Investing is often a study of inconsistencies and contradictions. If it weren’t, the markets would be a simple game and there would no back and forth between buyers and sellers, greed and fear and technical analysts, fundamentalists and momentum players. Our experience with silver since the end of last year illustrates this [but] we [still] think it makes sense to get exposure to the metal. [Let us explain.] Words: 820

So says Dr. Stephen Leeb (www.leeb.com) in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted (sub-titles and bold emphases) below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

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Leeb goes on to say, in part:

In particular, [silver] shows the contradictions between two time-tested stratagems:

In our experience, the longer one has been in the markets—or long enough to understand how hard it is to consistently make money—the more one tends to err on the side of the latter stratagem versus the former…

Our Long-Term Thesis for Silver

We’re content with the long-term investment thesis for the white metal:

•  currently roughly 1.5 ounces of silver is consumed for every ounce that is mined. The twin characteristics of being both a precious and an industrial metal  means that silver, unlike most commodities, has greater attraction than most
• the ratio between silver and gold has reached historical lows under 40, meaning it takes less than 40 ounces of silver to equal one ounce of gold. To get back to recent historical average levels of around 60, either gold has to fall (unlikely, given the fiscal and monetary situation in the world’s three most important currencies) or silver has to rise…There is no assurance that the ratio must revert; looking back several centuries, including when the American currency was first constructed under Alexander Hamilton, the actual historical norm when gold was used as money is actually in the mid- to high teens. Note, too, that at the previous high for silver back in January 1980, at which point silver fetched over $54 per ounce when adjusted for inflation etc., the ratio was 17.4—interestingly close to Hamilton’s original calculation.

Silver Investment Options

The only real competition against SLV is a smaller fund from ETF Securities, the ETFS Physical Silver Shares Trust (SIVR). Newer and smaller than SLV by a significant margin, SIVR has roughly $700 million in assets, compared to over $14 billion in SLV, and like SLV, stores its silver in vaults under London’s streets. This smaller fund is decently liquid, trading an average of 325,000 shares per day compared to 19 million in SLV, although this lower liquidity results in wider trading spreads. While SIVR carries an expense ratio of only 0.3% versus 0.5% for SLV and the returns for the two funds are almost identical, both would suit our purpose…The more adventuresome among you who are not put off by SIVR’s greater volatility and want to pay less in expense fees can easily swap one for the other. In either case, we suggest keeping a close eye on the position…

Potential Risks in Silver

Silver, in spite of its recent trajectory, could go higher still. This is not to say there is no risk in a renewed silver trade…While silver definitely rises faster than gold in a precious-metals bull market (as evidenced by recent events), it also falls faster when things turn around. From the 1980 ratio low, note that merely a bit more than a decade later, in February 1991, the same ratio was 101.8 and silver traded for $3.50 per ounce. Since then, the ratio has been in a more-or-less continuous downtrend, and it is clearly within the imagination that it is heading back to the mid-teens. After all, it is the ratio at which these two metals traded for centuries prior to the arrival of fiat, or paper, currencies…

Conclusion

Any new silver position—and we would advocate a physical-silver ETF instead of an equity- or futures -focused one in order to track the metal most closely—should be a small portion of your speculative budget and not a core holding. Nonetheless, with a decently tight stop-loss price and an understanding that any new position in silver must be watched closely, we think it makes sense to get exposure to the metal…

*http://www.leeb.com/content/silver%E2%80%99s-surge-party-isn%E2%80%99t-over-yet

Related Articles:

1. The Dollar is Toast! The Future is Silver

Psychologists tell us that there are five stages of grief over loss of whatever kind, usually death, or breaking up with a loved one, which are: denial, anger, bargaining, depression, acceptance. I’ve applied these to the loss of the dollar, as I see most people today are still stuck in denial, and here’s how to deal with that. Words: 1100

2. Silver is Still in the “Run” Phase  – With a “Dead-Cat Bounce” to Follow

The silver index is still in the “Run” phase of the “Bump-and-Run Reversal Top” pattern which will be followed by a “Dead-Cat Bounce” decline that will drive prices gradually lower. [How much lower? Read on!] Words: 990

