With Market, Without Price

Last week, the manufacturer of American Silver Eagle coin, United States Mint announced:

“The United States Mint will issue its last weekly allocation of 2013 dated American Eagle Silver Bullion coins on Monday, December 9, 2013.  We will begin accepting orders for 2014 dated American Eagle Silver Bullion coins on Monday, January 13, 2014.”

us-mint-close

What this means is, U.S. Mint will not be selling any American Silver Eagle coins for more than 1 month (between 9th December 2013 to 13th January 2014). This is not the first time U.S. Mint stop taking order. The similar announcement was made in late 2012 >> American Eagle Silver – Sold Out!

The record all time high sales for American Silver Eagle coin is 39.87 million oz in 2011. At the point of writing this article (3rd Nov 2013), the coins sales has reached 39.18 million oz. If you are reading this article in mid November (or later), I’m fairly confident the bullion coins would have made a new record by passing 2011 all time high record.

ase sales

In year 2011, there was major crash in silver price and sales went all time high. In 2013, there was another big drop and again, sales demand went up significantly. It seems that the lower the price goes, the higher the demand. This defies the basic supply demand principle and cannot go on forever. Physical silver is a finite resource with infinite demand and applications. When industrial usage used up the physical silver; when investors continue to buy physical silver at a rate and volume that increasing every year, physical silver will be used up (due to low price), and people will be wondering – now what?

It is ironic to see physical silver has highly demanded yet silver price has not significantly rise since 2011. The reason is because silver spot price is still largely controlled by paper silver price. This is a “with market, without price” situation, which means there are demand for physical silver but silver spot price did not catch up. Many physical silver investors are experiencing paper lost for holding the physical silver.

Malaysia property market is the opposite of this known as “with price, without market” situation. Property prices has been soaring for the passed 5 years. Transaction has been slow since early 2013, yet price did not drop significant. I was talking to a real estate agent over the weekend, he shared that he has one property being viewed for 13 times and yet could not sell it off. Many property investors are experiencing paper gain for holding their property.

Are these both illusions that would only clear themselves over time? Personally I’m in no rush of selling silver or buying more property. What is your game plan?

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 Malaysia

Calculate Silver Price Malaysia By Oz & By Gram In Ringgit

In Malaysia silver market, silver items are measured in 2 different measurement units, by ounce and by gram (or kilo gram). Many novice silver investors might find silver price Malaysia confusing. This chapter is to show how to convert from one unit to another so that investors could see the price of silver strictly by measuring the weight of the silver item.

silver price malaysia

Disclaimer: Displayed price and current price for silver price Malaysia might be varied due to spot price fluctuation. This image is displayed solely for illustration purpose only.

Before we calculate silver price Malaysia, note that when we talk about 1 ounce in precious metal it is actually 1 troy ounce. It is different from the standard ounce that people used for measuring weight of other “stuff”. For the very beginning, look at this conversion:

silver price malaysia

In the following silver price Malaysia calculation, for simplicity sake, we will use 1 troy ounce = 31.1 grams. We will also call it ounce (oz) instead of troy ounce.

Silver Price Malaysia – Conversion from Oz to Gram

To determine silver price Malaysia in ringgit, convert N number of oz to gram, you multiply N with 31.1. For example:
Convert 1 oz to grams = 1 x 31.1 = 31.1 grams.
Convert 3 oz to grams = 3 x 31.1 = 93.3 grams.
Convert 5 oz to grams = 5 x 31.1 = 155.5 grams.

This calculation is useful if the silver item is measured in oz but you are quoted silver price Malaysia in gram. By converting the weight of silver from oz to gram, it shows if an silver item is priced fairly.

