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.

Polis Diraja Malaysia Report

If there is one worst thing could happen to your silver investment, it would this.

The below victim is conned by a man name Fam Kim Siong (Maybank account: 154017536054) of RM1,500 for buying silver online. Victim’s personal details is being blurred on purpose to protect victim’s privacyThis information is uploaded here with the victim’s permission to alert everyone else who are buying or planning to buy silver online.

Polis-Diraja-Malaysia-Report

The same con man has cheated another person worth of RM3,500 with the promise of delivering gold. In both cases, once he received the money through bank transfer, he can no longer be contacted.

Buying silver online could be one of the cheapest method to buy silver, however there are always 2 sides of every story. Some people would rather paying a slightly higher premium (more expensive) to only buy from reputable dealers; while some would take the risk to buy lower premium (less expensive) from less reputable dealers. As much as the choice is yours, I would like to give you a few quick tips:

  • If this is the first time you buy from a dealer, always consider Cash On Delivery (COD). COD is a method you collect silver and pay cash when you meet up with the dealer. If the amount is small (less than RM1,000), you should consider meeting at coffee shops or shopping center; if the amount is relatively larger (more than RM1,000), consider meeting up in a bank so that money can be deposited into bank account immediately.
  • If this is the first time you buy from a dealer, always test his silver by buying a small amount first. Yes, it is OK to buy just 1 oz for testing purpose (of course, you don’t have to tell him that you are testing him). Investment grade silver is always 99.9 fine silver. Spend a little money to ensure the dealer is selling genuine silver. If you are planning to buy larger amount from the same dealer later, you might even want to send his silver to assayer service (this is the professional level of testing). Your silver will be cut into pieces to verify the inside content. However, you might not be able to sell this piece of silver in the future later. If you want to take a less destructive method of verifying the silver content, consider using a Densimeter. It measures the density of the silver item by dividing the reading of weight by volume. Your silver would not be affected.
  • As Warren Buffet said, “don’t put all your eggs into one basket“. If you are buying a large amount of silver online, you should discuss with your dealer to separate the delivery into few shipments. For example, if you are buying 120 oz of American Silver Eagle (equivalent to 6 tubes, each tube has 20 oz),  you can request these 6 tubes to be sent in 2 batches (3 tubes each batch on 2 different days).

There are many, many other tips you should know when investing in silver. Obviously, I could not cover them all in this short article, I do hope you would consider looking into my eBook Practical Guide For Investing Silver In Malaysia to find out more about the tips. The above victim’s case is a perfect example of those “costly mistake” anyone could make. If he have read the eBook before investing in silver, I’m fairly confident he would have avoided such “mistake”.

Silver Malaysia eBookIn the eBook, I’d also provide you a list of trusted and reputable dealers in Malaysia that you can safely buy your silver from. In fact, I personally buy from these companies / individuals. To find out more about silver investment, take a look at eBook: Practical Guide For Investing Silver In Malaysia.

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.

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.)

buysilvermalaysia

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:

fibo-resized

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.

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.

Is It Time To Sell Silver?

silver_1_year_o_usd

You can notice that silver price has been on down trend since October 2012. So, is it time to sell silver now to cut your lost? The short answer is, NO.

David Morgan has a great saying about a market like this, “it will either scare you out or wear you out.” (Note: “wear you out” means making you tired). When you have a narrow view by focusing on a short period of time, you will get tired of chasing the pricing and afraid the price might continue drop lower. All you will see is negativity. Consider taking a longer period to see a bigger picture:

silver_5_year_o_usd

$26 is an extremely critical point. It has been a strong support for many times. It has been reported physical silver mining cost is between $26 to $28. Can silver price drop lower than this? POSSIBLE, but NOT LIKELY to stay lower than this for a long time.

About two-thirds of silver is used in industry and jewelry. If silver spot price dropped below $26, there are 2 possibilities could happen:

  1. Some miners will be forced to scale back / close down. Simply because no one wants to spend RM1.00 to produce a product to sell for only RM0.80. The industrial manufacturers will run out of silver once the current supply is dried out. Silver price will shoot back up drastically.
  2. The gap between physical silver price and paper silver price continues to get wider. The paper traders could short paper silver price to as low as $1 but no one will be able to buy any physical silver at $1 (as no one wants to sell at that price). Anyone who owns physical silver would be holding tightly to their silver and not willing to sell unless the buyer is offering a fair price.

