Why You Must BUY SILVER NOW!

Silver prices are continuing to climb, and scale new pricing heights. Today (Feb. 21, 2011), silver tasted highs over $34 USD. That's an increase from the prior close on Friday of almost 4.0%!

Still, it makes sense to buy silver. Here are six good reasons:

1. China has turned net importer
China, the biggest commodity guzzler in the world, is importing silver big time. In fact, in 2005, China exported 100 million ounces of silver (one troy ounce = 31.1 grams). In 2010, five years down the line, the country has turned a net importer, importing 122.6 million ounces, which is around 14% of the global production.

Now, we all know the impact China has on the price of a commodity it takes fancy to. India, the biggest consumer of gold and silver in the world, imported 1,200 tons of silver in 2010, up 20% from the previous year. This increase in imports has largely been attributed to increase in the price of gold, thus making gold jewelery very expensive.This has made people in these countries turn to silver jewelery. In fact, as the price of silver keeps going up, more and more people are likely to take fancy to silver jewelery.

2. Supply demand mismatch
This is a very basic point, which is behind every price rise. Silver demand is more than silver supply, and thus the prices have been on a run. The Silver Institute, which tracks silver supply, reports that from 2000 to 2009 (the latest data available), the supply of silver went up to 709.6 million ounces, up from 591 million ounces. This shows an increase of around 2% per year.

Data from the CPM group shows that mine production rose to 741.5 million ounces in 2010 (up around 4% from 2009). Silver demand in 2009 stood at around 889 million ounces and the difference between supply and demand was largely met out of scrap sales. Given this, nearly 19% of silver demand is being meant out of scrap sale. This is not sustainable.

3. No recycling of silver
One way to increase supply is to recycle silver like gold has been over the years. Silver is largely used as an industrial metal. It is a very good conductor of electricity, the best heat transfer agent and reflector of light, a very good lubricant, catalyst and alloy. But it is used in very small amounts as an industrial metal. Given this, it is not easy to recycle silver.

Also, at its current price, it is not monetarily feasible to recycle silver. Experts are of the view recycling will become monetarily feasible only once the price of silver crosses around $50 per ounce (currently it quotes at around $32-33 per ounce). Given these reasons, increasing sale of silver scrap is not very easy.

4. Not easy to ramp up production
Experts who closely track silver believe the world is running out of silver. The most vociferous of this lot, Adrian Douglas, the proprietor of Market Force Analysis and also a director of GATA (the Gold Anti-Trust Action Committee), has gone on record to say the world will run out of silver in 2020, and thus become the first element of the periodic table to become extinct.

Theodore Butler, silver analyst, Butler Research, has said in the past that silver inventories have declined from 10 billion ounces (one ounce equals 31.1 grams) in 1940 to 1 billion ounces today. In comparison, gold inventories stand at a total around 5 billion ounces. So, if we were to believe these experts, there is five times more gold on this earth than silver. But does that reflect in the price of these metals? Certainly not.

This decreasing inventory cannot be built up through increase in production. The earth’s crust has around 17 times more silver than gold. Despite this, silver production cannot be ramped up quickly. The primary reason for this is that it is rare to find a pure silver deposit. Hence, nearly two thirds of the silver that is mined comes as a by-product of mining other metals, like copper, zinc and lead. So, increased production of silver in turn depends on the price of the other metals it is co-mined with.

Also, the silver “mine-cycle” is around 10 years, i.e. the time it takes from starting to explore for silver and until the mine finally begins to produce silver. Over the years, the low price of silver has ensured that the mining companies haven’t gotten around to looking for silver.

5. New uses of silver
As mentioned earlier, silver has lots of industrial uses, given that it is the most malleable and ductile metal, after gold. Silver is currently used in electrical applications like conductors, switches, fuses etc. It is also used in photography, and silver alloys are used as cathodes in batteries. New hybrid car batteries rely on the gray metal, as does the growing solar cell industry. Interestingly, the new uses of silver keep growing.

One of the newest and most innovative uses for the "poor man's gold" is to kill germs! As a bactericide, silver is used in water purification and air handling systems. Additional new products using silver’s biocidal qualities are being developed each year; clothing, bandages, toothbrushes, door-knobs (flu-protection), keyboards, and the list goes on growing.

