Upward momentum in silver prices look set to continue.
Prices of silver have finally broken through the key resistance level of US$19/oz. It was not long ago that it was struggling to break the resistance level of US$18/oz. This is a very positive sign for silver and this may be turning point for this metal that has remained so undervalued for so long.
Silver is relatively unknown to the mainstream investment crowd, and very few people are aware of its benefits. And, most investors in South Africa are practically clueless when it comes to investing in silver. In addition to the many industrial applications, even if the worlds banking system were to collapse and all the fiat money became totally worthless, like gold, silver would still have an intrinsic value, and could be used as money. In fact silver coinage has been used as money for thousands of years.
In 1940 approximately 10 billion ounces of silver was available in the world, and the US government owned almost half of it. Today, the US government no longer has any silver and deficits between supply and demand currently run between 50-100 million ounces per year. And unless there is some major new discovery of silver the only way to bring the supply and demand for silver into balance is higher prices. In its World Silver Survey 2010, GFMS in a detailed analysis of stock movements and composition, showed that the disposal of government silver stockpiles continues to dwindle and GFMS' estimate of the remaining stocks suggests that there is little scope for any recovery in the immediate future. There was "a continued absence" of sales from China or India, while Russia sold a reduced amount of stocks last year.
This is what makes the dynamics of the silver market very exciting for investors.
By investing in silver, I believe that you not only have one of the last chances to protect what you have, but you also have the additional opportunity of holding a severely under-valued and increasingly scarce asset – and one that could explode in price anytime – despite the threat of continual price manipulation from the major bullion banks who currently hold a short position of around 320 million ounces. If the price of silver should suddenly move to US$21/oz this could result in a substantial loss for these banks, and they may be forced to trim their shorts thereby putting more buying pressure on the price.
Even as premiums rise and available retail supply dwindles, there is still time to add this precious metal to your portfolio. Remember, the very best form of silver you can own is physical as it is in your personal possession. The preferred way to own physical silver is buy purchasing silver bullion bars and bullion coins as well as silver rounds which are practically the same as coins.
For weeks the price of silver has been trading in a range between US$17.50/oz and US$18.50/oz, but after seeing good support above US$18/oz for several days, the price surged upwards of Friday. The current momentum is upwards and we should soon see silver trade at above US$19.50/oz
About the author
David Levenstein is a leading expert on investing in precious metals, with more than 30 years experience.
For more information go to: www.lakeshoretrading.co.za
Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice.