Is Silver Price Coming Back?

Silver price has been 70% lower compared to the previous peek at about $48 in 2011.

downtrend

According to Lior Cohen from http://seekingalpha.com/ one of the main factors that keep silver investor hoping to see a major recovery is the expected changes in the production of silver in the coming years. Some analysts consider silver could make a comeback in the coming years on account of supply shortage – mostly due to cut down in production of other precious metals and base metals.

About 70% of physical comes as a byproduct of other mine productions:

  • 13% from gold
  • 38% from lead/zinc
  • 20% from copper.

Although silver production has gone up in recent years and could keep growing in the near term, it’s only a matter of time before production winds down and changes course. Some analyst expect production to fall this year.

With prices of gold and base metals falling to new low levels, miners are cutting down capital expenditure. Miners are likely to eventually reduce their output or at least not grow.

However, there are few consideration to take note:

  1. It could take years before companies will substantially cut down their productions. So far, many companies have been aiming towards conserving cash and cutting debt by reducing capital expenditure and selling assets.
  2. A drop in production doesn’t pressure prices up for a long time without s a strong demand for silver. For the past few years the growth in demand was mostly driven by investors via ETFs and bars and coins. And to a lesser extent by the higher consumption for industry usage mainly in China. Now, on both fronts demand isn’t expected to grow any faster (if at all for investment purposes). Thus, without a stronger demand for silver, a modest fall in supply in the coming years won’t be enough to drive up price of SLV. From here on end, we still have too many factors from the demand side that may offset slower growth or even fall in production. So it could take years before lower production will become an issue for the silver market to push prices to higher levels.
  3. The golden age of silver during 2008-2012 was also mainly due to gold. As of the past few years gold hasn’t gone anywhere but slowly down. So without the push from gold it will be hard for silver to make it on its own or reach new highs.

The silver market is at the cross roads. Even though production could start to slowdown in the coming years, the big issue for silver will remain what happens to its demand side – most notably will investors keep stocking up on this precious metal. The usage of silver for industrial purposes (e.g. solar panels) is an important factor that could keep the market tight. But without another panic a devaluation of the U.S. dollar, it will be hard for silver to recover. For now, the Fed remains on the fence of raising rates, which keeps SLV from resuming its descent.

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.

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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.

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.

US Government Shutdown

The shutdown of US Government has caused US President Barack Obama to cancel his visit to Malaysia for the 4th Global Entrepreneurship Summit 2013 in Kuala Lumpur last weekend. Obama was represented by Secretary John Kerry.

john_kerry

US Government Shutdown

On Thursday evening, discussions between Barack Obama and House speaker (John Boehner) ended after 90 minutes with no specific agreement. There is no solution to the current issue of government shutdown. However, both sides said discussions would continue to prevent the US defaulting on its debt obligations.

The current government shutdown is fundamentally due to reaching high dept ceiling. There is no agreement to resolve debt and no agreement to increase debt ceiling. A new budget cannot be agreed on and hence the government has shut down.

The United States public debt has increased by over $500 billion each year since 2003, with increases of $1 trillion in 2008, $1.9 trillion in 2009, $1.7 trillion in 2010, $0.9 trillion in 2011 and another $ 1.2 trillion in 2012.

US Government Shutdown - debt ceiling

What does debt level means? Assuming United States is a person, let’s call him Mr. Richard Lee who holds a Maybank credit card. Mr. Richard Lee’s credit card credit limit is RM20,000. He uses his credit card to buy a new smartphone, go for several vacations, buy a new laptop and ops… He has just max his credit limit of RM20,000. Instead of clearing off his debt, he made a phone call to Maybank to ask for an increase of his credit limit. Maybank credit officer raised his credit limit from RM20,000 to RM50,000. Now, he can continue spending without clearing off the previous debt. What Mr. Richard Lee does next is buy a new massage chair, buy some new accessories for his sport car, and buy some new furniture for his house – all by using his credit card. Very soon, he has again max his RM50,000 credit limit. What he did was, again he went to Maybank to ask the credit officer to raise his credit limit. The Maybank credit officer raised his credit limit from RM 50,000 to RM100,000 and he continues spending.

Mr. Richard Lee’s financial situation and United States debt level is very similar. Every time when they hit the limit, instead of clearing the debt, they are raising it to a higher limit.

When Mr. Richard Lee (as an individual) could not pay off his debt or could not raise his debt ceiling, he has to declare bankrupt. When US Government (as a nation) could not agree to cut on their spending or could not agree on a higher debt ceiling, the government shuts down.