For example, you are planning to buy a 2 oz coin and the respective website has published silver price Malaysia as RM 3.34/gram. The website is selling the coin for RM 310. So can you tell if the silver coin is priced fairly? Is this a low premium coin or a high premium coin? If high, how high? If low, how low? Let’s perform the following calculation:

Convert 2 oz to grams = 2 x 31.1 = 62.2 grams.
Calculate price for 62.2 grams silver in Ringgit = 62.2 grams x RM 3.34 = RM 207.75
Now, we can tell that the silver content in the coin worth RM 207.75.
The premium of the 2oz coin is RM 310.00 – RM 207.75 = RM 102.25
The premium in percentage is (RM 102.25 / RM 207.75) x 100 = 49.22%

You should be able to identify if the published silver price Malaysia premium is too high depending on the brand and mintage quantity. If you are a value-for-money silver investor and this 2oz coin is an less recognized brand in international market, you will want to skip this because you could buy other silver coins with lower premium and the silver coin that is recognized world widely. You should only buy this 2 oz coin if you are willing to pay for the numismatic value of the coin.

Silver Price Malaysia – Conversion from Gram to Oz

To determine silver price Malaysia in ringgit, convert N number of gram to oz, you divide N with 31.1. For example:
Convert 1 kilo gram to oz = 1000 / 31.1 = 32.15 oz.
Convert 500 grams to oz = 500 / 31.1 = 16.08 oz.
Convert 250 grams to oz = 250 / 31.1 = 8.04 oz.

This calculation is useful if the silver is measured in grams but you can only check silver price Malaysia in oz. By converting the weight of silver from gram to oz, you can tell if an silver item is priced fairly.

For example, you are planning to buy a 100 gram silver bar and the international spot price is USD 33.67/oz. US Dollar to MY Ringgit conversion is 3.02. The website published silver price Malaysia as RM 375.00. So can you tell if the silver bar is priced fairly? Is this a low premium bar or a high premium bar? If high, how high? If low, how low? Let’s perform the following calculation:

Convert 100 grams to oz = 100 / 31.1 = 3.21 oz.
Calculate price for 3.21 oz silver in Ringgit = 3.21 oz x USD 33.67 x 3.02 = RM 326.40
Now, we can tell that the silver content in the coin worth RM 326.40.
The premium of the 100 gram bar is RM 375.00 – RM 326.40 = RM 48.60
The premium in percentage is (RM 48.60 / RM 326.00) x 100 = 14.91%

If you are a value-for-money silver investor, this is a reasonable deal. Premium for silver below 15% from spot price could be considered as low premium. Silver price Malaysia can be calculated easily if you follow these simple steps.

“Silver Price Malaysia” is a sample chapter from Practical Guide for: Investing Silver in Malaysia.

Silver Malaysia eBookSilver Price Malaysia is simple if you follow the above formula. Practical 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.

Triple Top Formation

april

Many investors could recall that silver price broke major support at $26 in April 2013.

However for those who are familiar with technical analysis, it is no big surprise. This is simply to completion of Triple Top Formation. The definition for Triple Top Formation is:

When price that is trending upward tests a similar level of resistance 3 times without breaking through. Each time price tests the resistance level, it falls to a similar area of support. After the third fall to the support level, the pattern is complete. Price will falls through the support; the price is then expected to move in a downward trend.

tripletopnew

The movement of silver price fits perfectly into Triple Top Formation definition. First we saw silver price was trying to test resistance level at $36 for 3 times but failed to break through.

silver price - top

Then, price did fall to the similar support at $26

silver price - support

The final indication is to break through the similar support at $26 to complete Triple Top Formation. When I saw the 3rd top, I have advised some of my members to stop buying silver (in the short term) and wait for silver price to go below $26 before start buying again. The breaking of major support at $26 did not come as fast as expected but it did eventually come in earlier this year April 2013.

Now, the Triple Top Formation is over. What I want to show you NEXT is, how can we take advantage of current situation. The previous resistance is the current support. We need to identify the strong resistance in silver price history to determine current support. Determining such support would give us indication when is a good time to buy silver at a potential bottom.

We could notice silver price was acting as resistance level at $19 in late 2009 to early 2010. Few weeks back, silver price hit $18.18 and was supported (did not move further lower). We have potentially hit the bottom of Triple Top Formation.

silver price - resistance

I can’t promise this is the ultimate bottom for silver price but I did personally started buying silver again in early July 2013 (once silver price was around $18 – $19). Let’s hold tight to our PHYSICAL silver, wait and welcome the next bull run.

