Thursday, April 28, 2011
KMG Gold Recycling
Thursday April 28, 2011:
One way to buy silver for investment and to conserve assets is actually by buying silver rounds. With the value of silver on the rise, this is a very wise thing to look at.
Mint coins are probably the most expensive way to buy silver. There is a premium or mark up over the spot price of silver and it can take some time to make up this additional cost. In terms of a return on investment it is not very fruitful.
Bars are better, especially the larger bars, where the premium is substantially less. If you are interested in silver purely as an investment, then certificates or exchange traded funds are another way to go. The cost of purchase and redeeming the silver is less and are a better proposition in terms of investment as you do not have to take delivery, store and on sell the silver yourself. It is all done through paperwork essentially.
However the drawback here is the tax considerations as these are considered an investment and virtually all investments incurs a capital gains tax and possibly other taxes as well as they are considered investment rather than collecting silver as a hobby.
But if you like the idea of coins and bars and enjoy it more as a hobby than as a serious investment then there are many delightful coins to collect and, over time, you are still likely to improve your asset holding in silver as the value continues to increase. KMG Gold Recycling
If you are collecting coins then some of the best are the American Silver Eagle for example where the coin is pure silver. The American Silver Eagle is established as legal tender of course but the face value does not match the silver content. The Territorial Mint in the US also produces silver rounds with a low premium as well.
If you are buying silver bars at an auction, such as eBay.com for example, then it is a good idea to stay the smaller one and 10 ounce bars. The 100 ounce bars can easily be counterfeit by drilling holes in the side, filling the bar with lead and covering up with silver again and these are almost undetectable without cutting the bar in half.. With the smaller bars this is not a worth while activity so holding a dozen or so 10 ounce bars is preferable to holding one 100 ounce bar
Buying silver bars from a mint is a different thing of course. You get a certificate and the bar is sealed in its own protective plastic capsule and this should be unbroken when you get it and should remain so throughout the bars life.
Pure silver products 999 percent fine are produced by Mints around the world with 1 ounce coins and bars ranging from 1 to 1000 troy ounces. All the coins should be hallmarked with the purity and weight of the coin.
To buy silver can be a great hobby as well as a excellent long term investment. Silver was it its hey day during the 80s and dropped heavily over the subsequent year but now is making a big come back as there is a general shortage of silver world wide and the use of it increasing. Silver is now on a rising trend, so having some information about the best way to buy silver is a good idea indeed. KMG Gold Recycling
Friday, March 18, 2011
The silver-gold ratio has fallen to 39:1, it’s lowest level in over 13 years. Silver’s impressive rally over the last five weeks is no doubt a reflection of investor demand for safe haven assets in times of political and economic uncertainty. The political destabilization in the oil-rich region of the Middle East and North Africa has pushed up gold prices alongside of oil; and of course, silver has followed suit outperforming gold on the uptrend as usual.
Much of the run-up in investment demand for silver and gold over the past few years has been predicated upon the threat of rising inflation on the back of currency debasement.
While many a gold newsletter writer is still haranguing about the continuance of free money being dumped into the system by Helicopter Ben and the looming inflation crisis, some analysts are not convinced.
This latest rally in gold and silver prices is much more a function of speculative safe haven demand than any perceived threat of inflation. “I don’t think this is the Bernanke market,” said Robert Lenzer, writing last week in his StreetTalk blog on Forbes, “as he made it clear today that inflation is just the 2% he wants, and that’s despite the horrific run-up in food prices. And he’s beaten off deflation with QE2. No knee-jerk connection between Bernanke and precious metals. The connection for gold and silver is geo-political.”
And there are serious indications that the Federal Reserve will be ending the QE2 program early this summer, without any need for a third round.
Another threat to the “inflation thesis,” says The Steet’s Alix Steel, “is if central banks around the world decide to raise key interest rates.” The People’s Bank of China once again raised its rates recently, for the third time since October; and the European Central Bank has signaled it may do the same next month.
A major driver in the silver price over the last few years, exploding investment demand has succeeded in large part due to the creation of physically backed silver ETFs, which provided an easy way to invest for those previously denied access to the silver market.
