May 24, 2007
Jason Hommel: Why Silver will Soar
Silver Institute SurveySilver Stock Report
by Jason Hommel, May 23, 2007
by Jason Hommel, May 23, 2007
On May 14th, the CPM group issued their "CPM Silver Yearbook 2007", and I commented on it in my report, http://www.silverstockreport.com/2007/230.html
Today, the Silver Institute issued their annual "Silver Survey" of supply and demand. http://www.silverinstitute.org/news/pr23may07.html
A notable difference between the surveys is the estimated annual mine supply.
The Silver Institute lists mine production for 2006 at 646.1 million ounces.
The CPM group estimated 2007 mine supply to increase 3% to 520 million ounces.
Maybe I don't understand the nuances of how they are counting, but that's a big difference.
Nevertheless, both surveys put net investment demand for 2006 at about 60 million ounces.
The Silver Institute put 2006 net investment demand slighly lower than in 2005, while the CPM group listed net investment demand up in 2006.
The Silver Institute put net government sales at 77 million ounces, more than net investor demand.
In sum, both surveys show that the silver market is very small, and very tight. Silver consumption vastly exceeds annual silver mine supply, and the difference is largely met by silver recycling.
I'd like to make two big main points. First, people are unaware of the fundamentals, and second, the fundamentals are fantastic.
First, despite the different numbers, I think the surveys are mostly correct. They are sponsored by both silver producing companies and silver using companies, so the sponsorship bias should be neutral. But these are industry surveys mostly produced for people in the industry. The CPM group and Silver Institute are not marketers, nor do they have large marketing budgets. They do survey work.
Therefore, most silver investors are not familiar with these surveys, nor who produces them. But I think they should be. (But I'm biased as a silver investor.) I've polled silver investors at the mining shows who have come to hear the guy from "silverstockreport" speak, and perhaps less than 5% of silver investors have heard of the CPM group or the Silver Institute, by a show of hands. This is a very bullish signal. The silver fundamentals as presented by these two silver surveys are fantastic. If silver investors are unaware, then likely most of the world is unaware of the fundamentals for silver.
Second, the fundamentals clearly show that there is no room in the silver market for any significant investor demand. Net investor demand was listed by the Silver Institute as 64 million ounces. At an average 2006 price of $11.55, 64 million ounces was $739 million of net silver investment demand.
World Net Silver demand in 2006, as a function of U.S. money in the banks, is ($739/$11,500,000), which is 0.006% of U.S. money.
If the wider public became aware of the silver fundamentals, net silver investment would be much higher, and so would silver prices. With a market this tight, and the world this unaware, the silver price will probably rise much higher than anyone can predict.
Silver prices were up 58% in 2006 at $11.55 per ounce, up from an average 2005 price of $7.31 per ounce. Prices in 2007 now seem cheap on the charts having recently dipped to about $13.04 today.
And given that investors tend to buy more of things that show positive investment returns, net silver investment demand can continue to increase for a long time, helping to cause the very returns that investors seek.
Today, the Silver Institute issued their annual "Silver Survey" of supply and demand. http://www.silverinstitute.org/news/pr23may07.html
A notable difference between the surveys is the estimated annual mine supply.
The Silver Institute lists mine production for 2006 at 646.1 million ounces.
The CPM group estimated 2007 mine supply to increase 3% to 520 million ounces.
Maybe I don't understand the nuances of how they are counting, but that's a big difference.
Nevertheless, both surveys put net investment demand for 2006 at about 60 million ounces.
The Silver Institute put 2006 net investment demand slighly lower than in 2005, while the CPM group listed net investment demand up in 2006.
The Silver Institute put net government sales at 77 million ounces, more than net investor demand.
In sum, both surveys show that the silver market is very small, and very tight. Silver consumption vastly exceeds annual silver mine supply, and the difference is largely met by silver recycling.
I'd like to make two big main points. First, people are unaware of the fundamentals, and second, the fundamentals are fantastic.
First, despite the different numbers, I think the surveys are mostly correct. They are sponsored by both silver producing companies and silver using companies, so the sponsorship bias should be neutral. But these are industry surveys mostly produced for people in the industry. The CPM group and Silver Institute are not marketers, nor do they have large marketing budgets. They do survey work.
Therefore, most silver investors are not familiar with these surveys, nor who produces them. But I think they should be. (But I'm biased as a silver investor.) I've polled silver investors at the mining shows who have come to hear the guy from "silverstockreport" speak, and perhaps less than 5% of silver investors have heard of the CPM group or the Silver Institute, by a show of hands. This is a very bullish signal. The silver fundamentals as presented by these two silver surveys are fantastic. If silver investors are unaware, then likely most of the world is unaware of the fundamentals for silver.
Second, the fundamentals clearly show that there is no room in the silver market for any significant investor demand. Net investor demand was listed by the Silver Institute as 64 million ounces. At an average 2006 price of $11.55, 64 million ounces was $739 million of net silver investment demand.
M3 is calculated to be $11.5 trillion. Source: http://www.nowandfutures.com/key_stats.html
World Net Silver demand in 2006, as a function of U.S. money in the banks, is ($739/$11,500,000), which is 0.006% of U.S. money.
If the wider public became aware of the silver fundamentals, net silver investment would be much higher, and so would silver prices. With a market this tight, and the world this unaware, the silver price will probably rise much higher than anyone can predict.
Silver prices were up 58% in 2006 at $11.55 per ounce, up from an average 2005 price of $7.31 per ounce. Prices in 2007 now seem cheap on the charts having recently dipped to about $13.04 today.
And given that investors tend to buy more of things that show positive investment returns, net silver investment demand can continue to increase for a long time, helping to cause the very returns that investors seek.
May 20, 2007
Hugo Salinas Price: The silver bridge
Hugo Salinas Price, president of the Mexican Civic Association for Silver, elaborates on his proposal to put silver back to work as a regular currency in the world's foremost silver-producing nation. His essay is titled "The Silver Bridge" and you can find it at Jim Puplava's Financial Sense
May 18, 2007
Mineweb: Esoteric uses keep silver demand flying high
Mineweb: Esoteric uses keep silver demand flying high
Although some traditional uses for silver are declining, a number of newer ones are taking their place and hold out great promise for contributing to good demand in the future.
Author: Lawrence Williams
Posted: Friday , 18 May 2007
LONDON - In an address to the World Mining Investment Congress in London, Silver Standard President and CEO, Robert Quartermain, who also is the Vice President of the Silver Institute, devoted most of his address to factors affecting silver supply and demand rather than promoting his own company - which indeed has much going for it - to the audience of bankers, brokers, fund managers, mining company executives and investors.
Like virtually all the base and precious metals, low prices for many years meant that exploration and new mine openings have been rare and silver supply has been falling short of demand - even though its monetary element has diminished, as has the main industrial usage in the photographic sector. Pure silver mining operations are relatively rare in any case and the metal often is produced as a byproduct to gold, copper or lead and zinc - all of which suffered from the exploration malaise from low metal prices - or with one or more of these metals as a co-product, or at least as a significant revenue contributor. Only now are significant new silver producing operations beginning to come on stream, but these are hardly replacing the declining output from many older and declining producers.
Although the photography market may be diminishing, this was also notable for a substantial recycling element, which brought a high proportion of the photographic supply back to the market as ‘scrap'. As the photographic usage dies, then so will the recycling.
But it is silver's bivalency which is perhaps the key, which makes the metal highly reactive to the extent that, among other things, it is a natural biocide which means growing medical usage - and it is being used in clothing too for people in arduous occupations - like the military. It has uses in combating many viruses like legionella - and in the UK perhaps in the fight against hospital borne diseases like MRSA.
In electronics silver is the most efficient conductor of electricity so is finding increasing usage in this sector. Meanwhile legislation in some countries to remove lead from solders is opening up another big cumulative usage area in terms fo silver-tin solders.
So, Quartermain makes an excellent case for continuing strong demand for silver. He feels that any balanced portfolio should contain an element of silver - either as physical metal, ETF or silver mining stocks, and as far as the latter is concerned he would not argue against Silver Standard being a key part of this.
Although the company has existed for many years without mining metal, the big Pirquitas deposit in Argentina is ready to move to the production phase, while there are then a succession of projects in Peru, Mexico Argentina again and Canada waiting for production decisions.
All are primarily silver deposits except Snowfield in British Columbia, Canada, which is a gold deposit which looks to have potential as a big open pit gold operation with decent grades. So far exploration is in the relatively early stages here, but it looks to have the potential to be a major gold resource should big tonnages be proved up which could be of interest to one of the gold majors - which in turn could make it a finance source to be used to continue development of Silver Standard's silver prime targets.
Jason Hommel: Fraud vs. Truth
Posted at Oikonomika Blog:
Jason Hommel: Fraud vs. Truth, Major Frauds of the U.S. Monetary System.
