Careful about technical formations like gaps and islands in regards to fx, it's a 24-hour market and there are barely any true gaps occurring except perhaps for post G-7 meetings where they've discussed joint intervention over Sunday brunch. Also the cme market closes at one of the slowest times of the day for forex activity.
Gold & Silver
- Thread starter Cutten
- Start date
A few months ago on thestreet.com i wrote an article about why I like Silver. All of the arguments still hold so I will repeat the article here. The only thing I would add is that the gold/silver ratio is still at an all-time low:
(Written on 7/25/03):
Silver has made a sharp move higher in the last week and it hit a 52-week high yesterday. The question is not why is this happening but, rather, what took so long?
In a post a few months ago I mentioned the bullish case for silver. All of the points still stand and I will reiterate them here:
a. Silver hasn't risen as much as gold the past few years in part because it is an industrial metal just as much as its a precious metal. People are concerned the rise in digital photography will slow down the need for silver. However, digital cameras are still too expensive for most of the world (photography is quickly becoming a favorite pasttime in China) and the glossy paper used to print up digital photographs contains silver. In addition, silver is used for battery production and other industrial purposes.
b. Demand is outpacing production at a rate of about 100 million ounces a year. 1.5 billion ounces of silver have been depleted in the past dozen years. The U.S. government has run out of silver for the first time in 50 years and last year started buying on the open market.
c. Above-ground supply is approximately 400 million ounces. Warren Buffett owns about 130 million ounces of that. Note that George Soros owns 26% of SIL and Bill Gates own 10% of PAAS. Bill Fleckenstein is on the board of PAAS.
Silver is approximately $5/oz right now, up from the low $4s when I first started recommending people look at silver stocks.
In terms of price targets on these stocks, it's very difficult to say. They are not valued on the basis of earnings but more on their capacity to produce quantities of silver and the relationship between those quantities and the price of silver.
My guess on silver is that $10-$15/oz is not unreasonable over the next 2 years. Perhaps even much higher. Unlike gold, silver is used in every aspect of the industrial process. The world cannot live without silver. But at the going rate of demand (despite a global recession) the market is going to basically be cornered within three years by a guy a lot more sophisticated then the Hunt brothers -- Warren Buffett. And the two guys controlling two of largest mines -- Bill Gates and George Soros -- are not so shabby either.
For PAAS and SIL I would take a look at charts of NEM to make a price target. NEM has almost tripled over the past few years from low to high. My guess is that's conservative for PAAS and SIL.
(Written on 7/25/03):
Silver has made a sharp move higher in the last week and it hit a 52-week high yesterday. The question is not why is this happening but, rather, what took so long?
In a post a few months ago I mentioned the bullish case for silver. All of the points still stand and I will reiterate them here:
a. Silver hasn't risen as much as gold the past few years in part because it is an industrial metal just as much as its a precious metal. People are concerned the rise in digital photography will slow down the need for silver. However, digital cameras are still too expensive for most of the world (photography is quickly becoming a favorite pasttime in China) and the glossy paper used to print up digital photographs contains silver. In addition, silver is used for battery production and other industrial purposes.
b. Demand is outpacing production at a rate of about 100 million ounces a year. 1.5 billion ounces of silver have been depleted in the past dozen years. The U.S. government has run out of silver for the first time in 50 years and last year started buying on the open market.
c. Above-ground supply is approximately 400 million ounces. Warren Buffett owns about 130 million ounces of that. Note that George Soros owns 26% of SIL and Bill Gates own 10% of PAAS. Bill Fleckenstein is on the board of PAAS.
Silver is approximately $5/oz right now, up from the low $4s when I first started recommending people look at silver stocks.
In terms of price targets on these stocks, it's very difficult to say. They are not valued on the basis of earnings but more on their capacity to produce quantities of silver and the relationship between those quantities and the price of silver.
My guess on silver is that $10-$15/oz is not unreasonable over the next 2 years. Perhaps even much higher. Unlike gold, silver is used in every aspect of the industrial process. The world cannot live without silver. But at the going rate of demand (despite a global recession) the market is going to basically be cornered within three years by a guy a lot more sophisticated then the Hunt brothers -- Warren Buffett. And the two guys controlling two of largest mines -- Bill Gates and George Soros -- are not so shabby either.
For PAAS and SIL I would take a look at charts of NEM to make a price target. NEM has almost tripled over the past few years from low to high. My guess is that's conservative for PAAS and SIL.
Vishnu,
I agree with your general thesis, but why play it with those large (rel) companies? Aren't there a few small/micro cap silver stocks around that would be better alternatives? As you've seen with the gold stocks, while the large caps have gone up 90-150% the small/micro caps have easily climbed 300-800%. Wouldn't the same hold for silver stocks?
ps the gold:silver ratio is not at an all time low as you state. In fact its much closer to a high! It was much, much lower in 98/99:
http://stockcharts.com/def/servlet/SC.web?c=$GOLD:$SILVER,uu[m,a]wallnyay[pf][vc60][i]&pref=G
I agree with your general thesis, but why play it with those large (rel) companies? Aren't there a few small/micro cap silver stocks around that would be better alternatives? As you've seen with the gold stocks, while the large caps have gone up 90-150% the small/micro caps have easily climbed 300-800%. Wouldn't the same hold for silver stocks?
ps the gold:silver ratio is not at an all time low as you state. In fact its much closer to a high! It was much, much lower in 98/99:
http://stockcharts.com/def/servlet/SC.web?c=$GOLD:$SILVER,uu[m,a]wallnyay[pf][vc60][i]&pref=G
You are correct about the ratio. My mistake, and it was the ratio being at a low that I initially used as justification for making the trade.
As far as the small cap vs large cap you are probably right and the microcaps would be better. However, I was encouraged by the "safety in numbers" in sharing the trade with Gates and Soros. Although who the hell knows if that truly makes it more safe or not. What silver microcaps are you looking at?
- James
I think a basket of these will beat the pants off the PAAS and SILs:
http://cbs.marketwatch.com/tools/quotes/basic.asp?symb=silver&siteid=mktw&test=1&view=basic&x=9&y=15
There are also quite a few in Canada: ASM, BGS, ECU, EPZ, FSR, HDA, LSM, MAG and MCA (all Cdn symbols go to www.tse.com)
http://cbs.marketwatch.com/tools/quotes/basic.asp?symb=silver&siteid=mktw&test=1&view=basic&x=9&y=15
There are also quite a few in Canada: ASM, BGS, ECU, EPZ, FSR, HDA, LSM, MAG and MCA (all Cdn symbols go to www.tse.com)