3. Situation is Ultra-bullish for Gold & Silver Bullion and Stocks! What are You Waiting For?

The technical situation is ultra-bullish for both gold and gold stocks. Sentiment indicators…continue to show [that] the dollar is poised for a serious decline and the MACD on the gold chart is giving one of the most powerful buy signals in the history of the bull market. The GDX should reach $75 a share by year-end and gold should push to new highs in the $2000 area by January of 2012 [while silver] could possibly be the best investment opportunity available to investors for many years to come! [Let me explain and back up my comments with an array of charts.] Words: 781

A look at the chart for SLV from September 2007 to  August 2008 (11 months) and from November 2010 to October 2011 (11 months) is remarkably similar – almost identical in fact. Therefore, if silver continues to trace out a similar path to what transpired in 2008, what are the possible implications for stocks, bonds, currencies, commodities, and precious metals? Take a look at the following 19 charts for some possible outcomes. Words: 731

So says Chris Ciovacco (www.ciovaccocapital.com)  in an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Ciovacco goes on to say:

You don’t need to know anything about technical analysis to conclude the two charts below of the silver ETF (SLV) look similar in many ways. The first chart is from August 2008 and the second from 2011 (compare points A through H).

How can these charts help us with stocks, commodities, and precious metals? Silver tends to be in greater demand when (a) the economy is expected to grow, and (b) when inflation expectations are high…When silver is weak it is logical to question (a) the expectations for future economic growth, and (b) if investors are concerned about future inflation. If inflation is not a concern, then deflation fears are most likely increasing.

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The charts below show asset class performance from August 29, 2008 through November 21, 2008, allowing us to answer the question, “What happened next in the 2008 deflationary period?”

The key for the charts below: (SPY) S&P 500, (EEM) emerging markets, (FXA) Australian dollar, (UUP) U.S. Dollar Index, (DIA) Dow, (DVY) dividend stocks, (TLT) Treasuries, (SH) short S&P 500, (GDX) gold stocks, (GLD) gold, (SLV) silver, (DBC) commodities, (DBA) agriculture, (EWG) Germany, (PFF) preferred stocks, (XLU) utilities, (XLP) consumer staples, (XLY) consumer descretionary, and (JJC) copper. Symbols and descriptions are shown in the upper-left corner of each chart below.

What happened next in 2008?

If the silver ETF can fill the gap…between 32.54 and 34.51, it increases the odds of bullish outcomes for stocks and commodities. The longer SLV can hold above 32.54 the better for the bulls. If SLV fails to clear 32.54, the odds increase of an August 2008 scenario occurring again, similar to the outcomes shown in the charts above. An intraday move in SLV below 27.41, and more importantly, a weekly close below 27.41, increases the odds the deflationary trio of shorts (SH), the dollar (UUP), and bonds (TLT) will perform well.

Conclusion

As of this writing, we continue to give the bearish/deflationary case the benefit of the doubt, understanding strong and gut-wrenching countertrend rallies are part of any bear market. Our portfolios continue to contain a mix of cash, shorts (SH), bonds (TLT), and the dollar (UUP). The deflationary/bearish case will take a hit if the S&P 500 trades between 1,250 and 1,260 for more than three or four days.

*http://www.safehaven.com/article/22924/silvers-signals-lean-bearish-for-stocks-and-commodities

Now that Q4 is underway, investors are scrambling to find the right asset class for this rocky environment. Last quarter wreaked havoc on a number of investments and portfolios alike, as the global economy seems to be on a downward spiral. Given the current environment, various investors have flocked to their favorite safe havens to wait out the storm. Gold is perhaps the most popular safe haven in troubled markets, though its actual use as a metal is relatively low. As such, there has been much speculation over whether or not the metal is overvalued, scaring a number investors out of gold and into another precious metal, silver. Words: 3422

So says Jared Cummans (www.CommodityHQ.com)  in an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

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Cummans goes on to convey the following:

So says George Maniere (investingadvicebygeorge.blogspot.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([  ]), abridged (…) and reformatted below  for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. 

