Silver

[muppet]

Hi Guys

Another interesting read for those who have a few spare dollars.
Try silver but wait until after I've bought some.

http://www.financialsense.com/fsu/editorials/2003/0718.htm

Regards

[inzvestor]

An interesting article Muppet.

Judging from some of the reasons given to invest it also makes sense to stay away from this investment (mainly low supply to demand will lower the prices overall as there will be less silver to trade - in the longer term)
However, in the short term this may make an excellent investment.

Personally I am interested more in the Platinum market, and to a lesser extent, Gold.

If you have any info on these markets I would be very happy to review it.

[muppet]

Hi Inzvestor

Came across these Five Laws of Gold from the Richest Man in Babylon.

1. Gold cometh gladly and in increasing quantity to any man who will put not less than one-tenth of his earnings to create an estate for his future and that of his family.

2. Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.

3. Gold clingeth to the protection of the cautious owner who invests it under the advice of wise men in its handling.

4. Gold slippeth away from the man who invests it in business or purposes with which he is not familar or which are not approved by those skilled in its keeping.

5. Gold flees the man who would force it to impossible earnings or who followeth the advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.

"Wealth that comes quickly goeth the same way"
and
"Wealth that stayeth to give enjoyment and satisfaction to its owner comes gradually."


I came across an interesting discussion on silver on www.sharechat.co.nz. Also listed were a few web sites. I'll track them down when I get onto my other computer.

Regards

[muppet]

Hi inzvestor

Try this web site for a discussion on the merits of investing in silver. There are 6 pages of postings and there are number of other links that you may find interesting. The postings span most of 2003.

http://www.sharetrader.co.nz/topic.asp?TOPIC_ID=17422

If you haven't seen it before also try this site as it gives an up to the minute value for precious metals being sold around the world.

http://www.kitco.com/

Happy reading

[muppet]

Hi Inzvestor

Try this article.

December 2003 Issue
Volume IX, Number XII
November 16, 2003


BREAKOUT?

Last week’s final three days witnessed silver break free from its long restraining shackles. The precious metal rose a combined thirty-three cents and ended the week at $5.41. This was its highest closing level since February, 2000. This earlier event occurred in the aftermath of the explosive price advance that was engendered by information leaked to the marketplace, that Warren Buffet had accumulated tens of millions of ounces of silver. The high point of that rally occurred when silver touched $7.50 per ounce. Now, it appears that the white metal has finally completed its consolidation, and is poised to probe its destined higher levels as its Bull Market enters its next stage of advancement.

I remember when silver was tied to the dollar. Silver was pegged by the U.S. government at $1.29 an ounce at that time. During that period, prior to 1965, Silver Certificates could be redeemed by our citizens for a similar dollar amount of silver. Further, the U.S. government had an enormous 3 billion ounces stockpile of the white metal. During the late 1950's and into the early 1960's, the demand for silver sharply increased. Much of the metal was consumed by the government. It was used to produce our coinage that was desperately needed to keep our economy moving smoothly. Business had been expanding for a number of years and required an increasing amount of new minor coinage production to satisfy it.

Prior to 1965, silver was used to produce our dime, quarter and half dollar coins. In 1964, the U.S. Mint in Philadelphia was overwhelmed by the public. They queued up waiting to exchange their silver certificates for silver coinage. Also, rare coin dealers offered as much as $1.50 per dollar of silver certificates for anyone who cared to accommodate them. The dealers then brought their acquired certificates to the mint and redeemed them for silver coin and later for various other forms of silver. This was a profitable undertaking because silver had rocketed in price on the open market to a point that it far exceeded its government mandated price. This first rush into silver was the result of a shortage. It was created by a combination of a great increase in demand for the metal as well as by the government’s decades long ceiling on silver, which inhibited silver exploration and production.

In 1964, the price rise caused by the enormous silver requirements of our government and industry, forced our officials to remove silver from our coinage. Thus, from1965 to the present, the 90% silver content of our earlier silver coins was replaced by a combination of copper and nickel. Our half dollar saw its silver composition reduced to 40% for the years 1965 through 1970. However, by 1970, silver’s price had risen sufficiently high so that even the token amount of silver remaining in the Kennedy half dollars was replaced by the similar copper-nickel content that was used in our circulating dimes and quarters.

Another interesting event occurred by late1964. All of our circulating silver coinage rapidly met the fate of Gresham’s Law. This economic truth states that bad money drives out good money. The public realized that the silver in the pre-1964 coinage was worth far more than the face value of the coins themselves, the good money, and began to hoard them. The coins were quickly withdrawn from circulation and after1967, seldom were silver coins found in circulation. They had all been replaced by their look alike copper-nickel substitutes; the bad money. Even the U.S. government did not overlook the profitability of recovering the silver from our earlier coinage. A few years ago the Superintendent of the Mint during that era recalled installing separating machines at the various mint facilities. They removed whatever silver coins was missed by the public and melted them. Thus, tens of millions of our earlier circulating coins met their fate in various melting pots across the nation. They were destroyed and forever lost, to recover their far more valuable silver content.