Silver miner with nugget

The fact is there is 5 times less above ground available silver than there is gold (3 to 5 billion oz gold vs. 1 billion oz silver). Silver has thousands of application usages while gold has little. When we look at new supply including mined and recycled, new silver is only being added by about 10 ounces for every 1 ounce of gold. Yet investors are buying 50 times more silver for every 1 ounce of gold purchased.

This is totally unsustainable. The above scenario is like saying a manufacturer is selling 50 products a day but he could only produce 10 products a day. Where did the remaining 40 come from? It could be the old products that he has not sold previously, but sooner or later the old products will run out and that is when silver market gets REALLY interesting. By then, I would rather be gladly holding to my physical silver, than rushing to buy silver.

Since silver is both precious metal and industrial metal, silver price rises when

  • The economy improves and industrial demand grows, OR
  • The world’s major currencies continue to be debased (high inflation),

Remember, silver is an industrial metal first, precious metal second. But regardless which scenario happens, silver price rises. What if a robust economy and high inflation? Well, that is as good as you are getting a promotion (with increment) and bonus at the same time.

Personally, I do not think robust economy and high inflation are both happening together. World economy did not improve. Euro zone is still in trouble and US unemployment is still high. However high inflation is on its way. Few months back, US has launched Quantitative Easing Forever (they will be printing money without any limit, forever printing); while Japan announced their attention to double Japan’s monetary base to $3 trillion by the end of 2014. The direct consequence of such actions are high inflation. Precious metal is often a good hedge against high inflation. Robust economy? No. High inflation? Yes.

The most basic lesson in successful investment is Buy Low, Sell High. Simple theory, but many failed to truly understand it. In order to sell high, you need to buy low first. Unfortunately, when the price is low, investors are afraid that price might go even lower and then miss the opportunity to buy low.

So, what if you have already bought some silver at higher price, let’s say $35.00? Right now, when price is low, you can consider practicing Dollar Cost Average to lower your effective purchase price.

silver_1_year_o_usd

For example: Assuming exchange rate for USD and MYR is 3.15 and for simplicity sake, we remove the premium calculation in this example.

During this downtrend of silver price, if each time you bought the same amount of silver silver (let’s say 1 oz) at:

  • $35.00 (RM110.25)
  • $33.75 (RM106.31)
  • $32.15 (RM101.27)
  • $29.00 (RM91.35)
  • $27.00 (RM85.05)

Your effective purchase price (average cost) is ONLY RM98.85/oz. You do not have to wait until silver price go back up to $35.00 (RM110.25) before selling it just to break even. You can break even when silver price is merely $31.38 (RM98.85). Everything moves in cycle. When price move up to $32, although you bought some silver higher price at $35.00 (RM110.25), you can sell all your silver at $32 (RM100.80) each and already making some profit.

Silver Malaysia eBookDollar Cost Average is a strategy designed to protect investor from huge price fluctuation / changes. Dollar Cost Average is 1 of the 4 strategies I discussed in the eBook: Practical Guide For Investing Silver In Malaysia on the approaches to invest in silver. The preview chapter can be found here.

Malaya “Banana Money”

Last week, Cyprus banks opened for the first time in almost 2 weeks of “forced-close holiday“. The Central Bank of Cyprus imposed a €300/day limit withdraw limit and restriction of transferring money outside the country. If you have no idea what is happening in Cyprus, visit here (a simple explanation of the situation).

The previous proposed tax was 3% tax on deposits below €100k, 6.75% on those €100 – €500k and 15% on those more than €500k. In my previous article, I mentioned:

…The reality is, the government can steal as much as they want….

In the latest discussion in Cyprus, bank accounts exceeding €100,000 ($128,000 or RM397,000) will be taxed at 60% with the reason of saving the country from bankrupt. The remaining 40% amount of cash will be frozen to ensure the liquidity of the country. For example, if you have RM400,000 in Cyprus, RM240,000 (60%) will be taken away by the government while RM160,000 (40%) will be frozen until further notice.

