Outlook For Silver In 2013

David Morgan presented his outlook for the silver price in 2013, starting off with two long term silver price charts, both adjusted for inflation. The first of the two charts is using the CPI as measured by the US government. The chart shows the peak price of silver in 1980 (adjusted for today’s inflation) which is $ 125.  The upside potential for silver is clear.

Still, these prices are rather irrelevant, as the price of precious metals reflects the value of currencies. In the extreme scenario where an infinite amount of money would be printed, the price of the metals could go to infinity (obviously a theoretical example). It makes more sense to look at the long term trend, which is clearly up. David Morgan used several charts in that respect:

• The long term silver price is rising and keeps on accelerating in its move up.
• The gold to silver ratio is in a long term downtrend (which is in favor of silver). Silver has been outperforming gold over the past decade.
• Expectations remain that silver will continue to outperform gold. The current gold to silver ratio of 50 to 1 is expected to turn to 16 to 1, which is the historic average of the monetary ratio. Here it gets interesting. It makes sense to look at the ratio from the perspective of metals in the ground. By doing so, the ratio becomes 7 to 1. David Morgan doesn’t rule out that a ratio close to that will be possible at the peak.
• Silver is appreciating in ALL currencies, no matter if there are temporarily large increases or decreases in given currencies.

Now it’s often mentioned that silver touched $ 50 in 2011, speculating that it has passed its peak in the current bull market. The matter of the fact is that it was a one day event and it happened only in the futures market. In the physical market for instance, there was a “bid back” situation, which means the buy / sell spread was very large (dealers were buying physical silver at $ 35 an ounce and selling at $ 50). Moreover, the fact that it took only one day doesn’t make the market.


When looking at the same chart taking the SGS inflation into account, we see a totally different picture. That’s a measurement that is used by Shadowstats.com and is using the CPI with the same calculatation methodology as in 1980 (which was obviously than today’s calculation). By doing so, the picture becomes more extreme. David Morgan explains that a move from today’s $ 33 to $ 100 would indeed be a threefold move up, but still significantly low compared to the historic peak.

 

The long term trend of the silver price in all major currencies was shown in the following graph. Mark O’Byrne shows two concrete examples that prove the idea that silver is a store of wealth:

• In 2008, while the financial crisis was raging, the Sterling was under bigger pressure than the other currencies. You see on the graph that silver lost value in all currencies, except in Sterling.
• Likewise in 2011, the Indian Rupee came under high pressure. While the silver price had declined against all currencies, it did not in terms of Indian Rupees.

Yesterday In Gold And Silver

The gold price didn't do much of anything during Far East and most of the London trading day on Thursday, as it sort of wandered around aimlessly within a ten dollar trading range below Wednesday's New York close.

Gold finished the Thursday session at $1,700.00 spot right on the button...up $5.70 from Wednesday.  Net volume was pretty decent...around 140,000 contracts.

However, a rally of some substance began to materialize about 8:40 a.m. Eastern time...about twenty minutes after the Comex open.  The fun ended at the London close at 4:00 p.m. GMT...11:00 a.m. Eastern time.  From there it more or less traded sideways into the close of electronic trading.

Gold's low and high ticks, which are obvious on the chart below, were $1,684.90 and $1,704.40 spot.

The subsequent rally lasted until the same 11:00 a.m. Eastern time...$33.38 spot...and that proved to be silver's high tick of the day.  Then it got sold off until noon, before trading sideways into the close.

The silver price traded down about a percent by mid-afternoon in Hong Kong...before rallying back to almost unchanged by 11:00 a.m. in London.  From there it got sold off once again, with the low price tick [$32.46 spot] coming at the same as time as the low tick in gold...8:40 a.m. in New York.

Silver closed at $33.03 spot...up a whole 12 cents.  Volume was pretty decent...around 41,500 contracts.

The dollar index closed on Wednesday at 79.82...and then traded a hair lower up until 8:00 a.m. in New York.  The subsequent rally took the index back up to around the 80.30 mark...and it hung around that number for the rest of the Thursday session...closing at 80.25.

There was little co-relation between the precious metal prices and the dollar index at all yesterday...especially considering the fact that gold and silver rallied together with the dollar index during the New York morning session.  I'm sure that had something to do with bad new on the euro front.

The silver stocks were mixed...and Nick Laird's Silver Sentiment Index closed down a smallish 0.34%.

