The Bullish Case for Silver
16 comments
April 30, 2009
[url]http://seekingalpha.com/article/134284-the-bullish-case-for-silver[/url]
By Lara Crigger
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This article has 16 comments:
Silver is a
worthwhile holding, but I wouldn't bet the whole farm on it or gold. I would
definitely hold bullion silver rather than an ETF--just my preference. Just put
it away and forget about it.
I hold a lot
(for me) of physical silver,
but also a lot of shares in silver
miners and in
SLW(silver-Wheaton-stock). If you want to know about the coming
silver squeeze, see Ted Butler's columns--do a search. This week he says there
has been a shift, with the trapped COMEX silver shorts struggling to get out
because they know that the silver push is coming to shove. As for where else to
hold money, in addition to silver and gold and mining shares, there's platinum,
there's oil and there's nat gas, and water, and grains... cotton. Lots of
choices.
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"If you're a
copper miner,
you don't care about the price of
silver. You just pass it off to your bank for them to sell at any
price they like. That puts a lot of pressure on silver prices," explains Morgan.
Load of crap. The futures traders
set the prices of everything and even the largest company's seem
to have no control. Ever heard of
Exxon saying, "Our price today is $75 a barrel?"
"The natural gold/silver ratio, or the amount of silver coming out of the ground
relative to gold, is closer to 8 to 1," says Morgan.
I thought the prices of gold/silver were used to compute the ratio, not how many
oz. are mined?
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Looks like I
should clarify a few things:
On Apr 30 11:39 AM ZZ wrote:
> "If you're a copper miner,
you don't care about the price of
silver.
> You just pass it off to your bank for them to sell at any price they
> like. That puts a lot of pressure on silver prices," explains Morgan.
>
> Load of crap. The futures
traders set the prices of everything and
> even the largest company's seem to have no control.
Ever heard of
> Exxon saying, "Our price today is $75 a barrel?"
The issue here is not
that pure-play silver mining
companies are unable to set their own commodities prices, because
you're right--nobody gets to do that.
Rather, the issue is
that silver is
overwhelmingly an "incidental"
commodity -- most of the companies
who mine it out (silver) of the ground do so
only to get to the other stuff,
like copper and zinc.
So they really couldn't care less what silver ends up
ultimately being priced at; they
send it off to someone else and tell 'em, "sell it at whatever price you like,
we don't care". That sort of "whatever" attitude puts a real
damper on silver's market value.
> "The natural gold/silver ratio, or the amount of silver coming out
> of the ground relative to gold, is closer to 8 to 1," says Morgan.
>
> I thought the prices of gold/silver were used to compute the ratio,
> not how many oz. are mined?
What Mr. Morgan was getting at was that there's a discrepancy between the ratio
of actual physical gold mined each year to actual physical silver mined each
year (which he calls the "natural" ratio) and what we as investors regard as the
"gold/silver ratio" -- and that the former doesn't necessarily drive the latter.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++
Supply/Demand
Dynamic? The derivative traders are the new dynamic.
Oil zoomed to $150 a barrel
and then down to $40 a barrel in a
few months. Was
there a supply shortage
at $150? No
Did demand fall off the roof on the way to $40?
No
Industrial
uses for silver are increasing but there's also another factor to consider in
price forecasts. That is, the economic and political costs of bringing new mines
into production. These will play a large role in future costs.
Political costs, permitting etc. are increasing as are the labor and associated
social costs of mining. Mines are now expected to not only operate at a profit
for shareholders but, increasingly, to provide benefits for nearby communities.
With increased energy, demand and capital costs substantial increases in prices
are inevitable.
Should silver regain some of its status as a monetary asset David Morgan's
estimates could appear conservative.
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"Silver
Wheaton Corporation (NYSE:
SLW), another major silver mining company operating mines in Mexico, Sweden,
Peru, Greece and the U.S."
I thought SLW only had one mine, which wasn't acquired until this year.
Its primary business model takes
advantage of silver being, as you call it, an "incidental" commodity.
SLW buys silver in advance, from
miners who produce it as a
by-product.The
purchase price is lower than the market price, so SLW earns the spread and takes
on the risk/reward from moves in the silver price.
The miners get a guaranteed price
and don't have to bother marketing the silver.
+++++++++++++++++++++++++++++++++++++++++++++++++
The lack of
interest is from the investors that have been doing their homework and know that
J.P. Morgan Bank
has been manipulating
the Silver market with their large short positon.
++++++++++++++++++++++++++++++++++++
You might add, their large "naked" short
position. It's
highly unlikely that they have those options covered considering
the size of the position.
Or could it be they
have it covered with the bullion from the SLV ETF, which they are supposed to be
the custodian of?
I haven't substantiated this stuff, so as far as I'm concerned it's all rumor.
If it's true it would explain a great deal.
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I keep
hearing of the JP Morgan nekkid short position. Them folks is smarter that I is,
so what I wants to know is why the
'massive' short position?
From what I've read they could
never really cover (unless
they could buy/sell enough call/put options on Silver or miners
to make up for it), so why'd they do it?
Why didn't they cover in October '08?
Can anyone enlighten me or point me in the right dee-rection?
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The one
company that has a shot at being
taken over in the silver arena
is HL (Hecla-silver-stock).
It is a crappy company with a good portfolio. A major could eat them up and the
share holders are so willing now to sell out at a premium. That is the only
worthwhile silver play and it is only due to potential take out. Sorry silver
won't move for sometime.
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"But if
silver has so much potential, why
is it still so hush-hush among investors?"...
Look at what happened to the Hunt
Brothers. The money changers stepped in and changed the rules,
lest they be successful and others follow in their footsteps.
And Warren Buffet? Even he
was only allowed to hold his silver
for a few short years. No,
the big names know
that silver
is an off-limits
special metal, that due to its nature,
is used to control the price of gold (and thus paper
money).
For all we know, silver could not only be the most indispensable metal on Earth,
but throughout the whole Universe as well.
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