Cyprus Bank

Instead of as earlier proposed STEALING 15%, the government decided to ROB 60% of the deposit money and then said, you can’t touch the remaining 40% because the government said so. Sorry, you don’t have an option to disagree, you only accept it. Depressing? Unfortunately, this is the reality in Cyprus.

This is an extremely important financial event in the history. Never in the financial history such “legal robbery” has happened to the people. It is a matter of time, the people  will wake up and riot at streets and tell the government “who the hell you think you are to rob us?!”

What’s next? Cyprus very likely will continue restricting transferring money outside the country. Cypriots will be withdrawing the fiat currency and spend within the country like crazy with the mentality “If I don’t spend it, government is going to take it“. Hyperinflation is on it’s way hitting Cyprus.

Similar event has happened to Germany after World War 1. Hyperinflation hit Germany between 1921 and 1924. Due to war spending, Germany has printed massive amount of fiat currency that caused hyperinflation. The effect started to hit the middle class and everyone spent as fast as they could. Hyperinflation is never a funny matter. It is not about Nasi Ayam increased from RM4 to RM5. To put hyperinflation into Malaysian perspective, 2 years back if we could buy a bread with RM0.50 and then in the next 3-4 years, the same bread will cost RM201 Billion.

German Mark

Germany was fighting a war with weapons; while Cyprus is fighting a war with financial instruments. Unfortunately the financial war is now invisible and most people do not even realize it is here.

Too drastic to happen in Malaysia? 70 years ago, Malaysia have it’s own version of hyperinflation through “Banana Money” issued by the Japanese during their occupation of Malaya between 1942 and 1944. In order to supply the ruling authorities with money whenever needed, they simply kept printing more and more banana notes.

banana-money

During time of financial uncertainty, gold and silver remain as the best option to store one’s wealth. Not only gold and silver price will shoot up during such crisis time, but also the government cannot steal your gold and silver. (Remember, if you don’t hold it, you don’t own it) Between gold and silver, silver has much better potential than gold. Apart from the precious metal status (like gold), silver has an additional demand in industry usages. Computer, smartphone, air-cond, TV, battery, RFID, and much, much more. Almost every electronic devices uses silver as silver is the best electrical conductor in the world. The anti-bacteria element also made silver highly demanded in medical usage. To discover more silver industry usages, please visit here.

The total physical silver owned by ETP Silver Holdings continue to go up:

etf

For individual silver investors, I highly recommend you start buying some silver coins, bars or even rounds. There will be short term fluctuation of silver price, which I call them as “market noise”. For most people, it’s NOT worth the effort to pay too much attention to.

silver-eagle

American Silver Eagle coin is one of the favorite coins I keep (a lot!). Beside the beautiful design and low premium, I like the constant reminder of ONE DOLLAR minted on the coin, where right now the market is selling the coin for about $30 (RM100 – RM120, depending on the quantity and which dealer you buy from). This coin could once be bought at merely $1. It’s a perfect example / effect of inflation that pushed silver price up to such height.

Typically, investment grade silver in Malaysia can be categorized into coin, bar and round. For beginner, I highly recommend you start with American Silver Eagle which has many advantages over the other silver items in the market. The size is reasonably small where most middle class can afford to buy / invest. The premium is relatively low compared to other numismatic coin (which means you get more silver for every Ringgit spent), yet the coin has an impressive design. It is one of the most common and most demanded silver coin in Malaysia, in fact it is the best selling coin the world!

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 and tricks you never thought of in silver market. Please click here to find out more.

 

Money Is Not Safe In Bank

Government is going to steal some of them…

Cyprus, is country on a small island and a member of the European Union (EU). All members in EU shares the same currency known as Euro.

Cyrus is facing a financial disaster in the country. They lent money to Greece. When the Greek economy came down, the Cypriot banks double the gambling by buying up Greek government bonds in the hopes of a bailout. Unfortunately, Greece is now broke. Cypriot banks owe more money than they have. Actually, Cypriot banks owe more money than the whole country’s GDP. Right now, the Cypriot banks need a financial bailout from the European Central Bank. The bad news is, European Central Bank told the Cypriot that they have to come out with their own money to save the country.

20130328_cyp

Where to find the money? Cyprus has decided to steal the money from the people! On 15th March 2013, the government of Cyprus announced that it was going to tax (another word for stealing) 6.75% of all bank accounts less than €100k and 9.99% of all bank accounts more than €100k. For example, if you have RM100k in the bank, the next day you wake up you only have RM90k left. What happened? Oh nothing, the government has just decided to take away your money.