If you have been waiting for the perfect timing to enter into silver investment, this might be the time you have been waiting for.

Silver Malaysia eBookIn the eBook: Practical Guide For Investing Silver In Malaysia you will find out a list of trusted dealers whom I personally buy from. You can buy from them confidently without worrying buying from the wrong type of dealers. The eBook will guide you step by step to complete your silver purchase order. 

Capital Gain or Dividend Yield

What type of investor you are depends on what type of investment return you are getting. Refer to everything you have invested or consider investing, very often they boil down to ONLY 2 types: capital gain or dividend yield (or sometimes both).

Capital Gain

Buy low, sell high would get you capital gain profit. When you identify an undervalue asset, you buy it with a low price, keep the asset for few years and then sell the asset at a higher price. Take your selling price minus your buying price, if that is a positive number, you are profiting from capital gain.

Silver investment falls into this category. Silver is an asset where you invest when the price is low and sell when the price is high. Typically, it takes a number of years for investor to achieve a minimum double digit profit (percentage) return. Take a look at an example of capital gain at work in silver history price.

silver price history

We won’t pick the bottom or peak because that is simply unrealistic. Assuming you bought silver in year 2009 at price $12 and sold your silver in year 2011 at price around $29. You are making a good profit of 140%. In other words, if you have put in RM10,000 into silver in 2009, your initial capital has become RM24,000. Such return is not too bad for 2 years of waiting.

However capital gains work in both ways. Any asset that involves capital gain will experience market cycle. Price will go up and price will come down. We call the cycle as bull market (price keep going higher) and bear market (price keep going lower).

current silver price

In this example, we picked a price at $34 in July 2011 and hold the silver for 2 years and here we are silver price at $20 in July 2013. We are experiencing a lost at almost 50%. In other words, if you have put in RM10,000 into silver in 2011, your initial capital has become RM5,000. It is a painful experience to make a 50% loss.

Anyone who bought silver in the past 2 years would have experienced bear market and the pain of capital loss. The good news is at the point of writing, precious metal is believed  to have bottomed. If you have bought silver in the past 2 years, now could be the turning point for silver. If you have not bought any silver, you should give serious consideration start buying small amount of silver especially gold silver ratio suggests current silver price is relatively cheap.

Dividend Yield

You receive dividend yield as return when you invest X amount of money and after a period of time, you receive Y amount of dividend (or some call Y as interest) – regardless what is the value of your initial capital. The financial assets that gives dividend yield includes fixed deposit, REIT and dividend stocks. Silver could not be categorized into investment that gives Dividend Yield because silver does not produce cash flow.

Some investors are consistently buying silver in bulk at a low price and selling the silver with a profit margin. That gives the investor cash flow. However, I would not view this as investment gain (dividend yield) because this involves certain amount of labour wiork, which is more appropriate to be view as running a trading business.

Summary

Silver is a simple investment where you profit by buy low, sell high. If you are looking for an asset that you can buy at low price now and sell at higher price in the future, silver is one of the most undervalue assets in the market. Remember, in order to sell high, you first need to buy low. Nothing is going to happen if continue sitting at the side line watching without taking action.

Silver Malaysia eBookIn the eBook: Practical Guide For Investing Silver In Malaysia I discuss 4 strategies you can use immediately to help you achieve capital gain in silver investment. The 1st strategy is designed for beginner. 2nd & 3rd are for average investors. 4th are for the pros. Click here to find out more.

Gold Silver Ratio

Gold silver ratio is an important factor in precious metal investment but is often neglected by investors. Many investors focus intensively on precious metal prices fluctuation rather than the relativity factors. Professional precious metal investors could make money by mastering gold silver ratio alone.

Gold silver ratio is a value (number) by dividing gold price with silver price. Take example of today’s gold price ($1223.80) and silver price ($18.90).