To give newcomers to the silver market some perspective and bring them up to date, I believe that a brief historical review is important. By 1978, silver had broken through the $5.00 level, after the supply/demand deficit had acted to gradually drive up its price. The annual supply shortfall had been in effect for nearly a decade, and there was no end to it in sight. In fact, in order to satisfy the demand, or some say to suppress its price rise, the government undertook periodic sales of silver from their massive stockpile. Eventually, the government had sold all but a few hundred million ounces of the precious metal, which they needed to satisfy our military requirements.

By 1979, not only had the silver deficit worsened, but inflation had already begun to rear its head. Silver moved to $7.00 an ounce early in the year, to $10.00 by the summer, and hit an inter-day high of $52.50 in January, 1980. This occurred when gold peaked at $875 an ounce, inflation had risen above10% annually, and the entire commodity complex had exploded in price.

Late in the silver Bull Market, the Hunt brothers of Texas attempted to corner the silver market. To this end they were instrumental in the final, incredible price spike that took silver to its ultimate peak. However, as I recall, despite the entrance of the Hunts, silver had already surpassed the $10.00 level and was moving higher in tandem with gold. Silver’s supply deficit had already become a driving force and moved it explosively higher in price. The Hunt brothers astutely recognized that condition and positioned themselves accordingly. I am bringing this to the reader’s attention to point out that a precedence has been set. The white metal has already traded above $50.00 an ounce, and that was over 20 years ago. Remember, silver only recently surpassed $5.00 an ounce. The first time was 30 years ago!

After silver’s 1980, $52.50 high, it entered a secular Bear Market that existed until its nadir in 1991. During the 1991 through 1993 era, silver touched the $3.50-$3.55 area on several occasions. In retrospect, given the above history, this represented an incredible buying opportunity. And, given yesterday’s break-out above an earlier major area of resistance, I believe that silver’s upside price potential now safely exceeds it downside risk.

Yesterday, for the first time since early 2000, silver finally vaulted above the high $5.30 zone. It was repelled from this area on two occasions. As long-term subscribers know I turned strongly bullish on silver in April, 2002. At that time I recommended “taking a significant position in silver”. Since then I have become increasingly more confident in that belief. Now, I feel that silver is on the cusp of fulfilling if not exceeding my ultimate price expectations.

The reasons for owning silver at this juncture are as compelling as those that surrounded gold when I turned bullish on the yellow metal. This occurred after it rose from its 2001 low at $255 into the $270 area. At that time I viewed gold ownership as offering as limited risk for an investor as one could hope. I now view silver in a similar light.

Silver has been in a supply/demand deficit for over a dozen years. It’s annual shortfall has been in the neighborhood of 100 million or more ounces during this period. This has been satisfied by the dwindling above ground supplies. As I stated in my July, 2002 issue of Financial Insights, “the past few years have found the silver market essentially scraping the bottom of the barrel; there is little known remaining above ground silver to satisfy the supply deficit. If conditions do not change, it is likely that within three years the entire known above ground silver stock will be consumed. When that occurs prices will skyrocket”. I went on to state that “ Given the incredibly tight supply picture for silver and the enormous short position overhanging the market it is likely that we will not have to wait until the above ground silver stocks are consumed. If silver rises in its Bull Market it will pressure those who are short the metal. Like gold, I anticipate some spectacular silver short squeezes to occur during the next few years.”

Silver’s short position is the greatest of any commodity. This phantom supply has acted to retard any important price advance for the past several years. The reason that it has grown to such lofty levels is that it helped satisfy investor demand. Further, the physical market has become increasingly tight.

As you can see, the conditions surrounding the silver market are surprisingly similar to those that existed during the 1970's. However, today they are far more favorable for the silver investor. The government is now a net purchaser of silver rather than its major supplier, when it sold in the vicinity of 3 billion ounces of silver into the market. This acted to temporarily suppress its price advance. It has not only exhausted its silver supply but has been forced to enter the marketplace as a silver buyer. The U.S. Mint must compete with other silver users in order to acquire the needed supply for the coining of their Silver Eagles, as well as for their coinage to satisfy collector demands. Further, a short position has been built up that will unwind like a coiled spring as the market moves higher and the shorts run for cover and reverse their positions. Not only has the supply/demand deficit been as great and as long-lasting as during the earlier period, but the available silver supply has now been virtually depleted with scant likelihood of increasing for the foreseeable future. Remember, nearly 75% of the world’s silver supply results as a byproduct of copper, lead and zinc production, and these are not likely to shortly rise.