Cyprus-ATM

As a logical response, everyone in Cyprus rushed to the banks to take out their money. In order to avoid people getting their cash out of the banks, the Cyprus government declared a national holiday and closed the banks. People lined up at the ATM machine and soon found out the ATM machines are EMPTIED.

Here is the ironic part. If the government can steal 6.75% or 9.99% from the people, what’s stopping the government to steal even more? On 19th March 2013, the Cyprus changed the plan. They decided to steal 3% tax on deposits below €100k, 6.75% on those €100-€500k and 15% on those more than €500k. The reality is, the government can steal as much as they want.

On Friday, 22nd March 2013, the government have decided they would steal from their pension funds (equivalent to Malaysia EPF / KWSP). At the point of writing this, there isn’t any plan that is finalized. But whatever “solution” Cyprus government going to come out with, it is going to hurt the people in the country and it is NOT going to be pleasant.

Right now, the people in Cyprus have lost trust the banking system. Shops do NOT accept credit card and cheque, they only accept cash – as whatever payment made by credit card or cheque, the government is going to steal a portion of it. This is a typical example of: your money is safer under your mattress than in the banks.

Whatever happening in Cyprus is hinting us the global debt crisis is not over, it is only worsening. Cyprus is the fire starter and the worse is yet to come. During the time of financial crisis, gold and silver are the safest option to store wealth. Gold is good for storing high amount of monetary value.

However IF the time come for the people to fall back to using gold and silver for daily transaction, it is very unlikely that anyone would use gold simple because the value is too high. 1 gram of gold is equivalent to RM165 (gold spot price). You probably will NOT use your gold to buy some bread / noodle / rice to feed yourself or your family, because the value is too high. Under such circumstances, silver is a better option as silver is about RM3/gram (silver spot price) which is still 55 times cheaper than gold.

In Practical Guide For Investing Silver In Malaysia, you will DISCOVER how to start buying silver using the correct methods. Avoid queuing at the ATM when financial crisis hits, you can better prepare for the greater financial disaster ahead.

Silver Industrial Application

Both gold and silver are precious metal and played important monetary role in the history. The primary difference between gold and silver is the industrial application. Gold is mainly being keep safely by the central governments and banks while silver is being consumed in the industry. Each year more gold will be added to the global inventory; while total amount of silver on earth each year is getting lesser.

silver-inventory

There are MORE THAN 10,000 known applications for silver. The following are some of the usages of silver:

Car

myvi-interior

Whenever you drive a car or sit in a motor vehicle, you are taking advantage of a number of the great uses of silver. Over 36 million ounces of silver are used annually in automobiles industry. Every electrical action in a modern car is activated with silver coated contacts.

Basic functions such as starting the engine, opening power windows, adjusting power seats and closing a power trunk are all activated using a silver membrane switch. While driving, silver-ceramic lines fired into the rear window. The heat generated by these conductive paths is sufficient to clear the rear window of frost and ice. Finally, the active ingredient in antifreeze is ethylene oxide, which is a compound made from silver.

Battery

silver-battery

In recent years, silver oxide batteries replaced the once-ubiquitous lithium battery. Silver cell batteries have power-to-weight ratios that outweigh their competitors. Many current rechargeable and disposable batteries are manufactured with silver alloys as their negative side or cathode. The most common silver oxide battery is the small button-cell battery used in cameras, toys, hearing aids, watches and calculators. Approximately 35% of the battery weight is silver.

Silver oxide batteries are beginning to replace lithium ion batteries in mobile phones and laptop computers – as silver is safer and more environmental friendly. A new and popular type of battery is the silver zinc battery. These feature a water-based chemistry and contain no lithium or flammable liquids. Due to health and safety standards and environmental concerns, silver’s role in batteries to be more important than ever in coming years.

Electronics

Electronics

Electronics are configured with silver. From turning out the lights to turning on your television silver is playing an important role, behind the scenes. Silver’s excellent electrical conductivity makes silver a natural choice for everything from printed circuit boards to switches and TV screens. CDs, DVDs and plasma display panels are also fabricated using silver.