Maniere goes on to say, in part:

I recommend that you move away from GLD and SLV and move instead into the physical funds such as the silver Sprott fund (PSLV) and the gold Sprott fund (PHYS). These funds are not true ETFs. They are closed ended funds which means you are not buying shares, but rather units. (The knock on the Sprott funds is that they carry a hefty premium, but that is only the case if you are going to take possession of the gold or silver.) The physical gold and silver is audited every year and you know that you will not wake up one morning to find that the gold and silver “leased” to GLD and SLV are now not worth the digital bytes they are printed on…

So says Eric Dutram (www.CommodityHQ.com) in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([  ]), abridged (…) and reformatted below  for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.  Dutram goes on to say:

Physical Properties and Uses of Silver

Silver is a very malleable and ductile metal, prized not only for its hardness but for its brilliant white shine. Furthermore, the metal has the highest electrical conductivity and the highest thermal conductivity of all the metals. This combination ensures that silver finds its way into a multitude of uses ranging from jewelry and coins to medicine and electrical wiring.

While the photographic segment of silver demand may be waning, silver’s use in photovoltaic cells in solar panels are becoming extremely important to the silver industry. This is especially true since the world is beginning to rapidly shift toward alternative fuel sources and silver remains a relatively cheap and quality metal in the photovoltaic process. This comes at a great time for the solar industry since the photographic uses are beginning to decline quickly thanks to the advent and now widespread use of digital photographic methods. As digital photographs take off in emerging markets, demand for silver is likely to be limited. However, given the multitude of other uses for silver in the technological and medical fields it remains to be seen if this will impact the price or if things will even out for the industry.

Silver Supply and Demand

Currently, just 6% of silver is used for investment while the vast majority (near 40%) goes to industrial uses, 33% to jewelry, and the rest to photographic uses. This breakdown shows that unlike gold, silver has a wide number of uses and that large purchases by investors, or more widespread use of ETFs, will likely have a minimal impact on the marketplace and the overall supply and demand picture.

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Demand for silver has soared over the last several decades as emerging markets continue to grow and require more silver for electrical, medical and ornamental purposes. The Andean region of South America, which includes Chile, Bolivia and Peru, is the most active silver producing region in the world, accounting for close to one-third of global supplies in recent years. The three nations also make up close to 40% of known reserves ensuring that these countries dominate the discussion of silver prices. Because of this concentration of production, supply disruptions in the region have the potential to move prices sharply. Mine strikes, natural disasters, or spikes in geopolitical tensions in the region often send global silver prices higher in the short-term.

Below is a table highlighting some of the biggest producing countries as well as their known reserves of the precious metal (all data in metric tons):

Below is a list of the world’s top 10 silver producing companies in 2009. While many of these companies have high levels of output, it is important to remember that many of them do not exclusively focus on silver and thus may not be the best “pure play” on silver prices. With that being said, we have put an asterisk next to the companies that have been identified as “primary silver producers.” (All figures are in millions of ounces).

Although silver is by far the cheapest of the precious metals on a per ounce basis, steps are always being made to replace the metal with cheaper counterparts. In the film industry in particular, strides are being made to reduce silver usage across the board. Film with reduced silver content, silverless black-and-white film, and xerography (a photocopying method) substitute for silver that has traditionally been used in black-and-white as well as color printing applications are currently the most popular applications. In the medical space, surgical pins and plates may be made with tantalum and titanium in place of silver, although the cost effectiveness of this process may become questionable if titanium and tantalum prices rise. Another major silver dependent industry that has seen huge inroads in recent years has been in the “silverware” segment where stainless steel may be substituted for silver flatware. Germanium can also be added to this compound in order to make the flatware tarnish resistant. Lastly, aluminum and rhodium are being used to replace silver that was traditionally used in mirrors and other reflecting surfaces, achieving great cost savings in the process.

Price Drivers

As a global commodity, the price of silver is impacted by a number of factors, and is often subject to significant price swings in a relatively short period of time. The major price drivers of silver include:

Investing in Silver

Silver has appeal as an investable asset for several reasons. First, the metal has been a store of value for thousands of years and it is widely recognized the world over. The metal also has the potential to act as an inflation hedge, appreciating in value when prices broadly rise. Furthermore, unlike the rest of the precious metals group, silver is widely used both in the investment world and in the industrial one, suggesting that it may be a more balanced, but volatile, play than gold, platinum or palladium.

