Thursday, September 29, 2011

Silver Washout - Correction Or Crash?

Here is the latest from Duncan Cameron of The Anglo Far-East Company. Duncan describes the latest knock-down in silver prices in the context of the gold-silver ratio and the long term trend for silver.

The Anglo Far-East Company deal in the physical market at the high end. They have their fingers on the pulse of the physical market

Silver Washout - Correction Or Crash?

"Looking at events over the last week, it's somewhat humorous to see the way those who knock silver want to dump on its precipitous drop, but when you observe the violent ratio spike of 2008 in which we had a sustained period of Richter-scale-like spikes typical of a credit event earthquake, its plain to see that silver investors over gold are better off in terms of bang for their buck. The primary trend of silver in recent years, even amidst an ongoing global credit episode, bears testimony to silver's outperformance when looking at the gold to silver ratio.

 
(source: Duncan Cameron)

What we are witnessing today is the equivalent of an obese weightwatcher on an austerity program missing their morning tea donuts and complaining they haven't lost their kilos fast enough. Silver investors are fickle and so often think in terms of double baggers in extra quick time.

 
Source - Greg McCoach

The great issue for many when it comes to silver is the mental physiology of a volatile metal that, still at inexpensive valuation, is quickly dispensed with when emotion rules reason. When this period of earthquakes is done with and global leaders find some marvel to forestall the issues until our next crisis, it's not hard to imagine the same events all over again when gold is $5000 and silver $166 or a ratio of 30. Then, amidst the next crisis, it spikes wildly back to 40. Out goes the family silver, and on come the silver knockers bemoaning how they are disillusioned with it as an investment.

On a supplier level, try calling a local dealer to see if they are reflecting the drop in their prices. Lo and behold, I find their premiums have gone up on silver coins and 1 kilo bars, leaving a buyer no better off. We have also seen this before in 2008 when the paper market met reality in the physical market. Sellers wouldn't part with metal at a depressed spike-like event, so why should you? On the contrary, being an Anglo client puts you in a unique position of being able to source silver at the highest end of the Nile verses some type of local dealer dried out stream way down in a valley.

Gold in New Zealand dollars: $2073.18 per oz
Previous all time high: $2284.16 per oz (19 Aug, 2011)

Silver in New Zealand dollars: $38.46 per oz
Previous all time high: $59.19
per oz (30 Apr, 2011)
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YOUnique Gold and Silver

Buy small, affordable physical gold and silver or start a savings program towards
physical gold or silver grams for as little as US$25 per month.

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The Anglo-Far East Company
AFE is the gold bullion custodial provider of choice for the sophisticated investor,
families, and institutions that require the highest level of discretion, competence,
safety, and service.
Your reference: an-001
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