Jason Hommel: Fraud vs. Truth, Major Frauds of the U.S. Monetary System.
May 11, 2007
May 9, 2007
Why the Silver Price is Set to Soar
Precious metals remain the most undervalued of all the asset classes. Precious metals, and particularly silver, remain the most undervalued of all the commodities. Silver is even more undervalued than gold and is undervalued when compared to other strategic commodities such as oil and uranium.
Silver is currently trading at just below $14 per ounce. Gold Investments continue to believe that silver will surpass $20 per ounce in 2007, its non inflation adjusted high of $48.70 per ounce before 2012 and its inflation adjusted high of some $130 per ounce in the next 8 years.
Silver is currently trading at just below $14 per ounce. Gold Investments continue to believe that silver will surpass $20 per ounce in 2007, its non inflation adjusted high of $48.70 per ounce before 2012 and its inflation adjusted high of some $130 per ounce in the next 8 years.
The fundamentals reasons for our very bullish outlook on silver is due to continuing and increasing global macroeconomic and geopolitical risks; silver’s historic role as money and a store of value; the declining and very small supply of silver; significant industrial demand and most importantly significant and increasing investment demand.
Silver price: global macroeconomic and geopolitical risks
Property markets and equity markets in the western world are near or at all time record highs. There is increasing macroeconomic and geopolitical uncertainty in the form of the sharp slowdown in the US housing market, increasing trade friction between the US and one of their prime creditors China (the negative impact of the introduction of US trade tariffs on Chinese paper products and the US’ WTO piracy claim may not have been fully realised by and priced into the financial media and the markets) and the continuing geopolitical tensions with Russia, Venezuela and in Iraq, Iran and the wider Middle East. These factors look set to at least curb returns in most property and equity markets.
Indeed these and other significant risks such as record debt levels in the western world, the huge and unprecedented US trade, budget and current account deficits and the massive fiscal profligacy of the Bush administration are not subsiding. These factors have ramifications for the predominant global reserve currency of recent times – the US dollar.
The IMF, World Bank and OECD have warned that the global economy faces increasing "downside risks" including rising oil prices, falling stock markets and trade imbalances. The IMF’s semi-annual World Economic Outlook (released April 5th 2007) said an economic slowdown in the US would have only a modest global impact if it were confined to the property sector.
The IMF report warned, however, that the shock to the global economy could be more significant if the property downturn spread to consumer spending and business investment. This seems likely as the US consumer is more indebted now since 1933 with little or no savings whatsoever. The Comptroller Auditor General of the US, David Walker stated “last year (2006) was the first year since 1933 that Americans spent more money than they took home and, as you probably recall, 1933 was not a good year for the United States.”
The US’ national gross debt is $8,883,212,488,519 trillion ($8.8 trillion) and growing. When George Bush came to power US’ national gross debt was $5.7 trillion. Even the most sanguine, tunnel-visioned bull would have to admit that the fundamentals of the US economy are bad and deteriorating.
Other long term risks and challenges facing the global economy come in the form of the threats posed by a bird flu pandemic, peak oil and global warming.
Silver price: historic role as a store of value
Thus the monetary metals and safe haven assets of gold and silver are likely to continue to outperform other asset classes. Also they are likely to outperform other commodities such as the base metals, oil and uranium. These commodities would be likely to experience a fall in price were there to be a significant slowdown in the global economy which would create demand destruction.
Because of their historic and continuing role as monetary or currency metals and as safe haven assets gold and especially silver are likely to outperform. This is because they are not simply commodities but also currencies which cannot be debased like our modern fiat paper and electronic currencies.
Gold and silver has been used as money in more regions and countries and for longer periods of time than the relatively modern use of paper currencies. Interestingly, silver has been used in more regions and countries and for longer periods of time as money than gold. Nobel Laureate Milton Friedman, said of silver "The major monetary metal in history is silver, not gold.” In Mexico today, there is a movement to return to using silver as money with a bill being put before by the Mexican Congress by Hugo Salinas. The currency of India is the rupee and it comes from the Sanskrit word ‘raupya’ which meant silver or coin of silver. The French word for money is ‘argent’ which came form the Latin argentum meaning silver. The franc was established as the national currency by the French Revolutionary Convention in 1795 as a decimal unit (1 franc = 10 decimes = 100 centimes) of 4.5 g of fine silver.