6. The investment argument
Investors are gradually realizing the potential of silver. This has led to an increased demand for silver coins as well as exchange traded funds worldwide. The US Mint sold more than 6.4 million silver eagles this January —- the highest sales in a single month since the coin was introduced way back in 1986.

Eric Sprott, who runs Canada-based Sprott Hedge Fund and who recently launched a silver fund, made a very interesting point during an interview. His new fund entered the market to buy 1 million ounces of physical silver. The silver wasn’t readily available, and it took the fund nearly 10 weeks to acquire the entire stock.

Now, this was the impact of just one fund. Imagine what would happen once a few more silver funds are launched. In fact, data from the Silver Institute shows that the investment demand for silver went up by a whopping 184% to 136.9 million ounces in the year 2009 (the latest data i.e. available).

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles.

Rick

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Fiat Money: The Monopoly Game of Life

Playing Monopoly was a favorite activity on rainy days with my brother Mike and sister Nancy. It was a sublimely magical game, especially for me, because it allowed a middle class kid to become instantly transformed into a real estate tycoon. One minute I'm foraging around for a quarter to buy some candy or a comic, and the next minute I'm buying up properties in Atlantic City like I was Donald Trump on a bender! What made possible my sudden climb from small city kid to rich landed gentry? Paper or fiat money. The game was jam packed with it...and it was all-to-easily acquired. I never thought for a moment about who printed up the money and just why it could be used to purchase real estate, a way out of jail, utilities, railroads, pay taxes etc. I don't recall questioning if it was "backed" by any real items of value, but everyone else playing the game accepted it's worth, so who was I to make waves? Besides, it was just the one of the rules of the game, right? Now that I'm an adult, I know that our Federal government is the "man behind the screen" that plays the part of the mysterious money printer. The definition of fiat money is according to InvestorWords.com:

Money which has no intrinsic value and cannot be redeemed for specie or any commodity, but is made legal tender through government decree. All modern paper currencies are fiat money, as are most modern coins. The value of fiat money depends on the strength of the issuing country's economy. Inflation results when a government issues too much fiat money. Well, that definition about sums up the US paper money situation nicely, don't you think? It's funny money with no actual value of its own, other than the strength of the faltering US economy. Even the currently circulating "silver" pocket change falls under the same category since it's made from base, not precious metals any longer. The definition goes on ominously with a final warning about the risk of inflation if the issuing government prints too much fiat money. Inflation, of course, being the silent robber in the night who steals your hard earned money only to replace it with an identical, yet debased copy, that buys less goods and services than the original note.

To further illustrate the inherent inflation mechanism of fiat money, let's return to my Monopoly game. Once to spice the game up my siblings and I started the game with 3x as much starter money as the rules indicated. The result? We bought the same properties, but the bidding wars launched the real estate prices into the stratosphere. Even low rent properties like Baltic went for multiple times its stated value. Without realizing it, of course, we imitated the irresistable force of monetary inflation inherent in and unavoidably linked with the fiat money pantheon. At my family's last Thanksgiving I wanted to test the awareness level of the above basic economic truths (yes, I'm available for parties). A short conversation with my usually very intelligent brother-in-law, Bill, confirmed the consensus in the room. He thought the dollar was backed by gold in Fort Knox (nope), and that today's coins still contained silver (nope again, they haven't since 1964). I believe a countrywide survey would show the vast majority of Americans have similar misconceptions about the real value of their negotiable currency. The current American debt is now a whopping $13 Trillion dollars, and will likely reach 19 Trillion in 2015. The money supply in the US has also been growing alarmingly as the government seeks to stimulate the economy. By fiat money definition, inflation, and even hyperinflation, are axiomatic. The US Dollar is holding strong for the moment, because the world presently lacks another easy replacement to pay for their oil, etc. However, inevitable signs of serious inflation will undoubtedly undermine the confidence of Americans and foreigners alike in the US Dollar. Once that happens...game over man. Speaking of game over, guess how my siblings and I treated the Monopoly money once the game was finished, and we awoke to the fact that it was all just paper and therefore inherently worthless? We threw it in the box (no tidy denomination segregation) and chucked the whole kit and kaboodle into the closet. BUY PHYSICAL GOLD AND SILVER COINS OR ROUNDS NOW! Gold and silver have had value in human society for 5000 years! Let's see if the US Dollar will maintain it's value for a fraction as long. Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles. Rick