Silver membrane switches are used in buttons on televisions, telephones, microwave ovens, children’s toys and computer keyboards. These switches are highly reliable and last for millions of on/off cycles. Silver is used in conventional switches such as controlling room lights.

Silver-based inks produce so-called RFID tags (radio frequency identification) antennas used in hundreds of millions of products to prevent theft and allow easy inventory control. They are also used in Touch ‘n Go (toll).

In Summary, new silver demand in 2010 was only 10 million oz per year. It is expected by 2015, the new demand for silver will be MORE THAN 45 million oz per year. Current and future silver industrial application can be broken down as following:

silver-future-application

In Practical Guide For Investing Silver In Malaysia (3rd Edition), you will DISCOVER how to invest in the most undervalue metal in this decade. With this complete guide, you will be able to invest in silver confidently and avoid many costly mistakes.

Malaysia EPF

Manulife Asset Management published a report on Malaysia population “aging” issue.

  • In 2010, only 5% of Malaysian population are above 65 years old.
  • By 2050, there will be 15% of Malaysian population above age 65.

Malaysia population is getting older. As each year passes us, there will be more elderly seniors compared to the previous years:

  • In 2010, every 100 working person are supporting 7 retired elderly seniors.
  • By 2050, every 100 working person will be supporting 23 retired elderly seniors.

When comes to retirement age and financial support upon retirement, the 1st thought Malaysians think about is EPF. Taking a deeper look, there are LESS THAN 40% of working age Malaysians have an EPF account.

EPF

There are a couple of issue with our EPF:

  1. It is a one-for-everyone solution in retirement planning. Undeniably, EPF is safe and stable by consistently giving 4.x% to 6.x% dividend (in the past 15 years). Last year (2012), the dividend payout from EPF was 6.15%, which can be considered reasonably. Unfortunately, this return is merely slightly above FD (fixed deposit) rate. This might be an okay plan for someone above age 50 and have a family with wife and kids. He cannot afford to take high risk due to his age and dependencies. However we have other groups of working class such as someone who is below 30 and have no dependencies (no wife, no kids and parents are still healthy). They can take much higher risk in order to make higher return. Their money in EPF earning merely 4.x% to 6.x% dividend is doing a relatively poor job for their money. This group of working class need to consider an alternate option to grow their wealth quickly.
  2. Most people finished spending their EPF savings within 3-5 years. Firstly, as of end 2011, 86.5% of the active EPF contributors have LESS THAN RM100,000. If an elder spends RM1667/month (for food, medical attentions and other daily necessities), his fund will run out in LESS THAN 5 years. Secondly, most retired folks are not prepared to handle such large amount of money. They have been receiving salary all their life and only managing their salary of few thousands Ringgit (perhaps RM3000, RM5000, RM8000, etc), but they are not prepared to handle RM100,000 or sometimes even more. They are not intellectually prepared due to insufficient financial education and they are not emotionally prepared with that large amount of money. Their financial blueprint will immediately bring them back to the level where they do NOT have so much money. This is the same reason why most lottery winners that became millionaires overnight became broke again (or in worse financial situation) within 3-5 years.

Apart from better money management skill, we should consider taking a little risk and grow our personal retirement fund (not purely relying on EPF). In my opinion, the most potential  investment in this decade is silver investment. Silver is known as the largest wealth transfer in human history in this decade. Just like Energy, wealth is never destroyed, it is merely transferred from one pocket to another. The challenge with our modern generation is, the money / wealth have gone invisible. If you are not trained or educated in this subject, you won’t even realize “the transfer” has happened.

Silver investment is really simple. All you need to do is buy low, sell high. Unfortunately, most people are doing the exact opposite. When the price is going higher, they came in and  bought during the high price then soon found the price started crashing down. When silver price did come down, that’s the time they should buy but now they are conquered by their fear that silver price might drop further and paralyzed them from taking any action.

Remember this, if you want to sell high, you need to buy low. Price fluctuation (ups and downs) for silver will always be there. Price moving in straight line NEVER exists. At the point of writing this, silver price is $29. I would not call this as the rock bottom price, but this is definitely a good price to buy some cheap silver. It is always better to buy at a good price, than waiting for the best price that might never come.

For more of my work, please take a look at the eBook: Practical Guide For Investing Silver In Malaysia (3rd Edition).