To me, silver’s break-out above the important $5.38 level bodes well for sharply higher prices. All that I need are two further consecutive trading session closes above this point to solidify this belief. The next price target is $6.00 which stopped it in its tracks in1999. After that milestone is reached, which could occur quite soon, the $7.50 high that resulted after investors learned of Warren Buffet’s silver purchases is the next important area of resistance.

I believe that the words that I penned about silver in July, 2002, are today even more credible. Further, since that time the world community has depleted an additional 150 million or so ounces of silver from the available above ground supplies.

Not to be unexpected, silver’s price advance will be accompanied by sharp reversals! In fact, silver may continue to work in its present range as the short interests muster whatever strength possible in their fight for their financial lives. Given the incredible amount of the precious metal that they short, the likelihood of a massive short-squeeze can occur at any time. When that moment arrives those who possess the white metal, or the shares of the few silver producing or silver stockpiled companies, will be amazed at how quickly profits will accumulate.

THE U.S. STOCK MARKET

U.S. common stocks continue to work higher with more and more commentators espousing their belief that a new Bull Market has begun. Anecdotal evidence such as earnings increases, increased industrial production, rising stock prices, improved consumer sentiment and even a recent, slight increase in employment are heartening investors. It remains to be seen if Greenspan’s combination of sharply reduced interest rates, a burgeoning money supply as well as a weaker dollar will be sufficient to permanently reverse the economy’s decline. Yet, the typical investor continues to hope and pray that the exhortations of the alleged experts will prevail. This, despite the FACT that their comforting statements for the past three years have proven wrong.

Ours has been referred to as a jobless recovery. If we have indeed entered a new Bull Market it will be the first time that one has not been led by increased employment. Our nation has priced itself out of the job market for manufacturing and well as for numerous technical positions. An increasing number of jobs have migrated beyond our borders and China and India have been the major beneficiaries. China offers an unending array of competent employees. They are not only willing but they perform admirably, and will work for $30 or less a week. India has an enormous number of engineers and other technical people who will work for a fraction of their American counterparts. With this level of competition what thinking person can believe that our nation can substantially add to our work force. And, without an increased number of households receiving regular paychecks how can our economy grow? I know that Greenspan hopes that his machinations will benefit our workforce. Yet, given the above, I have to wonder from where the jobs will come.

I continue to believe that we remain in a secular Bear Market in equities. While I hope that Greenspan will succeed in both improving the economy and lifting share prices, it is likely that we are only experiencing a temporary reprieve. All earlier Bear Markets have only ended when common stocks offered great values and the investing public was both disgusted and essentially out of common shares. I continue to believe that while stock prices have the potential to continue to rise in the near term, the risk versus reward remains firmly against today’s stockholders. Gold and silver on the other hand represent two greatly underpriced items and, I believe, are destined to trade at multiples of their current price levels.

I have always been the most successful when I invested in undervalued and unappreciated items and awaited the recognition of that reality by the public. When the herd finally arrives and rushes into these tiny, presently widely ignored precious metals, their investors will profit to a far greater extent than if I am wrong about common shares, and a new equity Bull Market has begun.

THE GOLD MARKET

Gold ended last week a hairs breath below the $400 level. The increasingly abbreviated declines of the past several months have brought the yellow metal to the doorstep of what was widely thought to be an unattainable goal. Yet, no matter how much gold was sold or shorted, the appetites of the buyers have overwhelmed the sellers. Despite the rants of many commentators that the demand for physical gold is weak, information that I have belies their statements. Additionally, India and China are becoming progressively larger consumers of the precious metal. India continues to be a major consumer of gold and China recently allowed their citizens to acquire gold for the first time in over 50 years.

The seemingly unstoppable strength that gold has exhibited gives me confidence that my long anticipated breaching of $400 is at hand. When $400 is finally exceeded I believe that the character of the gold market will morph into a new form. Despite the wall of worry that its Bull Market has already climbed, even disbelievers will begin to pay more attention to gold’s price movements. The bettering of $400 will likely generate a major turn of events when many distant onlookers will enter the market for the first time. Further, once $400 is penetrated I would not be surprised if gold rapidly tests its 1996 high at $419. To me, this level is crucial. When $419 is surpassed I am confident that $500 will not be far behind.

We must continue to expect to endure sharp price declines as gold probes higher. Yet, given its continued vast undervaluation, due to among other things its 20 year Bear Market which took it to levels far below its true value, I continue to believe that those who are not as fully invested in gold to their comfort level, should shortly do so.