The gold stocks opened flat, but soon rallied to their 11:00 a.m. high...in lock-step with a rising gold price.  Once that high tick was in, the stocks got sold down to just above the unchanged mark...and proceeded to trade sideways from there until the equity markets closed at 4:00 p.m. Eastern time.  The HUI finished up 0.40%.

There were no reported changes in GLD yesterday...but a rather chunky 1,258,182 troy ounces of silver were deposited in SLV by an authorized participant.

The U.S. Mint had its third sales report in a row yesterday.  They sold 4,500 ounces of gold eagles...1,000 one-ounce 24K gold buffaloes...and 25,000 silver eagles.

Over at the Comex-approved depositories on Tuesday, they reported receiving 614,504 ounces of silver...and shipped 452,643 ounces of the stuff out the door.  The link to that activity is here.

Here are a couple of very interesting charts that Nick Laird sent my way yesterday evening...and they're definitely worth sharing.  Neither needs any further embellishment from me.  All comments regarding these charts should be directed at Nick...not me.

I have a decent number of stories for you today...and I hope you can find the time to read the ones that interest you the most.

Gold Miners Facing Tough Challenges

A new report from the world's largest gold producer Barrick Gold provides yet another illustration of the problems facing gold mining companies.


While 1991 saw the discovery of 11 new gold mines, in 2011 only three mines with production potential were found. Aside from the drop in gold ore and rising production costs, a third factor is increasingly hindering gold production: producing countries' tedious licensing processes and sluggish bureaucracy. 


According to Barrick Gold, this is being exacerbated by increasing environmental regulations that could jeopardise many mining operations.


In South Africa, extraction of gold from depths of more than 6,000 metres has almost become the rule rather than the exception. Mining costs are being pushed up by the logistical challenges of drilling at great depths, as well as an increasingly militant work force which is demanding higher wages. 


Add exploration costs to this mix and it’s little wonder that companies’ profits are being squeezed, despite the high gold price. According to Barrick, total production costs for all mining companies exceeded the $8 billion mark last year.

Many companies are also facing increasing hostility from residents in mining areas. This has been particularly evident in Peru, Bolivia or Ecuador – where there have been violent clashes between local people and police.

A tricky set of factors for many companies. But given the gains in gold many expect in the coming years, great fortunes could still be made in the right gold mining investments.

5 Things You Should Know Before You Flip A Property

1. Get An Inspection On The Home:

Get a complete inspection done on your property. By, spending a few hundred dollars on this expense you can save thousands in problems that you cannot see. Foundation, Pest, Wood Rot, Etc… By, getting a full inspection you can rest assured that you know every thing that is wrong with the property before its to late. 

In the contact for the house you need to make sure that you have 7 days to have a inspection preformed, and if the inspection finds problems that are going to cost more money that you are willing to spend you can get out of the contract with no penalties.

2. Money Is Made At The Buy, Not The When flipping a house your money is made at the purchase not at the sell of the house. So, many times people buy a house with the intensions of making a huge profit only to find out that they could not make any money after all the renovations because the purchased price of the house was to high. 

When you purchase your property you need to be sure that you buy the house with enough money to make renovations, have carrying cost, and add about 5 $6,000. Now, cost is at $147,000, and that is if everything goes as planned. Profit is under 10,000 dollars. The mistake was made at the purchase at the home, not the sell.


3. Don’t Do The Work Yourself:

Get a contractor or several sub-contractors and have the work done quickly. You need to have you house flipped ASAP, so that you can get it on the market and get it sold. When I started flipping my brother and me did a house together, and we did all the construction. I had a construction background and figured it would save thousands, but it took us over 4 months to get the work done that a contractor could have had the work done in a month. 
But, we trying to save money on our flip did all the work on our time off and after work, and it just took to long. 

On our 2′nd flip we used contractors for almost everything and had the house completely flipped with a new roof, new air conditioning, new hardwood, and much more in only 3 weeks. We did not have to spend all our time working on the property and were able to spend that time looking for the next deal. This is how you get rich in real estate.


4. Use A Real Estate Agent:

Do not try to sell you house on your own. Harness the power of a real estate agent and the power of the MLS system. When you do a FSBO you are depending on people driving by your house and seeing you sign, with a real estate agent you have some one actively marketing you house to get it sold. Once again this will free up more time for you to look for more great deals. If you want to help the process I have found that Craigslist and listing you house in Google Adwords help to, but I use these tools with the help of a agent to make sure I have all my bases covered.


