Silver bullish for long-term; proof: Resource nationalisation

Last Updated : 28 August 2012 at 12:40 IST
The writing on the wall is clear: silver is bullish for the long term; resource nationalisation is the proof.
The Malku Khota silver-indium project of South American Silver (TSX: SAC) recently nationalized by Bolivia is the latest news in resource nationalisation.

Peru recently nationalized Bear Creek (TSX-V: BCM) which is still trying to recover from its fall from grace in public markets.

So, why is this happening?

The death of paper money by virtue of the erosion of its value is not something worth writing about. Web pages already galore with content pertaining to the topic.

Now, what happens when paper money actually kicks the bucket? When governments taking into account the sorry state of global economic affairs inject unprecedented liquidity into the markets thereby creating hyperinflation?

When currency loses its value, it is always ideal to invest in precious metals. When people around the globe do that why should governments too refrain?

Take a look at this:

“Over the last 13 months, South Korea’s central bank increased its gold bullion reserves by five times, bringing its total gold bullion holdings to 70.4 tonnes, or $3.0 billion,” says Lombardi in an article.

According to Lombardi, this has continued the trend of emerging market central bank buying of gold bullion of the last few years.

“Kazakhstan’s central bank has made it publicly known that it plans to increase its gold bullion foreign reserves from 12% to 15%,” says Lombardi.

“As long as central banks continue to buy gold bullion, you can set aside the argument that gold bullion is in a bubble, because it is not exhibiting any of the characteristics of a bubble,” concludes Lombardi.

If this be the case, then there is yet another easier way by which one can source precious metals: Confiscation aka nationalisation of mines.

“Of the total 788 million ounces of annual world silver production projected for 2012, the part that is accessible without much hassle to you and I, the unsophisticated investor buying in public markets, is largely limited to Mexico, USA, Canada, Australia and Europe.

...the rest of the world offers few easy ways to invest in silver. This list of other producers includes China, Russia, Kazakhstan, Chile, Turkey, Morocco, Indonesia and India.” according to Rick Ackerman.

Clearly precious metals are ultimately what they are: precious! And governments around the world know that well.

As published in: http://www.commodityonline.com/news/silver-bullish-for-long-term;-proof-resource-nationalisation-49960-3-49961.html

Silver: Complicated; who would clear the air and how?

Last Updated : 27 August 2012 at 11:40 IST
April 25, 2011: 73600/kg for Silver
May 12, 2011: Rs 49,775
September 6, 2011: Rs,66898
December 25, 2011: Rs.48700
February 2, 2012: Rs 61,387
May 16, 2012: Rs.51259

Since then silver has again climbed 15% to touch Rs 56,700.

So what accounts for the volatility of silver when traders say that silver is the most dangerous commodity to hold matched only by crude oil?

The point is silver is having an identity crisis.

Silver is primarily an industrial commodity. About 50% of silver demand comes from industrial or manufacturing sector ranging from sweets to photovoltaics. So when industrial demand picks up silver demand too picks up. But when growth slows, silver too would plummet; or at least that is what people think about it.

In contrast, silver is also an investment commodity. Investor demand too can take silver to dizzying heights and given that one can buy almost 50 times of silver with same money as that of gold, silver prices shoot up when global growth slows.

So slow down is good for investment silver even as it is bad for industrial silver. Bullish by half and bearish by the same measure.

Now take a look at certain research reports:

Barclays predicts that global silver supply is expected to be in a surplus of 4000 tons for the current year. Meanwhile, market honchos like Theodore Butler and others think that silver is terribly shorted. Gurus like Jeffrey Lewis think that there is a pent up silver demand as silver is mostly on paper only and not in a physical dimension.

Clearly these conflicting reports that reach the lay man investors account for some amount of volatility in silver.

Ultimately fundamentals decide the movement in any commodity. But when obscurity veils the fundamentals; the same gets covered in mystery and add to volatility.

Now, who would clear the air and importantly, how? Are the regulators listening?

As published in: http://www.commodityonline.com/news/silver-complicated;-who-would-clear-the-air-and-how-49935-3-49936.html

The last chance to invest in Gold and Silver: Now

Last Updated : 24 August 2012 at 13:20 IST
The buzz of global depression—a hyper inflationary depression—has been doing rounds in the markets for a long time now.

The scenario is plain and simple, though horrible. As the paper money printing continues unabated by governments around the world, currencies around the world will begin to depreciate, almost violently.

And see who all are ready or almost ready to contribute to it?