Gold & Silver vs. Guns & Ammo

In the survival prepper community no topic seems to garner more heated debate than the question of whether to buy and stockpile gold or ammo. The gold side argues that investments in precious metals will see you through any crisis and are easy to accumulate and store. The ammo side, on the other hand, heaps scorn upon precious metals with such apparent simplicities as "you can't eat gold". Instead, the ammo folks recommend storing food, water, medical supplies, seeds, land, and other basic physical necessities as the best and only way to properly survival prep.

The reader of this blog may now well be asking themselves which survival supplies I recommend, gold or ammo? My answer is, YES! I do not take sides in the survival prepper war because I see a need for both precious metals and actual survival commodities in the following probable and possible future scenarios:

1. Inflation - has been the bane of our national existence the minute we started using fiat currency (paper money). It is highly likely that inflation will continue and accelerate in the future. Precious metals like gold & silver have been bulwarks against wealth erosion via inflation throughout history. It is likely that these shiny metals will continue to maintain their glow in the future.

2. Hyperinflation - The folly of our deficit spending and expanding fiat money supplies make this economic disaster a legitimate concern for any thinking man or woman. Once again, gold & silver have historically helped its owners to weather such times when the inherent worthlessness of a paper money supply unconnected to gold or silver becomes evident to the entire society. Inflation numbering in the thousands of percents per year can easily result, devouring the buying power of any paper or paper linked securities.

I have not mentioned the ammo side in the last two economic situations, because its value is distinctly inferior to precious metals in these particular cases. During the above inflationary periods basic necessities like food, clothing, shelter etc., are available, with only occasional spotty supply interruptions. The main problem isn't that food doesn't exist on the supermarket shelf, it's just that the prices have increased sharply. Stored gold and silver is easily converted to negotiable currency and will keep pace with either inflation or hyperinflation, maintaining or even possibly increasing commodity buying power. On the other hand, the extensive use of ammo in these situations where basic law and order is still present will only get you shot by the authorities or imprisoned. In addition, gold and silver coins or bars can be easily stored, transported, and sold. Physical supplies, not as much.

3. SHTF and / or TEOTWAWKI - In the case of the end of the world as we know it, precious metals can quickly lose their luster. If millions are starving, lacking basic medical supplies, and law and order has broken down completely, shiny metals will only get you laughed at or more likely killed. Imagine trying to bargain for food or water during the height of the Katrina disaster, with mobs of desperate looters roaming the streets, with only a few gold or silver coins! Starving masses want bread and clean water, not useless pocket change! In addition, for those who believe that a return to such a primitive existence will be permanent, precious metals will likely never be of any use as well.

However, in the course of human history there have been many natural disasters, wars, plagues, economic collapses, but we have always recovered. A return to even a limited law and order society will likely see the return of the gold and silver coins to favor. Why? Because carrying around bales of hay all day long so you can barter them to purchase chickens from a guy who's been touring with clucking fowl is a ROYAL PAIN IN THE ASS! That's why mankind reports the use of gold and silver coins in our earliest records.

I believe we must go back to the old west for some needed guidance and perspective in this precious metals worth question during a SHTF recovery period. A few hundred years ago when trappers traded with the Native Americans in the wilderness, they traded useful items like knives, guns, ammo, food, clothing, liquor etc., for the beaver skins they desired. After all, what would an Indian in the middle of the wilderness have wanted with shiny gold or silver coins? No, it wasn’t until the trader returned to “civilization” that he encountered trading posts willing to exchange silver and gold for beaver skins or other goods. A true SHTF or TEOTWAWKI situation is essentially identical to this old wilderness trading situation. Silver and gold only have value when you have established enough law and order and reestablished enough economic sophistication, that trading stations can be maintained and made profitable without being burned and raided on a regular basis.

No one knows for sure what the future has in store for us. I think a true survival prepper will use whatever resources he has now to provide for some level of protection for all three of the above challenges.

Disclosure Note: I put my money where my mouth is. I have some of all of the above mentioned survival prep metals and commodities.

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles.

Rick

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