_Silver_Eagle_Dual

Silver investors are buying on physical silver as there is a clear disconnection between the physical demand and spot price.

These are some of the reason why physical silver investors believe in physical silver and took advantage over the low price.

  1. Global electronics demand.
  2. Global jewelry demand, especially in Asian.
  3. Global industrial demand (it is expected to grow 5% per year through 2016 and outpace global GDP growth).
  4. The number of new industrial applications.
  5. The number of new bio-medical uses.
  6. Photovoltaic (solar) demand.
  7. Volume on the Shanghai Futures Exchange, which already surpassed the COMEX in 2013.
  8. Perth Mint sales were 41.6% higher in August than July, and September sales were the 3rd highest of the year.
  9. Domestic demand in China, which is expected for the first time in history to exceed 250 million oz in 2014.
  10. Gold/silver ratio (getting close to five-year high).
  11. The difference between price and the cost of production.

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.

Dr. Gordon Pederson

Silver is known for being applied in health science, listen to Dr. Gordon Pederson what can silver do to your body.

the-most-precious-metal-ebook

Click here to download the eBook, The Most Precious Metal by Dr. Gordon Pedersen with Dr. Bryan Frank.

The following article has first appeared in SilverHealthInstitute.com by Dr. Gordon Pederson

Silver’s Long, Proven History and Health

“Silver has an interesting history. Our mountains are made of silver particles, and as rainwater drains through these particles, it becomes purified spring water. Greeks used to use silver containers to purify their water. Pioneers used silver coins in their milk containers to purify the milk. What that means is that it killed the bacteria that caused the milk to go bad.

Silver has been used in containers, and now is even being used as needles to destroy bacteria. Needles for medical use. We’ve got silver that’s being used in clothing. The military uses it in the armpits and sock, and that silver kills the bacteria that causes order, and possibly even disease. So, what you are seeing is that silver destroys bacteria, viruses, and yeast. As such, we can use it in our washing machines, we can use it in our clothing, we can take it internally and it’s going to destroy those pathogens that could have caused disease.

Now we’ve learned to put a charge on that nanoparticle of silver. A particle so tiny it will fit inside a single red blood cell. Now, with that ability to transfer anywhere in the body, and destroy bacteria, viruses, and yeast, you’ve got a pathogen killing machine that’s as tiny as a single cell.

Silver is Nature’s Finest Germ Killer

Silver destroys bacteria, viruses and yeast. It does so very effectively. In fact that in lab studies, we’ve found that if you place a pathogen that can cause disease – from bacteria, from viruses, from yeast – add to it the silver, especially in the alkaline form, the molecular structure that’s tetrahedral will destroy those pathogens in under 6 minutes.

In fact, a pharmaceutical test reported that we can destroy even MRSA. That stands for Methicillin Resistant Staph Aureus. That’s the staph bacterium that causes flesh eating bacteria diseases; its eats your flesh. Even the resistant form, meaning bacteria that can’t be killed by the drugs, the antibiotics can’t even kill it; silver, in this form, can kill that in about six minutes.

In addition to staph and strep and e-coli, that causes food poisoning, salmonella causes food poisoning and pseudomonas aeruginosa, some of the most difficult bacteria and yeast like candida, are killed in under 6 minutes, using this form of tetrahedral molecularly strong silver, in an alkaline setting.

Is Silver Safe?

Silver is very safe when used in the right concentrations, in the right forms, and in the right manners. For instance, silver can come as a liquid. As a liquid with ten parts per million, you’d have to drink 16 ounces of that liquid every day for 72 years, it’s estimated, if none of it left your body, before you would reach a point where it would saturate your system causing argyria.

On the other hand, people who make their own colloidal silvers actually can have a problem, because many of them will make silvers with 50,000 parts per million. Those parts can accumulate because they are charged with the wrong electromagnetic charge, and they are put in a parts per million that is nothing less than an accumulation of silver in the fats. So, when you get a permanently dissolved silver in a liquid form, residing in an alkaline system, you know you’ve got the safest silver, and that you’re going to be able to take two teaspoons twice a day with a huge margin of safety. In fact, I’ve never seen anybody have an argyria problem, or any allergic reaction to this form of silver, even when they take it in large doses.

What this means to you is: identify the silver, identify the form of the silver, and identify the amount you are going to take. If you stay with what is listed on the label, you’re the person who is never going to have a problem with safe silver.” Dr. Gordon Pedersen

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.

Property vs Precious Metal Investment

For the past few years, property investment has been a hot investment choice for many Malaysians. Most people have the impression that a typical property would be a landed double storey house. The problem is, such typical house is often too expensive for majority medium class working employee to invest. Hence we would turn to cheaper alternative such as apartment or condominium.

The most common method of investing in apartment or condominium is to buy one (or multiple) unit during developer launch, keep it for a few years and sell it off for a profit upon completion. This method has little hassle as property developers often bear the transnational costs – although the truth is property developers have already factored those costs into selling price, we will leave that for a separate discussion.

Take a look at precious metal investment. The most common forms of precious metal are gold and silver. Gold is the typical grade of precious metal, which you can see it as the landed double storey in property investment; silver is the more affordable alternative of precious metal, which you can see it as the apartment grade of investment.

How much cheaper is silver compare to gold?

At the point of writing this, gold and silver price over Maybank counter has been taken as following:

maybank gold & silver price

Gold is selling at RM138.22/gram while silver is RM2.16/gram. In other words, silver is approximately 64 times cheaper compared to gold. We call this as the gold/silver ratio. This can be calculated simply by dividing gold price by silver price.

In fact if you look into the history, silver has always been much cheaper compared to gold:

gold silver ratio

Regardless which point of the history you are looking at in the past 20 years, silver price was fluctuating between 86 times to 32 times cheaper compared to gold.

You can make profit base on gold silver ratio alone without worrying gold price and silver price individually. This could be achieved by buying silver when gold silver ratio is high, swap your silver to gold when gold silver ratio is low, then swap your gold back to silver when gold silver ratio is high. Continue the swapping, you could have doubled or tripled your precious metal possession given enough time.

(I discussed gold silver ratio with much greater practical details in my eBook)

So what are the difference between gold and silver?

  1. Central banks do not hold silver. Gold and silver have long been considered money in the history. However, central banks do not hold silver because for the same amount of money central banks require a much large storage to keep silver.
  2. Silver price is more volatile than gold price. When silver price goes up, it goes much large in percentage compared to gold price. Similarly, when silver price comes down, it comes down much large in percentage compared to gold price.
  3. Silver price is traded far lower compare than the physical ratio. The average mining ratio for gold and silver is 1 to 10. It means when a miner digs the earth, on average the miner would find 10 gram of silver together with 1 gram of gold. However the trading price for silver is approximately 64 times cheaper as of today. How long can this go on?
  4. From point #1, we know that gold is mainly kept by central banks. However silver is mainly consumed by industrial application because silver is the best conductor of electricity. Gold is the 4th. Silver also has antibacterial properties which made silver widely used in medical field.

Silver is often seen as the poor men’s gold. In property investment, if you do not have a big budget to buy a typical double storey landed property for investment, you can turn to apartment or condominium. In precious metal investment, if you do not have a big budget to buy few kilos of gold, you can turn to 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.

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.