American Silver Eagle July 2013

American Silver Eagle coin is the best tool to benchmark the demand for physical silver. The sales number is very complete compared to other coins, and the demand is great all over the world.

2013_American_Silver_Eagle_Dual

In the first three months of 2013, investors were purchasing American Silver Eagle Coins at an average ratio of 48 to 1 to gold eagles. 48 to 1 ratio simply means for every 1 oz of American Gold Eagle Coin is sold, there are another 48oz of American Silver Eagle Coins are sold.

On April, ratio felt to 20 as investors found gold which dropped $200 in two days is a significant bargain. However, that does not mean silver did not gain investors’ attention. Total amount of American Silver Eagle coins sold in April was 4.087 million oz, which is higher than 2 previous months (February 3.369 million oz and March 3,357 million oz).

The ratio has went back up to 49 in May and slightly increased to 57 in June.

What I want to bring to your attention is the sales closed in July. US Mint has sold total of 4.407 million oz of silver, making July the second highest sales month for American Silver Eagle coins. (Traditionally, January is always the highest month due to market demand for new year design).

The ratio is 87, which means for every 1 oz of gold is sold, another 87 oz of silver is sold! (the following chart is slightly outdated as the figure does not reflect the final week in month of July)

Silver-Eagle-Sales-Ratio-To-Gold-Eagles

Total sales number of American Silver Eagle (ASE) coin is another interesting number to watch. Since 2007, total oz sold by US Mint is increasing noticeably. It reaches the peak in 2011 with almost 40 million oz sold. The interest of ASE peaked in 2011 as silver price dropped more than 30% in early May 2011.

Another interesting year to watch is year 2013. The latest sales number released by US Mint is 29.45 million oz as end of July 2013. This number has exceed the total sales number for whole year of 2009 (28.77 million oz). It is only slightly below year 2010 (34.67 million oz) and year 2012 (33.74 million oz) respectively. It is also just another approximately 10 million oz difference from the all time peak in year 2011 (39.87 million oz). Without a doubt, 2013 will mark a new history for ASE total sales BEFORE year end.

The reason for such strong demand for ASE coins is due to low silver price and investors believe it is a bargain to buy silver at such cheap price. In fact, the demand for ASE coin was so great that US Mint has suspended their sales twice in the last 12 months (December 2012 and January 2013) – stating US Mint has to replenish their inventory.

sales

Base on what happened in 2011 and what we are experiencing in 2013, apparently the lower silver price goes, the stronger the demand for physical silver. Silver is a precious metal that has limited supply on earth. The question is… how long can this sustain? And will you be holding physical silver when silver price explodes?

The following is one of the analysis in eBook Practical Guide For Investing Silver In Malaysia for American Silver Eagle coins:

American Silver Eagle Malaysia Rating

In the eBook, you will also learn the analysis other silver coins, silver round and silver bar. You will learn what are the factors that you should consider before investing in any silver. In fact, there are some silver that you MUST totally avoid!

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, tips and tricks for investing in silver. Click here to find out more.

Weaken Ringgit & Negative Outlook

Malaysian Ringgit dropped to 3-year low against USD. Currently it takes RM3.26 to exchange for USD1.00. The value of Ringgit has been drastically falling since General Election took place in 5th May 2013. It this chart, it shows the value of Dollar is strengthen against Ringgit – therefore a weaker Ringgit.

Ringgit

The 1st reason is global investors are selling Ringgit as they expect U.S. would soon end the aggressive monetary stimulus (Quantitative Easing). They would then use their money invest into U.S. instead of Malaysia.

The 2nd reason is, Bank Negara Malaysia made an obvious absence from currency market. Our government might be allowing the currency to weaken to boost exports and improve trade balance.

This will be beneficial to exporting businesses and tourism industry because it now takes lesser Dollar to buy products made in Malaysia. Malaysia has also becomes a more attractive destination for tourists because it is now cheaper to spend money here. Imagine for every $100, a tourist can exchange for RM296 in May 2013. Now for every $100, the same tourist can exchange for RM325. Our Ringgit has fallen almost 9% against Dollar since early May. Malaysia is now a “cheap” country which is good for exporting business and tourism industry.

However for most working class, this is a bad news. Whatever amount of Ringgit we have in bank has just lost 9% of its value. In fact, even our salary has shrunk 9% due to a weaker currency. If we buy a product from U.S. that costs $100, it now takes us RM325 instead of RM296 just two months ago. For business owner, it simply means it takes more amount of Ringgit to purchase the same product (or service) in the global market.