Physical Silver

Options for investing in physical silver are numerous to say the least. Due to the product’s relatively low price, wide number of uses and resistance to corrosion, silver coins, “rounds” and bars are very popular among many investors. Several countries mint coins, the following is a list of the most popular issuers:

In addition to these coins, investors have the option to buy bars in various denominations ranging from one ounce up to 100oz. bars and beyond. Investors also have the option to buy old U.S. coins which have high levels of silver…

Silver Futures

Silver futures are traded on the Chicago Mercantile Exchange under the product symbol SI. The contracts are quotes in U.S. cents per troy ounce [see reference to article on exactly what a troy ounce is here (2)] and each contract represents 5,000 troy ounces. Trading terminates on the third last business day of the delivery month and trading is conducted for delivery during the current calendar month; the next two calendar months; any January, March, May, and September falling within a 23-month period; and any July and December falling within a 60-month period beginning with the current month. Delivery may take place on any business day beginning on the first business day of the delivery month or any subsequent business day of the delivery month, but not later than the last business day of the current delivery month. Trading terminates on the third-to-last business day of the delivery month. Trading at settlement is allowed in the active contract months of May, May, July, September and December. Silver futures are subject to NYMEX position limits.

Silver Miners

Investors can also obtain exposure to silver by purchasing stocks [and warrants - see here (3) for specific details] of companies that are engaged in extracting and selling the metal. Like most companies, the profitability of silver miners depends on the prevailing market price for the products they sell. As such, mining companies tend to realize higher profits when natural resource prices are elevated – especially if significant portions of the cost structure are fixed in nature. Mining stocks tend to trade as a leveraged play on the underlying resource, meaning that the movements in price are often more significant than changes in the related commodity over the short term.

Many of the largest mining companies are engaged in the extraction of a variety of resources, including various precious and base metals. There are, however, a number of “pure play” mining companies and firms whose primary focus is silver:

• Silver Wheaton Corp
• Fresnillo PLC
• Pan American Silver Corp.

Silver ETFs

There are multiple ETFs offering exposure to silver as well, including funds that invest in futures contracts, the physical metal, and funds that invest in stocks of mining companies. Additionally, investors have exposure to the short side of silver via the ProShares UltraShort Silver Fund. For exposure to the physical metal, two choices exist:

• iShares Silver Trust (SLV) [read this article (4) for comments]
• ETF Securities Physical Silver Shares (SIVR)

If an investor is looking for futures exposure the following two ETNs are quality choices:

• PowerShares DB Silver Fund
• UBS E-TRACS CMCI Silver TR ETN

Lastly, for investors seeking leveraged exposure to the white metal, the ProShares Ultra Silver Fund offers 2x exposure to the price of silver.

As mentioned above, the Andean nations of South America are among the largest producers of silver. While the economies of these countries have become increasingly diversified in recent years, there is still a link between prices of silver and economic strength. As such, the following country-specific and region-specific ETFs may also be impacted by the price of silver:

• iShares MSCI Peru Index Fund
• iShares MSCI Mexico Index Fund
• Global X FTSE Andean 40 ETF

*http://commodityhq.com/2011/ultimate-guide-to-silver-investing/

Titles and Links to Articles Referenced Above:

1. Number of Canadian and American Silver Bullion Coins Exploding   http://www.munknee.com/2011/07/number-of-canadian-and-american-silver-bullion-coins-exploding/ 
2. What’s the Difference Between 1 Gold Karat, 1 Diamond Carat and 1 Troy Ounce?   http://www.munknee.com/2011/03/whats-the-difference-between-1-gold-karat-1-diamond-carat-and-1-troy-ounce/
3. The “Secret” World of Gold & Silver Company Warrants    http://www.munknee.com/2011/05/the-secret-world-of-gold-silver-company-warrants
4. All Gold and Silver ETFs are NOT Created Equal! Here’s the Best   http://www.munknee.com/2011/05/all-gold-and-silver-etfs-are-not-created-equal-heres-the-best/

Other Related Articles:

1. Don’t Delay: Get Your Fair Share of Silver Today! Here’s Why 
2. Sprott: Shocking Shenanigans in Paper vs. Physical Silver Market   http://www.munknee.com/2011/07/sprott-shocking-shenanigans-in-paper-vs-physical-silver-market/
3. Think You Know All About Silver? Take This Quiz and Find Out  http://www.munknee.com/2011/06/think-you-know-all-about-silver-take-this-quiz-and-find-out/
4. How to “Play” a Parabolic Move in Silver  http://www.munknee.com/2011/04/how-to-play-a-parabolic-move-in-silver/
5. Silver is Now Even More Precious Than Gold! Do You Own Any?  http://www.munknee.com/2011/03/silver-is-now-rarer-than-gold-do-you-own-any/
6. It Is Time To Embrace the New Refrain “Got Silver?”  http://www.munknee.com/2011/02/the-coming-silver-supernova/
7. Silver Is About As Close As You Can Get To A Sure Bet! Here’s Why  http://www.munknee.com/2011/01/silver-is-about-as-close-as-you-can-get-to-a-sure-bet-heres-why/
8. Panic Before the Herd and Win-Win with Silver!   http://www.munknee.com/2011/01/panic-before-the-herd-and-win-win-with-silver/
9. World’s Silver Production By Country – And Much More!  http://www.munknee.com/2010/12/worlds-silver-production-by-country-and-much-more/
10. Why You Should Own Some Silver – As Well As Gold  http://www.munknee.com/2010/11/why-you-should-own-some-silver-as-well-as-gold/
11. Why Silver at $398.52 is a Realistic Parabolic Peak Price   http://www.munknee.com/2011/07/with-gold-at-10000-silver-could-reach-714/

Editor’s Note:

• The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
• Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

Silver

The Surprising Truth About the Volatility of Gold and Silver Mining Stocks

The periodic volatility that afflicts gold and silver every year [is based on] two emotions – fear and greed. Financial consultants appeal to clients’ greed to deceive their clients into believing that overvalued stock markets…are really undervalued…[They appeal to their] fear… to keep them out of volatile but profitable asset classes such as gold and silver by selling them on the erroneous principles of beta and by convincing them that increased volatility means increased risk. [As such, they] are able to convince clients to engage in behavior that is a winning proposition for their companies but a losing proposition for their clients.

Global Investment Myths Exposed

1. The Strategy of Diversification

Diversification is nothing but a sales strategy designed by commercial investment firms to arm legions of clueless, incompetent financial consultants with a strategy that helps them pry hundreds of millions of dollars of fees from the checkbooks of wealthy clients. I’ll prove that diversification is nothing more than a sales scam and not an intelligent investment strategy with some cold hard facts at the end of this article.

The belief that volatility is directly correlated with risk seems, on the surface level, like a logical conclusion to draw from volatile assets. If assets rise and fall within several standard deviations of the norm, then massive speculation must be occurring within these asset classes and investors must not be investing in such asset classes based upon fundamental values.

Right? Not necessarily. With gold, and silver in particular, most investors do not consider another possibility behind the volatility that affects these two precious metals – banker manipulation and illegal banker fraud. If one understood that banker manipulation was the largest singular factor responsible for the volatility that afflicts gold and silver every year, then the perception of gold and silver as not only solid investments but as the only acceptable forms of money would gain serious momentum versus its perception among the masses as barbarous volatile relics to be avoided.

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In any event, once the investment industry knew that their propaganda campaign of equating volatility with risk had successfully injected this belief into the psyche of investors worldwide, bankers merely began introducing periodic steep bouts of volatility into gold and silver prices as their weapon to convince investors not to purchase precious metals, and instead, to purchase much riskier stocks that traded on the major global stock market indexes.

The fact is that the first necessary step one must take on the road to building wealth is to shed oneself of all the investment beliefs one has learned in school and from the commercial investment industry…

The Gap Between Reality and Perception

While the gap between reality and perception about precious metal markets has closed significantly, a large gap still exists in regard to gold and silver mining stocks due to the decades of misinformation deliberately spread by bankers all over the world…It is my strong belief that Central Bankers that are so preoccupied with trying to suppress the price of gold and silver would not ignore the opportunity to illegally intervene and suppress the price of precious metal mining stocks as well. For example, Central Banks have enlisted the aid of corrupt commercial banks to invent gold and silver derivative products and therefore create massive paper supplies of gold and silver at the same time physical supplies are becoming increasingly scarce. [See here (1) for an article by Sprott on the subject.]

In the chart below we can clearly see the recent underperformance of [ the 16 large-cap] gold and silver mining stock [constituents of the  Philadelphia Gold & Silver Index (XAU)] that has led the financial media to inundate the public with declarations that mining stocks, as an asset class, are dead weight and should be avoided at all costs.