5. Place The Property For Sale 1 To 2 Percent Below Market Value:

If you are wanting to flip real estate and make money the object is to buy and sell the property as quickly as possible, so that you can move on to the next house. If you purchase a house and try to sell it at top dollar to make and extra couple of thousand dollars on your flip, and end up holding it for 6 months you are loosing money. Get the house on the market at a price that is going to blow the competition away, and you will sell it no matter what the market conditions.

On our second house the market for selling house went down do to the housing market as a whole, and the tightening of the loans across America. We were told that you could not sell a property in this market, but we went ahead anyway and flipped our house. After 3 weeks on the market we had 3 people wanting to buy the house. Why, because we offered it at such a great deal that people wanted to jump on it. That is what you have to do especially if the market is slow.


I hope this article has been helpful with the basics needs of flipping a house. If you will study and learn you will make money. But, do your homework before you purchase a house, and make sure that you can pull a profit on your deal. Then, make it happen!

Vancouver Real-Estate Market Unlikely Victim Of China Slowdown

Over the past 18 months, the global fascination with Chinese economic invincibility has steadily waned. And economic sophisticates have reached a consensus: China’s growth rate is slowing. Western demand for exports is falling. And the economy is plagued by overinvestment and excess capacity in housing, steel, and a host of other sectors. Officially, China is growing at a 7.5 percent rate this year. But I guesstimate that China is downshifting. Over the next 10 years, it’s possible that China will grow at an annual rate between 3 and 5 percent.

The financial press is doing a good job discussing these direct impacts of China’s growth slowdown. But there are plenty of other indirect, second-order impacts that have been ignored.

For instance, the impact of the Chinese economic slowdown on art markets, something I’ve wrote about in this space, has been dramatic—with the share price of Sotheby’s falling by almost 50 percent over the past 18 months.

The hidden story embedded in the Chinese economic “slowdown” is that investment-led growth is plunging. And the global implications are many: industrial commodities like coal and iron ore lose their China “bid”; mining companies find themselves expanding capacity in the face of slowing demand; commodity-reliant countries like Brazil find the China growth tailwind is turning into a headwind; currencies like the Australian dollar are exposed as extremely vulnerable; rail and port operators find that the volume of containers they handle is falling.

“Vancouver has been a popular destination for Chinese, driven in large part by its proximity to China and its spectacular feng shui,” notes Jamie MacDougal of Sotheby’s International Realty. The surge of Chinese interest began in earnest following the Tiananmen Square massacre. Vancouver emerged as a safe place to park capital. A long-standing Canadian policy has offered citizenship to foreigners willing to make substantial investments. But MacDougal notes that Chinese offshore buyers arriving in Vancouver spiked to truly unsustainable levels in 2011, during which bidding wars were regular events and property values rose by the week. Check out the chart below.

Given this dynamic of rapidly rising supply, it would not be surprising to most observers if prices were falling rapidly. This has not been the case. According to Eugen Klein, president of the Real Estate Board of Greater Vancouver, “prices in the region remain relatively stable overall.” Again, the raw numbers seem to validate his view: average home prices in the Vancouver area were down a mere 0.8 percent between September 2011 and September 2012. It sure seems like we are witnessing stable prices in the face of rising supply and falling demand.

What You Need To Know Before Investing In Silver

I believe there is more opportunity in the silver market over the next two years relative to gold and, as such I’m now advocating accumulating a large overweight position in silver relative to gold because, over the long-term, there is such a great demand vs. supply situation developing….Before investing in silver, however, there are a number very important things that you must understand about the silver market. Let me explain.

1. Avoid Leveraged Silver ETFs:

Another important thing you need to understand about the silver market is you won’t know what’s about to happen ahead of time when the large players really move the market, and you will have to just endure it if it goes against you. Therefore, it is essential that you don’t use leveraged ETFs because the volatility will intensify. It is difficult enough to endure the volatility without using a leveraged non-physical backed derivative to trade it.

2. Recognize The High Degree Of Volatility:

The silver market…will trade with about 300% more volatility than gold does. This means if gold is up or down 1%, silver will probably be up or down 3%. The total silver market is a fraction of the size of the gold market in dollar amounts, so the market is less liquid. Relatively small amounts of money in or out of the market will produce sharp price swings. Because there are only a few large institutions, such as JPMorgan and HSBC that dominate the market making of silver and are also the custodians of the large inventories, it is an easily manipulated market.