The pressure on the Ringgit will remain until economic outlook improves and Bank Negara Malaysia will probably be forced defend the 3.25 per dollar support level by tapping into the country’s foreign reserves, according to a research note from DBS Bank.

On 30 Jul 2013, FitchResearch has revised Malaysia Outlook from Stable to Negative:

rating

Source: http://www.fitchratings.com/creditdesk/press_releases/detail.cfm?pr_id=798117

Malaysia’s public finances are its key rating weakness. It is approaching the government’s 55 percent limit. (Government debt rose to 53.3% of GDP at end-2012, up from 51.6% at end-2011 and 39.8% at end-2008.)

debt

The revision of the Outlook to Negative reflects Fitch’s assessment that prospects for budgetary reform and fiscal consolidation to address weaknesses in the public finances have worsened since the government’s weak showing in the May 2013 general elections.

As of July 2013, foreign ownership of Malaysian national debt was 49.5 percent. While foreigners only hold 30 percent of American debt. “There is indication that Malaysia is now at a point of vulnerability,” said Hak Bin Chua, Bank of America’s Asean economist.

The outlook for Ringgit and economy might not be extremely positive. Individual like you and me could do little to improve the situation. However, instead of blaming the government, we should learn to make the most out of available resource we as individual has.

Silver Malaysia eBookTo find out more about my work, please take a look at the eBook: Practical Guide For Investing Silver In Malaysia. You will learn how to invest silver in Malaysia.

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. 

How To Find Good Silver Deal

For silver market in Malaysia, a typical transaction would be a dealer bought his stock (silver coins, bars, rounds) from overseas supplier in bulk. Then, he sell the stocks to you in smaller quantity. You are buying his silver at a retail price. The dealer makes a margin as profit.

Sometimes, if you are buying a reasonably large number of silver, let’s say 100 oz or more at one go – you might want to purchase directly from overseas. The advantage is, you cut down the middle man (dealer) cost. The disadvantage is, the transaction a little more troublesome and delivery takes longer than a local dealer. (I have written a detailed step-by-step guide on how to purchase silver from overseas here).

What I want to show you today is, how to buy silver locally with overseas price, cheaper than overseas price!

This is a screen capture I took from APMEX website:

apmex

Assuming that I want to buy 10 oz of silver, each oz will cost $23.19. If I convert that into Ringgit…

usd

$23.19 is equivalent to RM73.27. If I’m buying 10 x 1 oz of silver, that would be RM732.70.

This is where it gets interesting… A local dealer (Silver Street) is selling a pack of 10 x 1 oz of silver at RM730. This price is even cheaper than the overseas website price!

silver-street

By the way, overseas delivery is usually much higher than local delivery. In this case, APMEX charges fixed $49.95 per shipment plus weight surcharge ~$0.30 for every oz in the shipment. While Silver Street only charges flat rate RM8.

By now, some people might thought this is a scam where someone offer irresistible low price for an item and would disappear after the payment is made. However, this is not the case because I’ve been buying from Silver Street for a long time. This company has a track record of offering silver products at very competitive price.

silver_1d_o_USDSilver price has increase quiet significantly on last Friday (28th June 2013), website like APMEX uses live spot price. When silver spot price change, APMEX price follows changing almost immediate. However Silver Street did not adjust the price to reflect the change in spot price. Is this a good thing? Well, good for investors but bad for the company pocket.

The good news is, if you are reading this on Monday morning (1st July 2013), you can still make it to buy some silver at such low price. The price will most likely only be revised by Monday noon. Such deal might not come every day, but when it comes do make sure you grab it.

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

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

Silver Street

Silver items price might be varied at the point of publishing this article and the point of visitor visiting Silver Street website.

Silver items price might be varied at the point of publishing this article and the point of visitor visiting Silver Street website.

Silver Street by AA Stackers Enterprise is one of the fastest growing silver dealers in Malaysia that provides affordable silver investment items to the general public. I have personally met up with the founder, Afham Aziz several times for multiple purchases. I found he is reliable, professional and provide valuable service for silver investors. He is someone I would pleasantly deal with again.  Below is an interview I recently have with Afham on 6th May 2013.