Most countries in the world used silver for smaller denomination coins in the 19th Century and through the 20th Century up until the 1950’s, 1960’s and 1970’s when currencies were gradually debased. Debase means to degrade, dilute or devalue. For instance, in the US up until 1965, silver dimes and quarters were made of 90% pure silver. In 1965, the US government debased and devalued the currency and reduced the silver content to 40% pure silver. These legal tender silver bags are still bought today by savvy investors.
Silver price: declining supply
Before looking at the demand side of the silver equation it is important to consider the supply side.
In 1900 there were 12 billion oz of silver in the world. By 1990, the internationally respected commodities-research firm CPM Group say that figure had been reduced to around 2.2 billion ounces of silver. Today, that figure has fallen to about 300 million ounces in above ground refined silver. It is estimated that 95% of the silver ever mined has been consumed by the global photography, technology, medical, defence and electronic industries. This silver is gone forever.
CBS Marketwatch published an article in March 2007 entitled ‘Silver may shine brightest among metals’, in which Kevin Kerr wrote that “Due to current supply/demand trends, the amount of silver above ground is projected to shrink to a critically low level in 2010. As supply shrinks, prices will keep rising steadily to new highs. Many in the investment world are unaware of this part of silver's story. Industrial demand has been outstripping mining supply for the past 15 years, driving above ground supply to historically low levels.”
Silver production was flat this year and is expected to be flat again next year. Incredibly, the amount of mined silver has been less than its demand every single year for the last 15 years. This hasn't resulted in significantly higher prices yet because the world has been able to fill the gap from inventories and official government stockpiles.
However, today the U.S. government's stockpile is all but gone, and sales from other official sources, such as China, Russia and India, are declining, too. The decline in refined silver stocks, from around 2.2 billion ounces in 1990 to around 300 million ounces today means that silver stocks are near an all time low.
The supply of silver is inelastic. Silver production will not ramp up significantly if the silver price goes up. Supply didn't increase in the 1970’s when silver rose 35 fold in price – from $1.40/oz in 1971 to a high of nearly $50/oz in 1980. Importantly, silver is a byproduct metal and some 80% of mined silver is a byproduct of base metals. Higher prices for silver will not cause copper, nickel, zinc, lead or other base metal miners to increase their production. In the event of a global deflationary slowdown demand for base metals would likely fall thus further decreasing the supply of silver.
There are only a handful of pure silver mines remaining. This inflexible supply means that we cannot expect significant mine supply to depress the price after silver rises in price. It is extremely rare to find a good, service, investment or commodity that is price inelastic in both supply and demand. This is another powerfully bullish aspect unique to silver.
Silver price: significant and increasing industrial demand
Another important factor as to why silver is likely to outperform other asset classes and commodities besides the declining silver supply is increasing industrial demand.
Why is this indispensable metal in such demand? The reasons are simple. Silver has a number of unique properties including its strength, excellent malleability and ductility, its unparalleled electrical and thermal conductivity, its sensitivity to and high reflectance of light and the ability to endure extreme temperature ranges.
Silver has the highest electrical conductivity of all metals, even higher than copper. It was used in the electromagnets used for enriching uranium during World War II (mainly because of the wartime shortage of copper). Silver has the highest thermal conductivity and optical reflectivity of all metals. Silver’s unique properties restrict its substitution in most applications.
Non investment demand for silver is based primarily on industrial demand including electrical, medical and photography and also in jewellery and silverware. Together, these categories represent more than 95 percent of annual silver consumption. In 2005, 409.3 million ounces of silver were used for industrial applications, while over 164.8 million ounces of silver were committed to the photographic sector, and 249.6 million ounces were consumed in the jewellery and silverware (‘don’t sell the family silver’) markets. Jewellery and silverware are traditionally made from sterling silver. Sterling silver is 92.5 % silver, alloyed usually with copper.
Industrial applications for silver have always been significant but have increased significantly in recent years. Industrial applications for silver have increased since 2001 to a record in 2005, according to London-based researcher GFMS Ltd. In their most recent report, they predict a 6% growth rate in industrial applications of silver in 2007. Silver is used in film, mirrors, batteries, medical devices, electrical appliances such as fridges, toasters, washing machines and uses have expanded to include cell phones, flat-screen televisions and many other modern high tech devices.
Increasing industrial demand for silver is forecast due to strong economic growth in China, India, Vietnam, Russia, Brazil and other emerging economies in Eastern Europe, Asia and the world. Growing middle classes are now demanding the quality of life and standard of living enjoyed by many in the West and thus the demand for silver will increase.