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Despite the short-term pressure on the metals, the Federal Reserve’s continued to create a weaker dollar in the long run, lead to eventual inflation and would boost the prices of gold and silver. The endless easy money policies from central banks around the globe have created a long-term boost for the various precious metals.

Gold is known the best of the precious metals, but as its price has been driven up, retail investors have turned to silver as an alternative precious metal. Unlike gold, the great thing about silver is that there is HUGE industrial demand!

In 2013 there was a significant shortage of both American Silver Eagles from the US Mint as a direct result of record high demand. Silver ETFs have continued buying silver bullion at a record pace. Demand for the metal as a precious holding is there from physical investors, and has helped get silver back to the $24.00 mark. Aside from silver being a precious metal, it also has many industrial and technological applications. There will always be physical demand. Such demand would pick up significantly when the global economy comes fully out of recession.

john_kerry_2

As John Kerry said on last Friday (11 Oct 2013), the current crisis US going through is merely an political play and it will be over.

When the economy rebounds, there will be a spike in physical silver demand in many areas. The demand will not be just in coin and bullion form, but also in jewelry, silverware and dentistry. On the technology front, silver is one of the most conductive metals out there, and thus is utilized in photography, electronic devices, optics, medical devices/tools and most recently, in nanotechnology.

Realize that tons and tons of silver are consumed in industrial processes. Some silver are recyclable while most silver is discarded into landfills. Those silver are gone forever. It is believed that 90% to 99% of all gold ever mined is still in existence above ground – in one form or another (such as jewelry and central banks holding). Available physical silver on stockpiles as a percentage of all silver ever mined is so much smaller compared to gold.

Since 1950s silver was consumed in a variety of modern applications at a amazing fast rate. By year 2000, known stocks of silver had shrunk over 95%, to around 500 million ounces. During the late 90s, 200 million-ounce annual deficit indicates the early sign of long term physical silver shortage. Thanks to new technology such as smartphones, demand for silver is unprecedented. Eventually there would not have enough silver to meet demand. The end result will likely be a rising long-term price and intense recycling initiatives (when silver price is high enough).

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.

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

Paper Silver

If you are bothered by the troubles of investing in and keeping physical silver, the good news is there is paper silver that allows greater liquidity than holding the physical silver, and lesser maintenance for taking care of your physical silver such as storage and cleaning.

silver-etf-rise

Paper silver is more appropriately known as Silver ETF (Exchange Traded Fund). A silver exchange-traded fund invests primarily in raw silver assets. These assets are taken care by the fund manager. The silver ETF fund manager plays a similar role like unit trust fund manager (such as Public Mutual Fund). There are many silver ETFs in the international market. The physical silver held by these funds are more than 1/3 of the world’s total annual silver production. The largest silver ETF in the market is iShares Silver Trust, the 1st ever silver ETF was introduced in 2006.

The whole idea for the invention of silver ETF is to allow investors to invest in silver, conveniently.

Although silver ETF gives you high liquidity and little hassle, there is always some tricky parts. Theoretically, each share of the ETF should represent specific amount of physical silver in storage. Unfortunately not all silver ETF are backed by physical silver. When you invest in silver ETF, you are investing in the shares of the fund instead of the physical silver.

etf

Let me gives you another example using real estate in local context. In real estate industry, we have a similar concept being practiced known as REIT, Real Estate Investment Trust. Essentially, REIT is backed by physical properties. Take example of SUNREIT (Sunway REIT). SUNREIT owns properties such as Sunway Pyramid Shopping Mall, Sunway Medical Center, Sunway Resort Hotel & Spa, Sunway Tower, Menara Sunway, Sunway Hotel Seberang Jaya, etc. However when you invest in SUNREIT, you DO NOT own any of these properties, you owns the shares of SUNREIT.

sunway

Now, let’s get back to silver ETF, when you invest in ETF such as SLV, you owns the shares of SLV and you do not have direct claim on the psychical silver.

david-morgan

The first and most important fact to address is that the Silver ETF and all ETFs, to our knowledge, are cash settled. This simply means that the underlying asset may be there in various forms, but the investor in the fund can only accept cash as payment. –David Morgan, silver-investor.com

OK, great! What is the problem here?

If your intention of investing in silver is to quickly turn RM1.00 into RM1.10 and sell it to reap some profit, then go ahead invest in silver ETF. In fact, you can invest in any share available in the stock market because the fundamental of the asset does not matter in this situation. As long as you could speculate on the right share, you would be able to achieve such profit. Fundamentals is not something that concerns you.

However, if your intention is of investing in silver is because you understand the fundamental of silver, realized how undervalue silver is and aware of the potential of silver in the future, silver ETF is not for you.