==== Begin of Interview ====

daniel-fooDaniel (SilverInMalaysia.com): Hi Afham, I have seen you started your silver store since day-1, where your web-store only started with 4-5 products until you now have a professional and comprehensive e-commerce website, http://www.silverstreet.my/ Yourselves being the founder of Silver Street, what made you so determined and passionate on  providing silver investment items to Malaysians?

Afham AzizAfham (Silver Street): Actually, business is my passion. I always aim to become a successful businessman. To achieve my target, I never give up looking for a good opportunity. In year 2011, a friend of mine has shared his interest in gold investing. His convincing perspective and information, has become an eye opener. The feeling to involve in silver investment business becomes stronger when I found that within 1 year (2011 -2012), there was a 30% gain in gold price. So, I did a lot of research and study about precious metal price movement. My research has provided me with the understanding that silver has better prospect than gold.

Daniel: I have personally bought from you a couple of times. You have proven that you do provide great service to your customers; I have no doubt on what you have just said. So, do you think silver has good potential?

Afham: Customer satisfaction is always my priority in my business approach and I am glad that you are happy dealing with me. To be honest, I never think any other business that has potential as good as silver. Comparing to gold, silver has larger market segment as well as affordable to all levels.

Daniel: Why?

Afham: Most of us know that silver is widely used in our daily life. Computer, hand phone, photography equipment and any other electronic devices need silver as the best conductor and the demand for these products are increasing over the time. When we were in younger age, computer and hand phone were luxury items but today, they are a need in our life. This demand will increase in future where the silver supply is decreasing. Hence, bullish momentum in silver will continue.

Daniel: Let’s get back to your web store, do you think it is safe to buy silver online these days?

Afham: Yes, definitely. Even we do not provide insurance as Malaysian courier does not cover for precious metal, but we never face any missing or undelivered parcel. Also, we guarantee you that our silver bar and coin are genuine. We did random test on stocks from time to time and all of them passed the test. If customer wants to ensure that silver they bought are genuine, they can get an Densimeter scale from our online store.

Daniel: How do you ensure your customers really received what they have paid for? Well ok, let me put this plainly, how can the customers make sure that after they paid you money, they would not be cheated?

Afham: We have 100% satisfaction guarantee policy. If any customers are not happy with their purchased products, we will offer 100% refund of the product’s price. Just let us know within 7 days. By the way, our market is not only limit to Malaysian. We have our customers in other nations like Brunei and we even sold and shipped to customer in Europe. They trust us, why don’t you?

Daniel: That’s impressive. I just visited your web-store 15 minutes ago, I saw your web-store have so many silver items, which item should investors start looking at? 

Afham: Silver buyers are divided into 2 categories – one is collector and another is investor. We have covered both categories. For collectors, they may look at our Lunar Series range as the mintage of 1oz coins is just 300,000 pcs worldwide and all of them were sold out at mint. Even its premium is little high, but it offers stability and uniqueness. Stability in price is very important especially when silver price is so volatile these days. Another group of buyer is investors and they often look for lowest premium possible. We have silver bars and famous low premium coins – Canadian Maple Leaf and American Silver Eagle (ASE) to win this group. We believe, our price are among the lowest in the market.

Daniel: That’s a good piece of advice. When I first started investing in silver, no one ever gives this sort of advice and I was kinda lost by trying out things one by one – which was a really painful lesson! To certain extend, I even lost money for buying wrong type of silver. You know, that’s why now I’m dedicated to provide silver investment education in my blog and my eBook.

Afham: Doing something that we are not really good at is a risk. I myself experienced all those ups and downs but the most import is we learn from it – be it good or bad experience. To keep risk as low as possible, I read a lot about precious metal investment and your blog was one of them. I would say, your articles played big part in my decision to involve in this business. I think, I have to thank you for such a good and informative articles.

Daniel: You are welcome. Alright, let’s wrap this up, if I want you to provide 1 most important silver investment advice, what would that be?

Afham: Before anyone start, educate yourselves about silver investment. Knowledge is the king. Once you think you are ready, buy silver consistently every week or month to get the best out of it. It is always better to prepare for the worst than merely praying for the best.

Daniel: That is another great advice. So, if people want to find out more about the silver items you are selling, how can they reach you?

Afham: Your readers may take a look at our online store, http://www.silverstreet.my They also can reach me at +60 13 926 6600 or email sales@silverstreet.my if they have any inquiries.

Daniel: Ok, thank you very much for your time!

Afham: You’re welcome.

==== End of Interview ====

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.