Sunday, May 8, 2011
Buy Silver When it is Down
What does this mean?
Although many commodities have raced up further and further this year fewer markets have surged to the same degree as silver. Extraordinarily enough silver seems to be more susceptible to market influences despite the majority of use being in the industrial and commercial sectors with only ten percent in the coin and investment arena.
Of the commodities silver is a curiosity. The silver investment market is smaller than most other markets. Only a small percentage is traded. Silver is in short supply, unlike gold, and gold has about four times the amount of tradable futures contracts as silver.
The value of new gold supply last year was $217 billion, with 17% of the total supply held by the world's central banks and multinational financial institutions. Silver, on the other hand amounted to just $49 billion in 2010, according to GFMS Ltd., a London-based metals consultancy with less than 5% of silver held by central banks and institutions according to some analysts. Instead, a significant chunk of the worlds 'investment' silver is held by individuals in the form of coins, medals and silver bullion bars. The low price of silver is a big attraction of course and the trading volume of silver-futures contracts have boomed over recent months.
So far this year silver futures contract' have more than doubled their volume compared with the same period last year. "It's been 1999 all over again," says Evan Lazarus, a 35-year old trader who manages T3 Trading.
Newsletter writers also helped to boost the market's surge. "It is obvious to anyone with any ability to think, that precious metals are a must investment!" said David Morgan, a long time silver backer, whose newsletter has 1,000 subscribers and thousands more who read email alerts. The note came after Standard & Poor's warned of a possible downgrade of the U.S.'s credit rating. "Where else can anyone invest for capital preservation outside of precious metals?"
When Chairman Ben Bernanke reaffirmed the Fed's low-interest rate policies on April 27, silver soared close to $50 an ounce, a 31-year nominal high.
So despite the giddy rollercoaster ride silver is having right now, in the long term, silver will continue its ten year trend and start to rise again in the not too distant future and now, is the right time to buy silver when it is down