Why? When you invest through silver ETF, every transaction is done through cash. Last month, during the sudden crash of silver price, investors are looking for PHYSICAL silver. Personally, I do not think last month shortage is a real reflection of the actual physical silver shortage problem. It is merely a scenario where physical market could not respond fast enough to the sudden demand. What worth mentioning is right after the crash, physical premium price shoot up noticeably.

The manufacturer, distributors and even your friendly dealers increased the premium because they wanted to slow down demand – simply because they do not have enough physical stock themselves. It is fair to say that when demand is up and there is no enough physical supply, premium will go up. In other words, the final purchase cost for physical silver is higher (or much higher) than the silver spot price.

silver bars

You see, when you invest in silver ETF, you are settling your transaction (buy / sell) through cash. You would not be able to get physical silver delivery. Which means even when there is a huge shortage of physical silver, you would not be able to take advantage of the silver you have invested.

For example, current silver spot price is $22, silver ETF price you have invested is $22 and physical silver price is $24 (where $2 is premium). When there is a shortage of physical silver, manufacturers, distributors and dealers would increase their premium say from $2 to $6. Now, spot price is still $22, silver ETF is still $22 but physical silver is $28. This might be an over-simplified example, but this is something identical to what happened last month during the suddenly physical silver shortage. The difference is, silver investors are expecting similar scenario at a much larger scale.

The real demand for silver is in the industrial demand. 2/3 of the annual silver production goes to industrial demand. You can’t give some silver ETF certificates to the industrial manufactures to produce TV, solar panel or water filter. They need physical silver for production.

To summarize this, if you do not like the trouble of investing in physical silver, the good news is there is silver ETF. Unfortunately the bad news is, there is no silver ETF in Malaysia. You need to buy the ETF in overseas, like buying an overseas share. The closest paper silver available in Malaysia is Maybank Silver Investment Account, it is not exactly a silver ETF but it is still one form of paper silver. You can find out more about my review on Maybank Silver Investment Account here.

Silver Malaysia eBookTo find out more about silver investment with Malaysian context, take a look at my eBook: Practical Guide For Investing Silver In Malaysia.

Physical Silver Shortage

Last Monday, silver price continued sliding down to as low as $22.50. Many speculated this is due to China released their GDP growth was 7.7% instead of the expected 8%. Silver is an important element for economic growth (manufacturing industrial demand), but missing 0.3% simply does NOT justify such big drop in silver price. Instead seeing this as a panic sell, this is an under-covered “price manipulation”.

This is a video that explains better the reason why gold & silver price crashed:

The video explained on gold price. Gold price is tightly coupled with silver price. When gold price goes up, silver price goes up, and vice versa. Further reading on: What Just Happened to Silver Prices

While the paper traders are selling paper silver, investors who truly understand fundamentals of silver investment are buying up more physical silver MASSIVELY during the price dip. They saw such time frame as a good buying opportunity to buy even more real physical asset with great discounted price.

The demand for physical silver is so great that many local silver stores run out of stock!

This is one of the largest silver stores in Malaysia, the physical silver supply has run out and only accepting pre-order. (Pre-order means the company accepts your order, takes your money, they will orders the stocks, and only delivers to you after the newly ordered stock has arrived. Usually at a much later date because there is simply no more stock left in the inventory at the point of taking your order.)

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Another local silver store running on pre-order basis:

silvermalaysia

Some of the individual sellers temporary “close shop”: 

SLS

The physical silver shortage is NOT only limited to Malaysia silver stores, but a world-wide shortage. Some of the major silver dealers in overseas are ALSO having physical silver shortage:

gainesvillecoins

Another silver store from United States:

apmex

Daniel Ameduri from FutureMoneyTrends.com said:

I recently had a purchase order canceled hours after placing it (this has never happened to me before), the dealer called and told me sorry that they just couldn’t get the 1oz rounds I ordered.

To make the matter worse, US is the 10th largest silver producer, Rio Tinto’s Kennecott mine in Utah which contributes to 16% of US annual silver production just landslided. This mine will likely shut down production. 5 million oz of annual silver supply (and 500,000 oz of annual gold supply) have just been vanished. The loss of 5 million oz silver supply will have a DIRECT AFFECT on the Sunshine mint’s ability to source silver for blanks, which are used in the production of American Silver Eagle and other Sunshine brand  silver products.

landslide3 landslide landslide2

landslide6 lanslide4 landslide5

In economics 101, when a commodity is low is supply, price will shoot up. Interestingly, while current physical silver supply is low and even with the news of landslided mine, silver price did not shoot up too much. Does it mean many people are missing out such great buying opportunity? Silver price has came down to lowest point in the past 2 years, is it a good time to buy silver now?