3. Don’t Trade Silver Futures:

Also, do not trade silver futures, because of the high leverage and the way the exchange can change your margin requirements overnight. They can crush you and force you to liquidate at the worst time. Do not do anything that might force you to sell except when you intend to. Many speculators found this out the hard way in 2011, when the price of silver approached $50 and the exchange tripled margin requirements. This is supposed to protect the exchange and it does, but the real reason was to try to crush the longs and staunch the losses of exchange members, who had shorted and were literally losing hundreds of millions of dollars.

There is also a clause in every futures contract that it can be settled in cash, and not actual physical delivery so if silver soared so much it was bankrupting exchange members, they could declare that the market is in “liquidation only” mode like in 1980. This would short-change the investors on the right side of the trade. Of course conveniently, this is never done when average investors are on the wrong side of the trade, but only when members of the exchange and large institutions are hemorrhaging cash.

4. Physically Possess Your Silver Holdings:

By far, I feel the safest place to store your metals holdings is to physically possess them, and I strongly advocate that….I feel Canada is the best place to have your metals stored when you use exchange traded funds or trusts. It is a country with a long history of mining and natural resources, and most of the companies involved in the sector are located there, so it is probably the safest country from government confiscation. They have different and easy to invest vehicles for their own and foreign citizens to own gold and silver, like the Central Gold Trust (GTU) and the Central Fund of Canada Limited (CEF). These are long-term vehicles with extra precautions, like storage at mints, and they are even insured.

5. Average Into Your Silver Purchases:

Another thing you want to do when accumulating your silver position, especially if it is correcting, is be patient and average into your purchases very, very slowly.

The Fundamental Flaw In The Silver Market:

The paper silver market (all outstanding futures and derivatives) is many times larger than the actual physical silver market which means that if a significant percentage of paper silver investors demanded actual delivery, the price would rocket higher when the shorts in the market couldn’t fulfill their obligations. That is a fundamental flaw in the structure of the silver market.

As time goes by and demand increases along with very tight supplies, [this shortage in actual physical silver] will force silver prices to increase much more than the gold market. That is also why you need to be concerned if you actually physically possess your silver. [You must] make sure you are using the best ETF possible to profit from the huge increase in higher prices. When you own a silver trust, you know it is physically backed and can deliver the silver so if there is a breakdown in the silver market structure, the premium for this trust would skyrocket.

How To Get Started Investing In Silver

Many leap into the silver's market without realizing how volatile the market can be. Most investments to the uninformed can involve some major risks. Taking your chances is never ever a waste of time provided that you know how the program works, and you use the spot chart to your benefit. Making a good guess on when prices will rise or fall is the main key to success in this trade.

Taking appropriate actions to any event in the silver market will save you from unnecessary loses.
Many industries suffered a loss during the economic recession in 2009. Silver miners reported a drop in production, whereas demand from photography and kitchen ware industries fell by a certain percentage. This year, however, the silver spot chart 2012 shows that the silver market is starting to gain momentum once more. Demand for silver is now on the rise, with digital gadgets, laboratory equipment, and medical instruments depending on silver for raw material.

It is speculated that the silver market will remain stable for the entire year, yet this does not make silver any less volatile. Silver prices may still go up or down anytime at a range not higher than $13. Experts have different interpretations of how the silver market will fare in the years to come. Only one thing is certain, that the demand for silver will continue to increase. At the same time, the mining industry does not foresee shortage in supply of silver in the near future.

What determines prices as with anything is supply and demand. When there is a decrease in the supply of silver, tendency is for customers to demand for more, resulting in an increase in price. Alternatively, when the supply of silver exceeds the demand for it, the price will go down. In this circumstance, the best time to acquire silver is when the cost is low, and the best time to sell is when the cost is higher. But it is not as simple as it appears.

What makes silver a risky venture is that, you cannot tell exactly when the silver prices will go up or down. The use of a silver spot chart is indispensable for predicting what will happen next in the silver market. It shows silver prices and the real modifications in realtime. It lets you see how the figures go up and down over a predefined period. By examining the behavior of silver prices and their causes, you have a better chance of realizing the appropriate option between buying and selling silver at any circumstance. A silver spot chart is crucial for knowledgeable and low risk investment in the silver market.