Japan in a phase of deceleration could possibly opt for a stimulus measure, observers say. China whose factory data may portray signs of slowing down is expected to announce stimulus measures. ECB could very well opt for a bond buying program injecting additional stimulus money into the system as per analyst opinion. And finally, the USA could kick start the doomsday machine by opting for another round of Quantitative Easing.

Add to this other countries who may opt for stimulus measures once the bigwigs start doing QE s: paper money would just become what it should not be: mere paper

It is irony that the day this doomsday machine starts to work would be the day when gold and silver bulls would rejoice.

There would be minor corrections in gold and silver for the short-term; but $4,500 to $5,000 in gold and substantially over $100 in silver is not ruled out by Egon von Greyerz in an article titled Gold & Silver off to the races.

Now, the crucial question arrives:

If paper money is about to lose its value, will it continue to make sense if the commodities are priced in dollar and other currencies? Doing it the other way really makes sense. This means, dollar is priced on a strong platform erected by precious metals. Yes, the proverbial gold standard which the world said farewell to in 70s. The system could well make a return in the coming years.

Now, if the gold standard does arrive can we also think of a silver standard? You can get fifty times of silver for the same price of gold! And governments that have lost most of their value—in whatever sense—would rather buy or may even mine gold and silver; by paying mostly from the bullion vaults they have!

And countries like India and China would transform into rich states overnight whose people harbour voracious gold and silver appettite unlike Europeans and Americans.

Truly, a reversal of fortunes and a date with history!

As published in: http://www.commodityonline.com/news/the-last-chance-to-invest-in-gold-and-silver-now-49904-3-49905.html

Is the golden era of Silver about to dawn?

Last Updated : 23 August 2012 at 12:10 IST
The time before monetary easing contributes to a period of uneasiness. Time after easing contributes to a binge.

It is because Quantitative Easings, wherever they are carried out ultimately find their way to commodities and equities. Now China, in an anticipated phase of deceleration predicted for August is expected to announce stimulus measures. US Federal Reserve minutes from the latest meeting of policy honchos is indicative of a round of QE 3 for many.

So, what is the outcome of these measures as and when they happen?

One word: inflation!

When printed money without sufficient asset backing finds its way to markets, it behaves like a tide and in a deluge kills the value of money. Hence you may have to pay that piece of burger or this piece of jewellery, a little more than what you had paid a few months ago.

The next question is how to safeguard your investments and assets from this deteriorating trend.

Investing in precious metals is the best option and investing in silver the bettter-than-best option!

“It does just have to be silver. Consider this: silver is the only major commodity not to have reached a new all-time high in this bull market; silver is still cheaper than it was 32 years ago, prices are astonishingly depressed. Then you can consider the impact of an economic slowdown on silver. Yes its industrial use will go down but so will its production because that is linked to the output of copper and zinc mines.” said Peter Cooper in an article.

[Pure-play silver mines are rare and silver is often obtained from zinc and copper mines in an also-mined fashion.]

“Investment demand for precious metals will take over in any case from industrial demand. And once the gold price heads up then silver will follow. You get 50 times more silver for your money than gold. Historically it was 12 to 15 times the amount of silver for gold, so that also looks like a correction just waiting to happen.” he added.

Nowadays there are talks of a global slowdown about to happen in lines of the 1930s depression. If that turns out to be true, those who possesses nuggets of gold and silver would rule the world.

Now, if the silver prices are being kept low as Theodore Butler has argued, and pent up demand in silver and a mismatch in paper silver and actual silver occurs, God save all those who have not invested in silver.

As published in: http://www.commodityonline.com/news/is-the-golden-era-of-silver-about-to-dawn-49876-3-49877.html

Silver bullish on US, EU crises; bearish on soft fundamentals

What happens when two analysts from two different brokerages react to same questions on silver? In separate interviews with Rakesh Neelakandan of Commodity Online, Bitupan Majumdar: Senior Analyst, JRG Securities and Renisha Chainani: Manager, Research; Edelweiss Comtrade Ltd. speaks about the prospects of silver.

There are areas where their opinions converge and there are regions where their viewpoints stand diverged.

For instance, while Renisha's tone is supportive of a bull rally in silver, Bitupan is more cautious and reserved. But both agree that the Euro zone crisis is having no quick-fix solutions.

Ultimately, it is for the investor community to ponder over everything as we provide the best of both worlds.

Rakesh Neelakandan: What were your expectations for Silver in 2010 for the period of 2011? Did the commodity outperform your expectations?

Bitupan Majumdar: Silver prices during 2010 were almost in line with our bullish view as industrial demand for the commodity has improved after a slump from 2008 to 2009. However, the gain in the early 2011 was above expectation as ETF demand and industrial demand were expected to start contracting from 2011 second half onwards.