Silver is known as the healthy metal and has many and increasing medical applications. While silver's importance as a bactericide has been documented only since the late 1800s, its use in purification has been known throughout the ages. "Born with a silver spoon in his mouth" is also a reference to health as well as wealth. In the early 18th century, babies who were fed with silver spoons were healthier than those fed with spoons made from other metals, and silver pacifiers found wide use in America because of their beneficial health effects.
Today silver is used in many health-care products. Specifically, the ‘silver bullet’ is used by nearly every hospital in the world to prevent bacterial infections in burn victims and allow the body to restore naturally the burnt tissue. Increasingly, wound dressings and other wound care products incorporate a layer of fabric containing silver for prevention of secondary infections. Surgical gowns and draperies also include silver to prevent microbial transmission. Other medical products containing silver are catheters and stethoscope diaphragms.
In a world that is showing increasing concern about the spread of diseases and pandemics such as bird flu, silver is being increasingly tapped for its biocidal properties. Research is ongoing on the use of silver and its compounds for therapeutic uses and on its potential use as a disinfectant in hospitals and other medical facilities.
Silver has many unique properties which make it ideal and indeed essential in global industry – especially in the global photography, technology, medical, defence and electronic industries. Yet, silver is a finite resource and the supply of silver is increasing only very incrementally.
Silver price: significant and increasing investment demand
According to the CPM Group, there are some 300 million ounces of refined silver in the world. That means that with silver priced at $14/oz., there is about $4.2 billion (300 million oz x $14) dollars worth of silver in the world. This means that the total silver market capitalisation is a very small $4.2 billion.
The increasing demand caused by investment demand is very compelling. Especially due to a number of key investment factors - the introduction of the iShares Silver ETF, the huge short position, the global liquidity bubble, the significant growth in the global money supply, the proliferation of millionaires, ultra high net worth individuals and billionaires, the proliferation of hedge funds and the exponential growth in derivatives.
ETFs
Investment demand for silver has also been rising rapidly the past few years with investors hedging themselves against rising inflation, possible currency devaluations and geopolitical and macroeconomic risk.
The silver market is currently in a transitional period where investment demand is starting to have a real impact on silver prices. Much of the new demand comes from iShares Silver ETF launched in April 2006. The fund has so far attracted 120 million ounces of silver investment. It is up nearly 30 million ounces since the start of 2007. It's important to remember that the silver market is very small - only some 300 million ounces.That means the ETF alone now accounts for more than one-third of the global silver market, and growing investment into the iShares ETF should drive prices much higher. If even a small amount of money flows into the silver market from investors, ultra high net worth individuals (ultra-HNWIs), hedge funds, pension funds and institutions around the world, silver will almost certainly reach the nominal non inflation adjusted high it reached in 1980 of nearly $50 per ounce.
Huge short position
Perhaps the foremost analyst of the silver market today is Mr Theodore Butler. He believes that gold and particularly silver are the laggards in the commodity complex due to price manipulation. At over 300 million ounces, the largest 8 traders on the COMEX are short more silver bullion than exists in total known world inventories, including total SLV holdings and total COMEX inventories.
Butler sums it up succinctly, ”If there is one thing that separates silver from any other asset class, or any other item in any asset class, it is the presence of an unprecedented concentrated short position in COMEX silver futures. It is the existence of this concentrated short position that will, at some point, launch the silver price to the heavens. This short position has grown so large, and is held by so few entities, that it no longer matters how it will be resolved. It must be resolved and, whether that resolution involves default or buying by short covering, it will have the same bullish impact on price. You don’t have to look any further than the concentrated COMEX short position as to why silver has not outperformed every other commodity. Just as it explains price under performance, it is telling you why there must be overperformance in the future. At some point, the price of silver must accelerate upward to price levels that are truly shocking.”
Money Supply
There is some $50 trillion worth of bonds and $40 trillion worth of paper money in the world.
Money supply is increasing at extremely high levels globally. The annualised growth of some national broad money supplies are United States M3 up 10%, Eurozone M3 up 9.0%, UK M4 up 13%, China M2 up 15.9%, South Korea up 10.6%, Australia M3 up 13%, Russia M2 up a staggering 48%.
This has given rise to increasing inflationary pressures, a huge liquidity bubble and to ripe valuations in many stock and property markets.
Huge Increase in Billionaires, Multi Millionaires and High Net Worth Individuals
There has been an unprecedented increase in wealth amongst a tiny segment of the population in recent years. The number of millionaires in the world is multiplying very rapidly and there are now approximately 9 million millionaires in the world. There are approximately 70,000 ultra-HNWIs who have a net worth of more than $30 million.