Gold silver ratio = 1223.80 / 18.90 = 64.75

(For simplicity sake, we round it and use 65)

gold-silver-ratio-1-65Professional precious metal investors who focus on gold silver ratio never worry about price of gold and silver dropping or rising. For them, regardless of which direction price moving, they make money out of the market.

Precious metal investment is a long term investment, let’s look at the history of gold silver ratio as far as we could:

gold-silver-ratio-1968

Regardless in which investment market, it is impossible to catch the bottom to buy and sell at the top. Forget about gold silver ratio bottom at BELOW 20 and top at ABOVE 100. Let look at some more reasonable numbers: bottom at 40 and top and 80.

The method they use is simply swapping gold and silver at the correct ratio. When gold silver ratio is high, they convert their gold into silver and wait. When gold silver ratio is low, they convert back their silver into gold. So where is the money being made??

Theoretically, if you have 1 oz gold at the gold silver ratio of 80 (year 1994). You can exchange your 1 oz gold into 80 oz silver. By the the time gold silver ratio drop to 40 (year 1998), you can use your 80 oz silver to exchange for 2 oz gold (2 x 40 oz silver). Because you know how to make use of gold silver ratio, in this swapping process you made 1 oz of additional gold.

When you sell the additional 1 oz gold, that is your profit while you still hold another 1 oz gold as your initial capital. During this process, you pay little attention to and have little worry on the fluctuation of gold price and silver price. You only take the prices to divide them to get your target ratio.

In reality, you cannot simply take gold spot price and silver spot price to swap your gold and silver. Gold and silver prices are determined by spot price PLUS premium. Premium includes minting cost, packing cost, delivery cost, dealer’s profit margin, and depending on the type of gold or silver you are getting, the premium could vary in Malaysia market.

Enough of theory, let’s compare 2 items in the market. 1 oz Canadian Maple Leaf gold coin (from UOB) selling at RM4165 and 1 oz Canadian Maple Leaf silver coin (from BuySilverMalaysia.com) selling at RM85.

uob gold price bsm

The current gold silver ratio in the market is:

Gold silver ratio: RM4165 / RM85 = 49

The swapping process for gold and silver in the market always uses the selling price of the precious metals rather than the theoretical spot price. Hence, you use 1 oz gold to exchange 49 oz silver, OR use 49 oz silver to exchange for 1 oz gold.

Gold silver mining ratio has been around 1 to 9. Since 80% of the silver being mined is a by product for gold, silver is only produced when there is gold. In other words, when 1 oz gold is mined from the ground, there is ONLY another 9 oz silver being brought up together.

Whether you want to use gold silver ratio of 65 or 49, the ratio is still way too high from the actual mining ratio. In order for gold silver ratio to come down, there would be 2 possibilities:

  1. Gold price stagnant while silver price goes up significantly higher, OR
  2. Gold price appreciates at a slower pace than silver

Either way, it is going to make silver looks extremely cheap at current price.

Silver Malaysia eBookIn the eBook: Practical Guide For Investing Silver In Malaysia I discuss more strategies for investing silver in Malaysia. You’ll learn many other “practical issues” in silver investment and I will show you how to solve them – right from choosing your 1st oz silver to storing your 1,000 oz silver. 

What The Chinese Are Buying?

Due to significant price price drop for precious metals (gold and silver), people around the world are massively buying up both gold and silver at such good price. Take China as example, on June 11, almost 10,000 people line up in front of a gold shop to buy precious metal. The buyers lined up during the three day Dragon Boat Festival.

Gold Line 2_0 Gold Line 4_0 Gold Line 5_0 Gold Line 6_0

While the PAPER price of gold and silver may have dropped nearly 25% this year, it’s clear that PHYSICAL demand in the real world is soaring.

Gold and silver tend to trade together, however the demand for these two metals is quite different. The biggest demand driver for silver is its industrial use. While gold is driven by investment demand from both private citizens and central banks. Demand for industrial silver uses in electronic devices (such as smart phones, air-conds, TV, computers, etc) is increasing. Demand outlook for silver is better than the demand outlook for gold.