The more investors take ETF positions, the more physical silver is taken off the open market, leading to higher and higher prices and increased demand. If the rumors about Chinese buyers planning to take delivery of SLV shares prove true, silver prices will surge even higher.
Analysts calling for $100 silver are surely making silver bugs salivate; however, let’s not forget basic economic principles. Despite the exponential growth in investment demand over the past five years, silver is still very much an industrial metal. Higher silver prices are obviously welcomed by silver investors, but no so much by the industrial sector that has to pay those high prices on materials needed for production. According to some insiders, end-users are already becoming frustrated with rising silver prices. The concern is that if prices continue to rise, end-users will look to more economical substitutes for the white metal. Such a move would lead to decreased industrial demand for silver long before prices could reach the three figure level.
Nonetheless, 2011 forecasts for industrial demand are strong with growth from electronic gadgets such as iPads, the renewable energy sector (e.g. solar panels) and the medical field. But, don’t expect demand to be on par with the significant levels seen in 2010. “This year, this type of news will not be quite as unequivocally good,” said GFMS’ Philip Klapwijk. “We’ve had such a significant rebound in industrial demand for silver that gains will be somewhat harder to come by this year compared to 2010.”
What about that supply deficit?
The proposition of a possible near-term silver supply deficit is hard to swallow for some who point out that the market has been in a surplus for years on rising output as a secondary metal from gold and base metal operations, and industrial demand from traditional sources such as photography has been slipping for years as well.
But the signs of an actual supply deficit in the physical silver bullion market are piling up, including the recent backwardation in silver futures prices on the COMEX. Other points of proof include the US Mint’s temporary discontinuation of US Silver Eagle production due to a lack of “sufficient inventories of silver bullion blanks,” and Sprott Asset Management’s announcement that it has encountered problems sourcing 1,000 ounce silver bullion bars in large volumes for its silver fund.
But skeptics remain. “In the silver market, there is enough silver, it is more to do with a short-term squeeze,” said Standard Bank analyst Walter de Wet.
Last month, the CPM Group dismissed the idea of a deficit in total above-ground supply, laying the blame on the recent tightness in the physical market on spot shortages of particular high-grade bars.
“There are rumors of shortages of physical silver circulating in the market. There are some spot shortages, but they appear limited to higher purity metal in specific forms and locations,” CPM analysts said in a report, specifically referring to the supply of 1,000 oz bars of 0.9999% and 0.99999% high-purity. There is a shortage of these bars because the majority of manufacturers focus their energy and materials on producing high-purity silver sponge for industrial applications such as solar panels rather than high-purity investment bars, and rising investment demand has in turn created a high demand for these specific bars, further creating tightness in the supply of said bars.
But what about the shortages in coins and 100 ounce investment bars? CPM Group surveyed Fidelitrade, Kitco and Northwest Territorial Mint (NWTM) last month and found “hundreds of thousands of ounces in 100 oz bars available for immediate delivery, and NWTM said it was steadily producing more each day.”
“In conclusion, there are short-term market developments along the lines of what CPM has repeatedly said to expect in February and March 2011, and there is spot tightness in high purity silver cast into bars as opposed to sponge. The rest is noise.”
In regards to the backwardation in March COMEX future prices, CPM analysts are not impressed and blame market congestion rather than supply deficits. They also point out that although the lease rate has risen to 0.8 percent from 0.3 percent, over the last three decades lease rates have ranged between 3 percent and 6 percent, making 0.8 percent still very low.
Still a good time to get into the silver market?
Yes! say those optimistic bullish silver bugs who see the price of silver surging higher and higher in the near to medium term.
James Turk, GoldMoney founder, has said silver is still in stage one of its bull market (gold, according to Turk, is in stage two) and won’t advance into stage two until the price of the white metal pushes past $50 an ounce, which he expects will happen in 2011. And because silver is still in the first stage of its bull market, it remains a good buy.
Speaking with Reuters at the annual Prospectors & Developers Association of Canada convention in Toronto Tuesday, Eric Sprott of Sprott Asset Management said silver will continue to outperform gold. “I watch where the money goes and the money’s going into silver. There’s as much money going into silver as into gold in dollar terms.”
But, a few say the time to enter the market has passed.