Forbes recently estimated that there are now a record 946 billionaires in the world. In 2006, there were 178 new billionaires. These included 19 Russians, 14 Indians, 13 Chinese and 10 Spaniards, as well as the first billionaires from Cyprus, Oman, Romania and Serbia. Bill Gates and Warren Buffet are worth some $51 billion and $40 billion respectively. One man’s net worth increased in one year by multiples of the total value of all silver in the world. Carlos Slim Helo, is a Mexican of Lebanese origin whose net worth increased from $20 billion in 2006 to almost $50 billion in 2007 or by some $30 billion.
All the billionaires' combined net worth increased by $900 billion to reach $3.5 trillion. There are a total of 8.7 million millionaires around the world, representing a total wealth of a mind boggling $33.3 trillion. A trillion is an extremely large number and difficult for most to comprehend. It is one million million or 10 to the power of 12. It is an absolutely huge number and it is important to remain conscious of the sheer size of this number.
Conversely, the total value of all above ground stock of silver is a very small $4.2 billion.
If only a tiny fraction of these millionaires, ultra-HNWIs and billionaires decided to diversify out of their extensive property and stock portfolios and invest even a very small amount of their portfolios in silver it would result in the silver price increasing in price exponentially. Given the extremely strong investment fundamentals of silver this seems likely.
Hedge Funds
Globally, hedge fund’s speculative capital have doubled to more than $2 trillion (or two thousand billion) in the last three years. Some hedge funds have started moving into the silver market. Charles Supapodok of Artemis Capital Management is seeking to raise a $300 million hedge fund to invest mainly in silver. Artemis Silver Fund, advised by Artemis Capital Management, will put 80 percent of the fund's holdings in silver.
Again due to the incredibly small size of the global silver market if even only a percentage of the roughly 9,000 to 10,000 hedge funds in the world decide to take positions in the silver market the price will increase in value by multiples.
Derivatives
The Bank for International Settlements has estimated that the total value of derivatives contracts was $450 trillion at the end of 2006 (up from $260 trillion in June 2006) and is increasing exponentially.
There is still a debate as to whether derivatives are a good or a bad thing. Ben Bernanke and most in the financial industry believes they are good as they create liquidity and help spread risk throughout the system. Greenspan was a little more sceptical and warned that they could create ‘moral hazard’ as they did when LTCM collapsed in 1998 sending shockwaves through the financial system. He also warned that they could lead to "cascading cross defaults."
Warren Buffett is similarly not as sanguine: “Charlie [Munger] and I believe, however, that the macro picture is dangerous and getting more so. Large amounts of risk, particularly credit risk, have become concentrated in the hands of relatively few derivatives dealers, who in addition trade extensively with one other. The troubles of one could quickly infect the others. . . . Linkage, when it suddenly surfaces, can trigger serious systemic problems.”
“The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Knowledge of how dangerous they are has already permeated the electricity and gas businesses, in which the eruption of major troubles caused the use of derivatives to diminish dramatically. Elsewhere, however, the derivatives business continues to expand unchecked. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts.”
For this reason Buffett has called derivatives “financial weapons of mass destruction.”
The systemic risk posed by the near infinite creation of hundreds of trillions of dollars of derivatives means that the finite currencies and safe haven assets of gold and silver are likely to be diversified into increasingly.
If only a tiny fraction of the humongous derivatives market was to reallocated into the silver market, silver would increase in value exponentially.
Silver's price history
Silver remains historically undervalued. Despite the incredibly bullish fundamentals outlined silver has so far underperformed nearly all the other commodities. Silver has gone from below $5 to some $14 and is up some 190% in the last 7 years.
This seems like a lot but when compared to other commodities and metals it is very little:
Oil is up from $10 to $63 or 600% and more than 6 fold.
Zinc from $.35 to a high of $2.00,. now $1.50/lb or nearly 5 fold.
Copper, from $.75 to a high of $4.00, now $3.58/lb or nearly 5 fold.
Lead from $.20 to $.90/lb or nearly 5 fold.
Nickel from $3 to $22/lb or more than 7 fold.
Indium, Molybdenum, Selenium, Cobalt are all up 1000% or 10 fold and more.
Uranium is up a phenomenal 1300% or 13 fold.
Many commodities are up between 5 and 13 fold.