While gold is roughly double its nominal high of $850 in January 1980, silver is still barely below half its nominal high of around $50 an ounce set in 1980 and April 2011. That makes the white metal affordable and such a bargain for the average investor looking to protect the value of his wealth.

eric-sprott

Eric Sprott, the billionaire Canadian investment guru, recently said:

“I think silver will be the investment of this decade whereas gold was the investment of the last decade. Silver will outperform gold. I believe silver will trade down 16:1 ratio to gold…Your return will be 300% more. If you have the patience and can stomach the volatility, I think silver will by far be the better investment going forward.”

In the first 5.5 months of 2013, U.S. Mint sold more than 23 million American Silver Eagle bullion coins. That’s the first time ever the Mint has sold this many coins so early in the year, setting a record in the 27-year history for this coin. If price continues to stay this low, sales is expected to exceed historical high in 2011. Do note that this is the data for 1 coin ALONE –  American Silver Eagle.

silver-prices-investment-demand-chart

The reality is, coin dealers both across the U.S. and locally in Malaysia have been regularly selling out of their inventories, desperate to get new allocations. Find out more about the physical silver shortage in Malaysia.

Silver prices ended April down $4.14 an ounce, or 14.6%, at $24.42 an ounce, marking the third consecutive month of declines. The metal was little changed in March, trimmed by just $0.10. In February, silver shed $2.92. In January, it gained a modest $1.12.

However, do not get overly concerned on short-term fluctuation in paper silver price due to economic noise. I personally treat it as a great buying opportunity when price is low. Silver is an industrial metal first, precious metal second. Two third (2/3) of the annual physical silver supply went to feed industrial demand. Industrial demand requires physical silver, while the fluctuation of price is paper price. Get it? The demand for physical silver continue to be expected as strong in the coming years:

silver-prices-industrial-chart

Global industrial consumers typically don’t hold large reserves of silver thanks to just-in-time supply in production practices. A huge rush in orders could trigger a silver industrial supply shortage. Earlier this year rumors swirled that Apple  iMac “production problems” were actually tied to a silver shortage. Apple’s iMac and iPad screens use more silver than the older models.

Silver Malaysia eBookTo find out more about silver investment in Malaysia, take a look at the eBook: Practical Guide For Investing Silver In Malaysia

Capitulation Phase

This is the big diagram of Bubble Phase.

bubble-phases

 This is the long term silver chart from 2002 – 2013.

silver

If we overlap the 2 charts, it is obvious that we are now in Capitulation Phase. Capitulation Phase is defined as the action of surrendering or ceasing to resist an opponent or demand. Investors give up any previous gains in price by selling in an effort to get out of the market and into less risky investments.

In layman term, it is the phase where many silver investors give up on hoping silver price would go up as much as they expected earlier. I personally know many people who started investing silver when price was $30+. Now, they are not particularly excited when hear about silver. But, they are also not desperate to sell off their silver at a loss.

The ironic part about investment phases is, we never know what phase we are at until we passed the phase. There are 2 directions we can go now:

  1. Whine and complain how silver was a bad investment because you might have enter in a bad timing. Then curse and swear that you will never buy a single oz of silver again in your life, OR
  2. Realize that silver price has came down significantly since April 2011. We now have the timing advantage to buy cheap silver, much cheaper compare to those who bought in 2011.

The fundamental for silver investment remains strong as before. Silver is still an extremely important industrial metal which has no replacement. The underlying global economy crisis is never solved. The can was merely kicked further down to the road. The biggest financial disaster in human history is still waiting for us.

However we need to be aware that further QE (Quantitative Easing) has no more stimulating effect on precious metal price. QE exit in the future would potentially bring precious metal price down. Which is a short-term market reaction.