On MCX, prices rose towards 75,000 and in COMEX, it rose almost $50 which was not in sync with its fundamentals. The result there has been a collapse as long liquidation and fresh selling emerged at higher levels. For remaining 2011, we maintain a neutral stand on MCX while slightly bearish on COMEX. As USD-INR is expected to reach high as 52, silver parity prices on the Indian market may not drop much, despite a drop in prices in the international market.

The optimism from the Euro zone after the EU summit keep sellers away from the market as of now, but the Europe does not seem to have a long term fix for its debt as well slowing growth.

European economies may see contraction in growth or may see negative reading for medium term horizon following austerity measures taken by these countries. Apart from that, slowing US growth and Chinese fear of a real estate crisis may be a matter of worry for the white metal.

Renisha Chainani: We had silver as our diwali pick last year, we did forecast a price of 40000; but it certainly outperformed our expectations and could breach 70000 bucks; the rally was supported by the gloomy economic outlook as well as strong industrial demand in the developing world.

Q: By April end, silver touched $50. Will it rebound to those levels yet again? If so, what would be the driving factors? If it will not, what would be the dampening factors?

Bitupan Majumdar: We do not expect Silver prices to recover due to soft fundamentals. From supply perspective, mine production has been increasing after a decline in 2006.

Mine supply has increased an average of 2.1% YoY during the last decade. It is expected to rise in 2011 as well after a better price realization.

However, demand may weaken from 2012 onwards following contraction in industrial activity.

Silver is mostly an industrial metal while investment demand just contributes 15% of total demand. In our view, industrial activity to slowdown across US, Europe and emerging nations and this will result in slowdown of silver demand growth or a contraction.

Renisha Chainani: Technically, If Silver prices trade and sustain above $34 and $45, we will see $50 retesting.

Bullish factors would be the same- US and EU debt crises, demand from developing nations, alternative to higher Gold prices, new uses in Industrial sector, etc.

Q: Are you confident of the European summit achieving its objective of preventing a mayhem or contagion?

Bitupan Majumdar: The EU summit may have a short term fix and the EU problems are larger in nature. It may avoid the imminent banking crisis in the Euro zone, but structural problems will weigh.

Renisha Chainani: While talking about the EU Summit we should bear in mind that one can’t hold the globe and hence the surroundings are uncontrollable even if the Euro zone leaders get the world accord.

At the first glance they themselves are not in accordance with the goal they are sharing. Until last 15 days no one was ready to take an initiative but when it burnt, all started blaming the major partners of EU and hence Franco-German had to take the lead.

Hence, we are quite confident that EU summit will not be more than PAPER TIGER when it comes to a result, and if at all they will be able get certain forceful results out; then also sooner or later the murkier fundamentals are going to kill the EU as well as Euro.

Q: How do you see the industrial demand for silver for the rest of the year and early 2012?

Bitupan Majumdar: Industrial demand may drop due to weak industrial activity in developed and emerging nations. Silver fabrication demand has been in a declining trend since 2000 till 2009, but recovered in 2010 following sharp recovery of the global economy. We expect the industrial demand to drop by 5-6% during 2012 and total fabrication demand may drop to 8-10%- compared to 2010.

Renisha Chainani:In 2012 silver consumption in India is expected to rise to 5,000 tonnes. Silver demand in China and India has increased sharply in 2010 and 2011 as more investors use silver as a store of value. China's net imports of silver was up 400 percent to 3,500 metric tons in 2010.

About 70% of China's silver demand comes from the industrial sectors. Silver is widely used in the production of solar panels, electronic products, jewelry, industrial production, medical equipments, and water purification industries. China is the world's largest producer of solar power and electronics.

Q: How do you see the investment demand for silver—futures and ETFs--for the rest of the year and early 2012?

Bitupan Majumdar: Silver ETF holdings have dropped almost 10% from 2010 closing till date. The following chart of Silver I shares tell the story.



There has not been any significant demand rise after recent price drop.We do not think Silver ETF will keep pace in 2012 and will remain subdued due to soft fundamental of the commodity.

Renisha Chainani: Silver demand is expected to outpace in coming six months as an alternative to gold and safe haven. People who could not afford to buy gold due to higher prices are likely to buy silver. There is great demand coming from developing nations like India and China , where there is festive and New Year demand.

As published in : http://www.commodityonline.com/news/Silver-bullish-on-US-EU-crises;-bearish-on-soft-fundamentals-43202-3-1.html