Why Silver has not reached 31 year high

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silver haven

“particularly gold and silver, are likely to remain underpinned as concerns about the stability of the Mideast region continue and investors opt for safe-haven asset types,” said James Moore, analyst at FastMarkets.

As usual the report fails to adjust for the increase in the price level, when comparing silver’s price today and in a former time. If we adjust for a change in the price level, reflecting purchasing power of a quantity of silver (or any other commodity) the price of silver would have to be roughly $85 to $90 per ounce to equal the REAL (price level adjusted) value it reached in 1980. But this does not reflect opportunity costs of holding silver during that period, which would be substantial since silver does not pay a dividend (but actually costs money to keep safely.)

The game is all about who has the lowest MER ( management expense ratio). Some call it an administration fee. Anything above 60 basis points these days is not competitive.

real silver price

Bullion Management Group (BMG) has admin fees that are through the roof ( approx 2.4% )compared to other precious metal vehicles. They would be my last choice. Also expensive redemption clauses. Illiquid.

Sprott’s ( PHYS – NYSE) are lower but still about 12 basis points higher than Central Fund ( Central Fund of Canada- Cef.a -tsx ) which is 40% silver. Its listed on the NYSE . Problem there is you are exposed to the U.S dollar by owning it in the U.S.

The best way pure silver play is Silver Bullion Trust , also by Central Fund ( SBT.un on TSX ) . Its admin fees are approx .005 ( 50 basis points) . Lowest MER in the silver world. While the other silver funds have hardly moved this one has made people a lot of money since it listed 18 months ago. Management has 30+ years experience, well run. All holdings stored in Canada at CIBC.

Claymore also has a silver fund but it also has much higher admin fees which are also full of extra hidden expenses. We estimate 80-100 basis points after all is said and done . They hedge currency which is expensive and that expense comes out of shareholders pockets as does the tax implications from it. It and has suffered massive redemption’s since its inception. The funds market cap is down about 30% from its peak. Liquidity now a problem. They store a large percentage of its holding in NY and London which could be bad from a confiscation point and withholding tax perspective.

There is of course also SLV . However it is riddled with controversy that it holds very little physical and its sub custodians have turned it into a derivative nightmare.

David Morgan Explains Why Silver Is Catching Up, Why It’s Broken Out and Where It Goes From Here

David Morgan: “The major monetary metal in history is silver, not gold.” – Nobel Laureate Milton Friedman in an interview with James Blanchard at the New Orleans Investment Conference. November 7, 1993. The above quote is fact of monetary history but few in the West study or know silver’s history. Yes, gold is money but silver has been used as money more often, in more places, by more people than gold ever has.

Daily Bell: Why has silver been known as the peoples’ metal?

David Morgan: Because of value per unit, as this interview takes place gold is about $1400 US per ounce and silver is about $25 per ounce. Since most transactions are small daily transactions by all people it is known as the peoples’ money. Silver buys your small items—food, water, energy, and clothes for example. Large settlement purchases would be done in gold.

Daily Bell: What is the gold/silver ratio and where is it today? Has it closed the gap since we last spoke?

David Morgan: It is the price of gold in dollars divided by the price of silver in dollars. As of this interview that would be 1400/25, which is 56. The ratio has moved from 68 to 56 in the past six weeks and it has moved in favor of silver since our last interview. Source: Silverseek (1)

David Morgan is probably correct that a big market correction will force a rash of liquidations to cover margin that will hurt bullion in the near future and short term I’m keeping my powder dry to add silver on that plunge.

We also implore people not to buy paper products unless its a Central fund product. Paper whether its futures, ETFs or bullion certificates are not fully backed and there is a good change of default in the silver market.

Always buy physical silver

It is recommended by most experts to take physical delivery. The paper market is a sham and will bust when the margins get called. There isn’t enough silver to come close to meeting the paper demand. Silver is even a tighter market than gold.

Be very wary of the guys toughing paper. You know where that got us. Use common sense. Would you feel better with it in your hand or some player in NY on his way to an airplane as the market calls for delivery.

Without it in your basement you have nothing but toilet paper.

References:

(1) Silverseek

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