HSBC Global Asset Management analyst Charlie Morris says he still supports having some silver investment, but not picking up more at these prices and at this time. “Not to say I think it’s coming down, but I think we’ve missed it. Buying something overbought and chasing it is rarely a good strategy.”
Many analysts are still bullish in the medium to long-term, but advise investors to stay cautious in the short-term and heed silver’s seasonal cycle
Standard Bank’s de Wet advises, “If you’re long silver, stay long, but it’s probably not worth the risk/reward getting in now. It’s not called the devil’s metal for nothing.” I believe he’s referring to silver’s infamous volatile nature characterized by huge swings on the downside.
“Silver is surging and gold has made new all-time highs, but the technicals indicate that risk is high and that better entry points may be presented in the months ahead,” said MoneyShow.com senior editor Tom Aspray. “For those who are not already long precious metals, my analysis continues to suggest that you will have a better risk/reward entry in the next few months.” Aspray is referring to the seasonal cycle of silver, in which late April, and the summer doldrums are traditionally marked by significant downside in silver prices, offering investors a chance to jump in the market at discounted prices.
Analysts are also warning of an upcoming pullback in precious metals prices before moving higher. Silver guru David Morgan told Mineweb’s Metals Weekly podcast listeners that he remains long-term bullish on silver with a price forecast of $40 for 2011; however, is exercising caution as he views gold as ready for a correction. “With all of this geopolitical tension it [gold] should be soaring to new highs and it’s not doing so. I’ve seen it time and again that people say gold is the best thing you can buy right now and I see it not reacting as favourably as it should be to what’s going on, on the ground on the political front. When that takes place the smart money usually is backing off the gold trade.”
Another bullish, but cautionary statement comes from CPM Group’s Jeffrey Christian, whose forecast puts silver trading in a range of $20 to $40 an ounce over the next few months, showing he fully understands the volatile nature of this market. CPM Group has advised “clients to not necessarily be buyers a $36,” while at the same time maintaining their long positions, buying “some puts to hedge against prices falling down.” Christian suggests investors looking to add to their silver holdings wait until the price pulls back to the $27 an ounce range, which he expects to happen over the next few months.
Besides the futures or ETFs market, there are still profits to be had in the junior mining sector.
Higher silver prices translate to higher silver miner share prices, notes Northern Securities analyst Michael Zylstra, who also points out that as prices for the metal rise the margins of producing juniors will as well. “A typical silver producer might have total cash costs around $5 to $10/ounce so, with the price of silver at roughly US$34/ounce, margins should be strong.” Exploration and development stage juniors will benefit from rising prices as well since majors will be looking to acquire further resources and increase production rates, making those juniors with promising projects very attractive takeover targets.
A look at the Silver Stock Index on Silver Investing News should give investors insight into how silver juniors are performing in relation to the silver market and against each other.
Thursday, March 10, 2011
Submitted by Tyler Durden on 01/18/2011 15:22 -0500
Our friends at GoldCore have summarized recent shortages in the silver market and provide some observations on what this could mean for future silver prices. Curiously, the lack of inventory has happened even as the spot price of silver has consistently declined over the past week (if nominally the decline has been very modest). Just as curiously after the US Mint reported a massive surge in buying, the number of January sales has been fixed flat at 3,407,000, where it was a week ago, and indicates that either buying interest has ceased overnight (unlikely), that the mint is not updating its numbers (likely), or, worse, that the Mint has now stopped selling any form of silver for reasons unknown. Although at the end of the day the only question worth asking is whether JPM feels lucky (again): as we posted last week, the firm has received "grandfathering" protection from position limits, arguably the biggest reason for the recent drop in the precious metal price.
Silver Bar Shortages to Lead to Price “Tipping Point”?
Gold is mixed while silver is higher in all currencies today, especially in the weaker US dollar. European sovereign bond yields are higher and the UK 10-year has risen to 3.66% and is close to breaking out after inflation figures surprised the majority of analysts who remain complacent about inflation.
Gold is currently trading at $1,370.75/oz, €1,022.11/oz and £856.57/oz.
Equities in Asia were higher as are those in Europe so far today. US equity index futures are mixed with Apple leading to weakness in the Nasdaq; the S&P 500 is flat.