The potential for silver has not fully shined. I would hold my physical silver for long term and has no plan selling any in the short term. If for whatever reason you need to liquidate your silver in the medium to long term, below are some of the indicators you can look for:

  1. The Federal Reserve (U.S.) and the Bank of Japan end their QE.
  2. Silver has another parabolic rise like it did in April 2011.
  3. Another better investment opportunity comes up that I feel would offer better returns than silver.

One fact is, it is never easy to buy something at the bottom and sell at the top. It is always better to buy and sell an investment at a good price, rather than a best price that might never come. Every investment has its cycle. What went up will come down, and what came down will go up. When one cycle has completed, another cycle will begin. Are you ready to catch the next “New Paradigm!!!“?

Silver Malaysia eBookTo find out more about silver investment in Malaysia, take a look at the eBook: Practical Guide For Investing Silver In Malaysia

Big Brother of Silver

Gold, is widely known as the big brother of silver. When gold price moves, silver price follows. If you look at the long term gold chart and long term silver chart, the price and percentage of movement might not be exactly the same, the direction is however identical. Generally, silver price movement is more volatile than gold price.

long-term

If you want to know what is going to happen to silver, look at gold.

223.519 metric tons of gold was imported into mainland China for the month of March. Compare that to the 51.3 metric tons and 97 metric tons imported in January and February 2013. The last time China importing gold on this scale was November 2011, when 102.6 metric tons was imported after the crash in prices from the short-term peak of $1,922 per ounce troy.

Gold Demand in China

From January 2013 to date, China has bought as much gold as whole year of 2011. Let ‘s be reminded that now is only early May 2013. If such trend continues, the demand for gold would be growing exponentially. When people are shorting the paper gold price (selling paper gold), there are people who take advantage of the low gold price to buy up physical gold.

China is buying the dips, they keep buying physical gold whenever there is significant drop in paper gold price. As evidenced by gold and silver American Eagle sales from the US Mint, the 2.841 metric tons of gold coin re-exported from Hong Kong into the U.S.

To summarize the situation, here is the analogy:

The powerful financial institutions and individuals who trades in paper gold are doing their work to bring down gold price. When gold price came down, the Chinese are aggressively buying physical gold into China (from the U.S). Later, the Chinese sell back the gold to U.S… What?!

China vs US currency war

During the price drop in April 2013, gold coin sales has been higher. January sales is usually much higher than the other months, because January is when the new design being released. Due to price drop, the numbers from US Mint showed the sales for April 2013 is even higher than January. While the paper gold price is smashed down, many investors simply recognize this is a fantastic opportunity to buy physical gold.

us-mint-gold

Gold is the big brother of silver, both gold and silver are precious metal. However, silver has an additional demand as industrial metal. Silver is a metal highly consumed in manufacturing including car, electronic (TV, smartphone, refrigerator, RFID chips, etc), car, clothing, water purification, solar panel and much, much more. In fact, silver has more than 10,000 known applications.

There are approximately 3-5 billion oz of physical gold available for investment in the market, but there is only about 1 billion oz of physical silver available. If gold is a great buy, silver is even greater.

During the recent price drop, silver sales has gone much higher than the previous 2 months:

us-mint-silver

In the first 4 months of 2013, the US Mint sold MORE THAN 18 million American Silver Eagle bullion coins. That’s the first time ever the Mint has sold this many coins so early in the year, setting a record in the 27-year history of the series.

In that same period of time, the world’s silver ETFs actually added 20 million ounces to their vaults. That’s nearly $600 million of worth of silver being bought within just 3-4 months, all while silver prices were steadily declining.

Again, when there are people busy shorting (selling) the paper silver. Many investors understand the physical silver is the real tangible asset, and took advantage to buy silver at such low price.

During silver price drop last month, the world has literally facing a shortage of silver. This did not only happens to Malaysia silver market, but also globally. Click here to find out what happened in April 2013 during silver price crashed.

Now, look at it this way, you now have 2 choices:

  • Keep holding on to the paper money that central government can print as much as they can, while seeing them use the paper money to crash precious metal price, OR
  • Take advantage of current low paper price, exchange your paper money with tangible physical precious metal that has limited supply on earth.