THE RESOURCE MARKET

It was a long time coming. It required substantial patience and belief in a Bull Market in both gold and gold equities, but the past few months have more than made up for our wait. Both the major gold producers and the junior exploration companies joined in and rallied sharply along with the price of the yellow metal. Many producing companies posted increases in the 10% or better area since my last Letter. The junior market on the other hand literally exploded in price. While virtually all companies tacked on significant gains, some nearly took our breaths away with rises of as much as 100% in the space of four short weeks. A perusal of the Financial Insights followed company chart shows the magnitude of the price advances.

I have been fortunate to have featured a number of great price performers among the junior exploration companies. The overwhelming majority of their stocks have risen at least 50% from their original inclusion in Financial Insights. However, do not forget, this condition will not continue uncorrected forever! I believe that this rally will extend into the new year. It will likely mirror that of gold. Yet, I suspect that the by the time that gold peaks, after it breaches $400, the gold stocks will enter what may be both a severe and extended correction.

Financial Insights is a monthly newsletter. Thus, I only convey my thoughts to subscribers a dozen times a year. While I myself remain fully invested at present I expect to take some money off of the table by February or March or possible sooner. I will do this in anticipation of reentering the market after an inevitable correction. Even if I only exit or reduce some positions 10% to 15% from their temporary highs, I believe that we can anticipate repurchasing these or similar companies at lower levels later in 2004. I suggest that you begin to set your own parameters given your comfort level. Just as we went through a trying period awaiting the current market conditions, we will eventually be faced with a falling market that will truly test our mettle. If you have built up sufficient working capital it will be far easier to endure this period as it will offer you the opportunity to use your profits to acquire good companies at discounted prices.

The next major correction in gold equities will be a pause in the initial phase of what I expect is an enormously profitable long-term Bull Market in gold and gold shares. However, given my experience in the great Bull Markets of the 1970's, the passing price reversals can also take both your confidence and your paper profits away. Do not let this happen to you! It is impossible to presently predict how far this Bull Market up-leg will carry. However, it is a given that it will be followed by an important price decline. Be prepared, and try to control the greed that we all possess. Do your best to protect yourself from yours.

Happy reading

[muppet]

Hi Inzvestor

I rang the Australian Gold Refinery this afternoon on 0800 804704 and got the latest silver price.
500gms = $173.13
1kg = $26.26
5kg = $1625.57

Their office is in 14 Maidstone St. Ponsonby.
Also their web site is http://www.thebulliondesk.com

Merry Xmas

[inzvestor]

Great Info - Thanks Muppet

Will digest this over the xmas period (when I am stuffed full of roast pork and al the trimmings !!)

[muppet]

Hi Guys

Gold and silver continue to go up in price.

However some people think a correction is due.

http://www.cavendishconversions.co.uk/tbd/goldreview.htm

Regards

[muppet]

Hi Guys

I get a weekly newsletter from a guy called Jason Hommel.
Here is the link to his latest newsletter:

http://www.goldismoney.com/ssr/SS40.html

Regards

[Marc]

Hello muppet!

What about gold? Is that a good investment?

Cheers

Marc

[muppet]

Hi Marc

Read the article. The answer is yes but you get less bangs for your bucks with gold rather then with silver.

Regards

[JBM]

BULLISH on silver&gold why not invest in ASX market great exchange rate for NZers-now that the bull trends back on line
going be buying more MMN shares 14c come monday
holding OGD-70c 30% discount to recent float price

-WZA-huge resource base will be rerated soon buy in -22c
-TTR-30c
6-8months from now-MMN-20-25c>silver/gold
-OGD-1$-2$>gold
-WZA- 40c +>gold/nickel
-TTR-40-50c>nickel/gold

[muppet]

Hi Guys

Final paragraph of a long essay from this site http://www.silver-investor.com/cs_july04.htm about why the silver price is set to explode upwards. Read on:

According to the March 2004 National Geographic, it was only last year that China attained the figure of ten million automobiles on its highways. Look at the tremendous room for growth in that figure in a population 130 times that, and all vehicles will consume some silver. As a current Chinese proverb says, "An American is a man with two arms and four wheels." If in the next five years, their per capita silver consumption attains to say, four tenths of an ounce--- that adds some 520 million ounces to annual world demand. We are in negative territory with silver supply now for many years, and as what appears to be the last significant government held stockpile in the world is exhausted, there will be no where else to turn to for silver, other than to a free market, with free market prices. This will light the blazing inferno under the gold price, and create widespread support for remonetization. The world's paper money systems are headed for severe crisis, and these bankers resent independent thinking people holding precious metals, knowing that these cannot go broke! Hold your silver, gold, platinum and well-positioned mining shares. It is not possible at this moment, considering the limits of imagination, to conceptualize in your consciousness how extreme are the impending demands on the silver supply, and how astronomically sky-scraping the price of silver will mount! China's silver vault appears to be empty! Prepare yourself for the ride of your life!

Regards