Silver is currently trading $28.81/oz, €21.48/oz and £18.01/oz.
Reports of shortages of silver bullion continue to grow. While there are no widespread shortages in this area and dealers with extensive supplier networks (mints and large refiners) are not experiencing difficulties sourcing bullion inventory, it would be wise to keep an eye on this.
Silver in USD – 35 Years – (Weekly). Click for full size
Reuters reported shortages of 1 kilo gold bars in Asia last week. Sprott Asset Management reported that it was experiencing difficulty sourcing 1,000 oz silver bars. Sprott said they were concerned about the “illiquidity in the physical silver market" and said delays in being able to source physical silver highlights the “disconnect that exists between the paper and physical markets for silver."
Zero Hedge reported that Bullion Vault, the digital gold provider, had run out physical silver inventories in Germany (and possibly elsewhere) and was advising clients to buy silver from other sources.
Zero Hedge also reported yesterday that some smaller bullion dealers in the UK were having difficulty sourcing all silver bars and had delayed delivery of silver bars (including 1 kilo silver bars) until February.
This comes at a time when the US Mint has reported huge demand in the first two weeks of January for their very popular US Silver Eagle 1 oz bullion coins.
Click for full size
At about $33, €25 or £20 a coin, collectors and those seeking financial insurance have been buying silver in very significant quantities. The 2011 minted coins were first issued on January 3 and in just the first two weeks, 3.5 million coins were sold, according to numismatic web site Coin News.
In January 2009, the silver coins first topped the 3 million sales mark, with record sales totaling 3.59 million for the entire month.
If sales continue at these levels, that record should be surpassed this week. The all time monthly record of 4.26 million silver coins, which was set last November, is clearly in sight.
A recent report by analyst Adrian Douglas of GATA warns of forthcoming shortages of gold and silver bullion coins and bars, and that a “tipping point” will soon be reached that could lead to a COMEX default and a short squeeze which leads to much higher prices. Douglas himself has shown in Le Metropole Café how Comex silver inventories are shrinking and are not far from ten year lows.
The “bear raids” by the large concentrated shorts being investigated by the CFTC, are only leading to increased physical off-take. Indeed, the selling raids may be leading some participants on the COMEX (including large hedge funds) to take delivery or sell futures and buy bullion in allocated accounts.
None of the factors, in and of themselves, suggest that widespread shortages of silver (or gold) bullion are imminent in the immediate future. However, much circumstantial evidence suggests, especially the bona fide reports of difficulty in sourcing large silver bars, that the supply and demand balance in the silver market is very tight.
The more than 80% increase in the silver price seen in 2010 is not leading to an increased supply of silver but rather to a continuing and possibly increasing demand.
This is not surprising as silver is a byproduct of base metals and therefore its price increase will not have led to any material increase in silver mine production. This fact is known by most buyers of silver coins and bars and many of them continue to hold and add to their silver holdings in anticipation of much higher prices.
Silver at $50 per ounce and the 1980 adjusted for inflation price of $130 per ounce are conservative estimates for some silver enthusiasts. They have been proved right in recent years and the extremely delicate supply and demand equation in silver could see them proved right again in the coming months.
Since 2003, GoldCore have written research articles pointing out that the very small size of the silver bullion market would likely see its inflation adjusted high of $130/oz reached in the long term.
Interestingly, were gold to reach its adjusted for inflation 1980 price of $2,300 per ounce, and silver revert to its long term gold/silver ratio of 15:1 (geologically there are 15 parts of silver to every one part of gold in the Earth’s crust) then silver would reach over $150 per ounce.
While this seems über bullish to those who know little about the silver market, some silver enthusiasts - and there are many - believe that in time, silver will be valued at the same price as gold as huge quantities of silver have been used up in industrial applications since the Industrial Revolution of the 19th Century and throughout the 20th Century and into this millenium.
In these unprecedented financial and economic times, it is important to have a long term perspective.
KMG Gold Recycling saw a glut in the silver market in Decmber 2010. "We couldn't sell our silver to the secondary refineries." Said KMG president Michael Gupton, "We had to shop it around. That doesn't seem like a shortage of silver to me, that sounds like media manipulation".