Silver Malaysia eBookTo find out more about silver investment in Malaysia, take a look at eBook: Practical Guide For Investing Silver In Malaysia. You will find out why silver is a better investment compared to gold and learn how to buy your 1st silver coins.

The Truth

Have you watch the video? Please watch. “The Truth” is a highly awakening video everyone should watch. Really.

If you are now in certain form of debt (including credit card debt, personal loan, car loan, Ah Long debt, or any other creative debts), this did not happen by chance. The global monetary system is designed to get you into debt. The more debt you have, the more powerful “they” have over your life such as indirectly forcing you to cling to your job. When it comes to money, nothing happened by chance. The truth is, EVERYTHING is there for a reason and the reason is usually NOT benefiting you. Monetary system could simple if you understand how it works; but if you don’t, I recommend you take your time to look at these FREE educational videos I have compiled over long period of time.

Last week, I shared Rio Tinto’s Kennecott which contributes to US 16% annual silver production has landslided. This mine will likely shut down production. 5 million oz of annual silver supply (and 500,000 oz of annual gold supply) is vanished.

This week, I will share with you more precious metal mines are closing down due to the recent crash of silver (and gold) price. For the miners, it is simply not worth the cost to bring out new metal when the production cost is higher than the gold & silver price they can sell for.

1. Drumlummon Mine, United States

Miners drill holes on a grid pattern in the Drumlummon mine in 2010

Miners drill holes on a grid pattern in the Drumlummon mine in 2010

U.S. Silver & Gold is shutting down its historic Drumlummon mine because it costs more to produce an ounce of gold than it’s worth, the company announced on April 24, 2013.

During the first three months of 2013, the mine near Marysville produced just over 2,100 ounces of gold at a cost of nearly $2,300 per ounce. At the point of  the announcement, gold price was only $1,431. To put this into simple  layman terms, no businessman would want to continue an operation that requires RM2.30 to produce a product that can only be sold at RM1.40. Fair?

2. Pascua Lama, Chille

Pascua Lama

Pascua Lama is supposed to bring 700,000-800,000 oz of gold and 35 million oz of silver annually. Barrick (the company) is considering permanently suspending the Pascua Lama project. Barrick CEO, Jamie Sokalsky said “we are working to address the environmental and other regulatory requirements on the Chilean side of the project“. Do note that the shut down of Pascua Lama is due to environmental issue rather than silver & gold price crash. However, this would impact the global supply of physical gold and silver severely.

Knowing that for every 100 oz of paper silver being traded, there is only 1 oz of physical silver back them. For every 1 oz of physical silver that you buy at current suppressed price, you are making the silver manipulators to walk on a thinner layer of ice and helping to bring silver back to their true value.

Silver short term price movement might not be too exciting. Last week, I shared that silver price is “potentially” going to $20 within the next few weeks. Of course, do not know for sure if that would happen. But I will share with you what I observe:

Descending Triangle is one of the patterns in Technical Analysis. We draw one trend line that connects a series of support and a series of high. Once the breakdown occurs, the price is potentially going lower.

Descending TriangleHere is how silver price chart looks like:

Click on image for full resolution

Click on image for full resolution

How low would it go? I do not have the answer. However, during such suppressed price, I see it as an great opportunity to buy silver at undervalue price.

The MOST interesting part about our current situation is, regardless how low silver price, you might NOT be able to buy physical silver. Click here to see some proofs of physical silver shortage happening in both our Malaysia local silver stores and other silver stores in overseas.

Assuming that there is silver, premium (which contribute to the final purchase price) is much higher than it used to be. The premium for silver bullion is being updated 2 to 3 times in a week. The disconnection of silver spot price and physical silver is obvious and getting wider. Right now in US (a matured silver marketplace), it has been reported that some dealers are charging premium of more than 25%.

Looking at the silver chart earlier for the potential downtrend. This could be just the beginning. So, EVEN if silver price drop to $11, PHYSICAL silver might be selling at $30, $60, or even $100. In fact, I would be worried for you if you could still find silver at that time.