Last week I shared about Fibonacci Retracement. Some readers wrote to me saying they didn’t really get it. So I will explain it further here. I have draw the lines on a long term silver price chart – going back as far as 2009:

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Click on image for full resolution (Right click, open with New Tab)

The lines consistently served as the support level and resistance level throughout the long term chart. When it comes to Technical Analysis, the longer the time frame, the clearer the trend, the more accurate decision we can call. In this chart, the data goes as far as year 2009 – 2013.

For the past 18 months, silver price has been consolidating between $26 to $36. The line at $36 served as a stubborn resistance level while the line at $26 served as a strong support level. Last week, silver price broke $26. The NEXT strong support can only be found at around $20. At the point of writing this, silver price is $23. Does it mean silver price will continue to go down to $20? I do not have the answer but the chart shows a “POTENTIALLY yes” that might happen within the next few weeks.

Someone asked:

“Where will you buy silver if price goes 20/oz or even lower?”

My response was:

When price was $30+, it’s a question of which dealer provides the most competitive price; when price is $20 (or lower), it’s a question of which dealer is still selling silver.

I have shown you proofs that physical silver shortage happens when price went down to $23 – $24. Smart investors would take advantage of the low price rather than running away from it. Many of the established dealers who were selling their silver at such price were losing money as they bought the silver price at higher price. If silver price does dropped to $20 (or lower), it is a matter of who else is still selling silver. During the recent silver price dip:

  1. The premium of silver products has increased. Premium is the difference between silver spot price and the actual selling price. Dealers usually increase premium to discourage buyers from buying because the dealers only have limited amount of stock.
  2. The delivery time for physical silver has been increasing from 1 week, to 2 weeks, to 4 weeks, and the latest reported is up to 6 weeks. No business prefers delay delivery. The delivery time will increase ONLY if the dealers genuinely do NOT have enough stock to ship.
  3. Spot price is now below mining cost. The mining cost for silver in Q4 2012 is average $25.74 but current spot price is below that, at $23. We witness for the 1st time, physical silver shortage in both local market and overseas market. Silver price can go down to as low as $11 or $12, but the question is, can you buy physical silver at that price?

Silver Malaysia eBookThe eBook: Practical Guide For Investing Silver In Malaysia will show you where to buy silver, how to buy silver and ensuring you maximize your return for investing silver in Malaysia. Click here to find out more.

Gold Price

One of the members in Malaysia Silver Investor Membership has shared the following video (with the rest of the members) to show how ignorant people are on gold price.

We can’t entirely blame the people how ignorant they are on gold, because for the past 42 years, we are living in a world that uses fiat currency (paper money) for daily transaction.  In 1971, Richard Nixon, the president of United State back then took US Dollar off the gold standard. Before 1971, each Dollar is backed by certain amount of gold. After 1971, the  Dollar is just paper as the Dollar is no longer backed by gold. Since every country currencies  (including Ringgit Malaysia) is backed by US Dollar as reserve currency, from that point onward all the “money” in the world has become paper currency that the central government can print anytime and any quantity they like. While we as middle class are working hard everyday for that? How ironic?!

Most of us in this generation are brainwashed to believe that the paper currency printed by government (which is just some paper not backed by any gold) is actually money. We never have a proper / official education on the value of gold. Most of us buy gold for cultural reasons. It is just a wisdom passed from the previous generations. We never question or fully understand the fundamental of precious metals (gold & silver). This is exactly the reason why I started this silver blog to share more information on silver.

If there are so little people understand gold, there are even less people understand silver.

The potential for silver is extremely positive. Last 2 months, silver coins were sold out in US Mint for twice! Canadian Mint faced the similar shortage problem. Silver, apart from being a monetary metal, it is also one of the most highly sought after industrial metal that being used up in large quantity. China being the 3rd largest silver producer in the world still does not have enough silver and they have to import more from other countries.

10 Years Silver Chart

According to Christenson from Deviant Investor, the highs in 2004, 2006, 2008, and 2011 were at or above that trend line. A price of $15 in 2006 was just as extreme as a nearly $50 price in 2011 and a possible $100 price within the next two years. The ten year chart of silver prices is plotted on a logarithmic scale and shows a highly volatile exponential increase in prices over that ten year period. The higher trend line extends to approximately $100 by the end of 2013. Prediction – Certainly Not! Possibility – Yes!

If you are interested to find out more about silver, I highly recommend you to read the following book.