Silver is not even up 3 fold. If silver were to catch up with these other less rare and less precious metals, it would have to increase in value by some 500%. From the bottom at some $5/oz in 2001, that would result in silver being valued $25.
Silver reached $50 briefly in 1980 when just one billionaire Bunker Hunt (one of a handful of billionaires in the 1970’s) attempted to corner the silver market causing the price to surge (in conjunction with many investors seeking to hedge themselves from the stagflationary 1970’s). A lot of technical orientated analysts, investors and hedge funds are looking at this figure and as nearly all the other asset classes and commodities are all at near all time records there is every reason that silver will do likewise in the coming years.
Silver is priced at some $14/oz today. The average price of silver in 1979 and 1980 was $21.80/oz and $16.39/oz respectively. In today’s dollars and adjusted for inflation that would equate to an inflation adjusted average price of some $60 and $44. It is for this reason that we believe silver will be valued at over $50 in the next 3 to 5 years.
Why silver is the investment opportunity of a lifetime
Finally, it is important to put today’s total value of all above ground refined silver in the world - $4.2 billion – in context.
$4 billion worth of Boeing planes was bought by Ryanair in 2005. $4 billion was the cost of stamp duty tax on Irish property in 2006. €8 billion worth of overseas commercial property was bought by Irish investors in 2006. Scottish Ministers are in charge of £2 billion (some $4 billion) of tax revenues. Macquarie, the Australian bank, recently acquired the O2 Airwave police radio business for £2 billion. The 2006 Sunday Times Rich List UK estimated that there were 20 people with a minimum wealth of £2 billion (some $4 billion) residing in the UK.
Further context is provided in the fact that the actor Will Smith has had a worldwide career box office of $4.4 billion. Microsoft is growing revenues at over $4 billion a year. In March and April of 2007, just two months, one man’s wealth increased by $4 billion. Since Forbes calculated its 2007 wealth rankings, they recalculated that in two months the Mexican tycoon Carlos Slim’s fortune rose $4 billion to $53.1 billion.
Rarely are there 'no brainers' in life and very rarely are there ‘no brainer’ investment opportunities. Invariably, ‘too good to be true’ investments turn out to be just that.
However, this is not the case with silver. It remains the investment opportunity of a life time.
Silver is unique in terms of being both a monetary and an industrial metal and having the highest optical reflectivity and the highest thermal and electrical conductivity amongst all metals. Silver industrial and investment demand is increasing very significantly and meanwhile supply is falling. The fact that the huge majority of the investment public and financial services industry remains ignorant of the fundamentals in silver means that the bull market in silver remains in it’s early stages. Silver remains probably the most undervalued asset class.
How to Speculate in Silver
• Silver options and futures
• Silver ETF
• Silver mining stocks
• Spread bet silver
How to Invest in Silver
• Perth Mint Government Silver Certificates
• Allocated and unallocated silver accounts
• 1000 troy oz bars – (weigh some 31 kgs) These bars are COMEX good delivery bars.
• 100 troy oz bars – (weigh some 3.11 kgs) These bars are among the most popular with retail investors. Popular brands are Engelhard and Johnson Matthey.
• 90% Silver Bags
• 40% Silver Bags
(Pre-1970 U.S. legal tender 90% and 40% silver coins, which were used as money until they were replaced by the precious metal free coinage introduced in 1970 and used today. Bags of U.S. dimes, quarters, half-dollars containing 90% silver or 40% silver are traded based on their precious metal silver weight.)
Silver bars and silver bags can be taken delivery of but due to the volume, weight, difficulty to store securely and cost of insured delivery most investors buying silver in volume opt for unallocated and allocated silver accounts or government silver certificates due to their being no annual and ongoing storage/ insurance fees.
Mark O'Byrne is the Managing Director of Gold and Silver Investments Limited, Ireland's Asset Diversification and Wealth Preservation Specialist ( www.gold.ie ). He is regularly quoted and writes in the financial media and was awarded Ireland’s prestigious Money Mate and Investor Magazine Financial Analyst of 2006.
May 3, 2007
Silver Bullish: New Solar Cells See the Light
New Solar Cells See the Light
By John Simpson
ScienceNOW Daily News
24 April 2007
A team of Australian researchers has cleared an important hurdle in the development of cheap solar power. The scientists have devised a new manufacturing technique that could boost the efficiency of an inexpensive type of solar cell by up to 50%, making the technology an economically feasible alternative to fossil fuels in the search for sustainable energy.