Silver Malaysia eBookTo find out more about silver investment, take a look at eBook: Practical Guide For Investing Silver In Malaysia. You will find out where I personally buy my silver from and my review on the dealers.

Silver Price Broke $26 Support

Last Friday (12th April 2013), silver price broke $26 support level for the first time. Silver price is now at the lowest for the past 2 years.

silver

Why did this happen?

  1. Federal Reserve is considering ending QE by year-end.
  2. Goldman Sachs (American multinational investment banking firm) put a sell recommendation for gold.
  3. Cyprus selling gold worth of 400 million Euros (equivalent to £341m).

I believe the question that matter to you most is, is now a good time to buy?

smallfallingknifeFirst of all, it is never a good idea to catch a falling knife. Catch a falling knife means when silver price is dropping, you buy when you think the price is low enough. If your assumption is correct, great! You manage to buy some cheap silver. You managed to buy at the bottom. Once the market bounce back up few days later, you already made paper gain without selling your silver. However, if unfortunately your assumption is incorrect, you suffer paper lost immediately because price keep falling. When price falls, it usually drops at much greater speed.

A better recommendation to deal with this price fall will be determining the support level and then only start buying when the price bounce back up. This will ensure silver price will not continue falling after you made your purchase. You might not buy at the rock bottom price but you surely will not get caught in a situation where the price continue go lower after your purchase.

bounce-support

The bad news is, this sophisticated technique requires you to have technical analysis skill to determine where the support line is at. A common method to find the support level is using Fibonacci Retracement. This method is not for everyone. Not only it requires the skills but also time and commitment to monitor the price movement. However, if you are interested to find out more, you can consider using this simple Fibonacci Retracement Calculator created by one of the members in Malaysia Silver Investor Membership to the help the rest of the members to calculate Fibonacci Retracement easily and quickly.  It was only intended to be used within the membership site. Now, with this member’s permission, I share this simple Excel calculator with you. You can download it here.

Dollar Cost Average is a more practical alternative to take advantage of the current price dip. This strategy is simple to understand and to follow. It does not require you to have specialized knowledge nor extensive time to stay closely to the market. For most people, it is a great strategy to practice. Even the experts Mike Maloney, David Morgan, etc highly recommend and using the technique themselves:

How Dollar Cost Average strategy works is simply allocating a fixed amount of money to invest regardless the price of the asset. In silver investment context, you can consider purchasing / investing fixed amount of silver every month regardless of the price fluctuation. For a start you might want to begin accumulating 1 oz every month. Later when you are more confident with silver investment, you might want to increase it to 2 oz, 5 oz, 10 oz or even 50 oz a month. It all depends on your financial appetite but the keyword here is consistently every month, for at least 12 months.

Here is a quick trick about Dollar Cost Average. If current silver price is significantly lower than your average price, you can consider ad-hoc purchase more silver (again, the quantity is depending on your financial appetite). For example, if your cost-average price is RM110/oz for the last 10 oz. During the recent price dip, price has gone down to RM100/oz. If you ad-hoc purchase another 5 oz of silver, your cost-average price will be also go down to RM106.67/oz. The calculation is as following:

 RM106.67/oz = (RM110 x 10 + RM100 x 5) / 15

In Malaysia, there is a monthly accumulation program that is suitable for Malaysians who have no time to follow price fluctuation closely. When you join the program, the company will invoice you every month to buy investment grade physical silver for you and deliver to you (or you can collect it yourself). You can find out more details here:

My Silver Accumulator – A silver monthly accumulation program.

My Gold Accumulator – A gold monthly accumulation program.

Remember, every investment moves in cycle. If there are down trend, there will be uptrend. Price will NOT stay low forever. The fundamental of silver investment is to buy low, sell high. But in order to sell high, you first need to buy low.

Silver Malaysia eBookTo find out more about silver investment, take a look at eBook: Practical Guide For Investing Silver In Malaysia. You will learn the finest tricks for investing silver in Malaysia.