I have written Practical Guide For Investing Silver In Malaysiaan eBook specifically written for Malaysian in silver investment. You will learn different silver investment strategies and I will show you how to invest silver below market price! Click here to find out more.

Silver Shortage

I have been yelling about silver shortage in my blog. Even in my recent radio interview with BFM (89.9) I could not stop emphasizing how industry has been using up physical silver and when silver is used up, it is gone forever. Apparently the reality of silver shortage is not too far away from us.

American Silver Eagle

American Silver Eagle Sold Out

American Silver Eagle (ASE) has always been my personal favourite coin. It is a very beautiful coin selling at low premium. I could get it easily anytime I want but I’m afraid things have started to change…

  1. On 17th December 2012, US Mint informed authorized purchasers that ASE 2012 had sold out and no additional ASE 2012 would be struck. The new coin ASE 2013 is only available for order on 7th January 2013 onward.
  2. On 7th January 2013, US Mint announced 3.937 million Silver Eagles were sold in a single day. This is the highest sale in the single day history!
  3. On 8th January 2013, US Mint sold another 300,000 oz of physical Silver Eagle coins. It is expected that January 2013 would hit the highest sale per month in the history.
  4. On 17 January 2013, United States Mint is sold out for 2013 American Eagle Silver coins. As a result, sales are suspended until they can build up their silver inventory.  Sales will resume on or about the week of 28th January 2013.
  5. The week of 28th January 2013,  all the authorized dealers are queuing for another massive round of Silver Eagle coin order!

Apple iMac Delay

imac

Apple announced the new iMacs on 23rd October 2012. The new model uses a lot more silver on the new Iris screen (which is much brighter) compared to the older models. In January 2013, Apple could not supply enough of this model.

“There is simply not enough silver available to produce them”, Bally A. said. The brighter screens require substantially more silver than the earlier models. That is also why there was a $100 price increase on most models of the iMac, he added.

A 3-month delay after the announcement has never happened before in Apple history! No business will ever tell the public what exactly went wrong within the business. Apple only addressed this as “production problems“. Well, common sense, it does not take 3 months to handle any “production problems“. If a problem continues for 3 months, it is very likely to be an external factor that is out of Apple’s control. Silver shortage fits perfectly into such “production problems“.

Do you know what is more interesting?

Apple manufactures their iMacs and iPads in China. China being the 3rd largest silver producer in the world yet, China does NOT have enough silver and have to import more silver from other countries!

(You can check out more about China Silver Market here.)

SLV Purchased 572 Tons of Silver

iShares Silver Trust (SLV)

On 17th January 2012, there is an unconfirmed report that SLV purchased 572 tons of silver. SLV is silver exchange-traded fund (ETF) in the US. It is also the largest silver ETF in the world. In layman term, it is called Paper Silver. Similar like Maybank Silver Investment Account, you can never demand delivery and you can never get your physical silver. You just have to assume they have all the silver they claim to have sold you.

SLV claimed they have bought 572 tons of silver. What is happening here? Two scenarios:

  1. They claimed they have bought 572 tons of silver so that they can sell more paper silver to the market. Why do they want to do that? Are they are expecting a huge increase in silver price soon?
  2. Let’s assume SLV did purchase 572 tons of physical silver, that means the world has 572 tons less physical silver for average investors like you and me to purchase. Economics 101, the lesser supply of silver, the higher silver price will rise!

I intentionally discuss both physical silver and paper silver. The reason is I want you to see the difference. When Silver Eagle coins are sold out by US Mint and when Apple needs physical silver to make iMacs, what is the point of holding paper silver that the private organization can print out anytime they like? Give the paper silver to Apple to get them start manufacturing? Give the paper silver to US Mint to get them start minting more coins? Whether or not the physical silver shortage has started, we will soon find out from the market.

I have personally bought enough physical silver. I have started buying silver since 2010. Today, I continue buying silver every month or whenever I have spare cash. I pay close attention to Malaysia silver market so that I can grab undervalue deal whenever it comes. Thanks to all the research I have done and the personal experience I have, I can tell which silver is suitable for investment or not. I know Malaysia silver market well enough to have helped many Malaysians started their silver investment journey. You see, keeping the information to my own advantage is selfish. That’s why I have written the eBook Practical Guide For Investing Silver In Malaysia to share with Malaysians.

In the eBook I’m going to guide you step by step and you are going to learn how to buy your 1st oz of silver. If you are a big boy and want to invest 1000 oz, I will show you how to buy from the cheapest source. Click here for the A-Z guide in Malaysia silver investment.