The high cost of solar cells means that the energy they generate is about five times more expensive than conventional power, keeping the technology off the roofs of the average citizen. Much of the expense comes from the silicon in the wafers that make up the cells. As a result, researchers have focused on improving so-called thin-film cells, which minimize the use of silicon. The downside to these one- or two-micron-thick films is that they can only convert about 5% to 10% of incoming sunlight into electricity, versus up to 25% for thicker silicon wafers. That's because a process called etching, which is used to maximize light absorption by the cell, reduces the cell's current, voltage, and overall output.
So researchers led by doctoral candidate Supriya Pillai of the University of New South Wales in Sydney, Australia, took etching out of the equation. Their new approach involves depositing a thin film of silver (measuring about 10 nanometers thick) onto a solar cell surface and heating it to 200° Celsius. That breaks the film into flattened spheres, called islands, which are about 100 nanometers in diameter. When struck by light, these islands achieve the same feat as etching by a natural but complex process. Incoming light, as an oscillating electric and magnetic field, strikes the silver nanoparticles, which also oscillates the metal's free electrons back and forth. These oscillating electrons, known as surface plasmons, reradiate light into the underlying silicon, which increases light absorption into the cell. Plasmons have been used in wafer-type cells, but Pillai's group is the first to experiment with them in thin films.
Most thin-film solar cells are about 8% to 10% efficient, says Kylie Catchpole, a co-author of the study, but this technique could increase the value to between 13% and 15%. That's an important advance, she says: "If they're below 10% efficient, then you can't really afford to install them, because it would take up too much of your roof area, for example, to power your house." Once the technology approaches 15% efficiency, says Catchpole, it becomes commercially viable. An average house could be powered for a one-time investment of $10,000, including installation of panels that cover eight square meters, she says. Further research and development should bring prices even lower, the team reports in an upcoming issue of the Journal of Applied Physics.
The use of plasmons to enhance solar cell technology is promising, says materials scientist Mark Brongersma of Stanford University in California. "There's a huge opportunity ... to manipulate light in ways that semiconductors and insulators never have been able to do," he says.
By John Simpson
ScienceNOW Daily News
24 April 2007
A team of Australian researchers has cleared an important hurdle in the development of cheap solar power. The scientists have devised a new manufacturing technique that could boost the efficiency of an inexpensive type of solar cell by up to 50%, making the technology an economically feasible alternative to fossil fuels in the search for sustainable energy.
The high cost of solar cells means that the energy they generate is about five times more expensive than conventional power, keeping the technology off the roofs of the average citizen. Much of the expense comes from the silicon in the wafers that make up the cells. As a result, researchers have focused on improving so-called thin-film cells, which minimize the use of silicon. The downside to these one- or two-micron-thick films is that they can only convert about 5% to 10% of incoming sunlight into electricity, versus up to 25% for thicker silicon wafers. That's because a process called etching, which is used to maximize light absorption by the cell, reduces the cell's current, voltage, and overall output.
So researchers led by doctoral candidate Supriya Pillai of the University of New South Wales in Sydney, Australia, took etching out of the equation. Their new approach involves depositing a thin film of silver (measuring about 10 nanometers thick) onto a solar cell surface and heating it to 200° Celsius. That breaks the film into flattened spheres, called islands, which are about 100 nanometers in diameter. When struck by light, these islands achieve the same feat as etching by a natural but complex process. Incoming light, as an oscillating electric and magnetic field, strikes the silver nanoparticles, which also oscillates the metal's free electrons back and forth. These oscillating electrons, known as surface plasmons, reradiate light into the underlying silicon, which increases light absorption into the cell. Plasmons have been used in wafer-type cells, but Pillai's group is the first to experiment with them in thin films.
Most thin-film solar cells are about 8% to 10% efficient, says Kylie Catchpole, a co-author of the study, but this technique could increase the value to between 13% and 15%. That's an important advance, she says: "If they're below 10% efficient, then you can't really afford to install them, because it would take up too much of your roof area, for example, to power your house." Once the technology approaches 15% efficiency, says Catchpole, it becomes commercially viable. An average house could be powered for a one-time investment of $10,000, including installation of panels that cover eight square meters, she says. Further research and development should bring prices even lower, the team reports in an upcoming issue of the Journal of Applied Physics.
The use of plasmons to enhance solar cell technology is promising, says materials scientist Mark Brongersma of Stanford University in California. "There's a huge opportunity ... to manipulate light in ways that semiconductors and insulators never have been able to do," he says.
Subscribe to:
Posts (Atom)