However, if you remove the emotion of “fear” from this conclusion and inject the explanation of deliberate banker price suppression schemes executed against mining stocks you might just conclude that the “best in class” mining stocks are grossly undervalued and a great buy this summer season [see here (2), here (3), here (4), here (5), here (6), here (7) and here (8) for other articles on the subject] whether or not the bottom has been put in for the summer, versus the commercial investment industry conclusion that they are dead weight.

[As noted above, the XAU was at] the same level…in mid-June as it was in mid-September of 2010 [yet] despite its flat performance silver had risen 74% higher than its mid-September 2010 $20.44 an ounce price and gold had risen nearly 20% higher than its mid-September 2010 $1,270 an ounce price.

To illustrate that investing in volatile mining stocks need not subject an investor to an emotional roller coaster ride, note the several points [in the chart above] in which I point out that mining stocks were undervalued and in which I point out that they were likely to be hit by the bankers to the downside again…

In conclusion, I hope to impress upon you the following. Bankers deliberately manipulate and introduce volatility into gold and silver mining stocks specifically to:

You can also see from the chart below that the volatility of the mining stocks necessitates the use of an active management style - the antithesis of widely accepted and adopted diversification strategies - to optimally benefit from being invested in this asset class. From mid-June 2007 until the end of the first quarter 2011, if one had invested in the HUI Gold Bugs Index or the XAU [read this article (9) for the different bias of each] and had elected to ride out every scary bout of volatility in the past four years, one still would have been rewarded with cumulative returns of 73.18% and +59.71%, respectively, as compared to returns of 13.53%, -10.90% and -22.70% for the S&P 500, the ASX200 and the FTSE100, respectively… [So much for volatility! Indeed, without knowing ] the facts, one might have believed that gold and silver mining stocks had massively underperformed, instead of massively outperformed, the major global stock market indexes in recent years.

Furthermore, incorporate a keen understanding of banker manipulation schemes and the understanding of when to enter and exit gold and silver assets and when it is necessary to ride out volatile periods without panic exiting, and one can easily add a great deal of “extra” performance to even the stellar returns of the HUI and XAU indexes. [For example, the recommendations in my subscription Crisis Investment Opportunities (CIO) newsletter shows above] returned a cumulative +200.96% return (in a tax-deferred account) versus the +59.71 and +73.18% return of the XAU index and the HUI gold miners index, respectively. [For even greater returns than that of the CIO go here (10) to read about the major returns made by long-term gold and silver company warrants over the years.]

Conclusion

If you trust financial consultants with your family’s financial future then continue holding fiat currencies and heeding their propaganda. However, if you lack confidence that the pound, yen, euro and the U.S. dollar will fail to hold their purchasing power over the next decade - a feat that they have failed to accomplish since they were conceived of by Central Bankers - then it’s far beyond the time when you should have started investing in physical gold, physical silver, and best-in-class gold and silver mining stocks [and their associated long-term warrants where available].

I admit that commercial investment industry employees have an amazing capacity to cry wolf for years on end and still maintain the trust of their clients. However, armed with the knowledge of this article, it’s time we all stopped falling victim to their misinformation campaigns.

*http://seekingalpha.com/article/277967-the-surprising-truth-about-the-volatility-of-gold-and-silver-mining-stocks

Titles and Links to Articles Referenced Above:

1. Sprott: Shocking Shenanigans in Paper vs. Physical Silver Market   http://www.munknee.com/2011/07/sprott-shocking-shenanigans-in-paper-vs-physical-silver-market/
2. It’s Not Time to Buy the Gold Miners – Yet   http://www.munknee.com/2011/06/its-not-time-to-buy-the-gold-miners-yet/
3. Negative Sentiment Suggests Buying Gold & Silver Stocks NOW  http://www.munknee.com/2011/06/negative-sentiment-suggests-buying-gold-silver-stocks-now/
4.  NOW is the Best Time to Buy Gold Stocks! Here’s Why http://www.munknee.com/2011/06/now-is-the-best-time-to-buy-gold-stocks-heres-why/
5. Gold Mining Stocks Are CHEAP Compared to Price of Gold  http://www.munknee.com/2011/06/gold-mining-stocks-are-cheap-compared-to-price-of-gold/
6. July Breach of Gold’s 150-Day MA Would Suggest 22% Rise by Year End   http://www.munknee.com/2011/07/july-breach-of-golds-150-day-ma-would-suggest-22-rise-by-year-end/
7. Gold’s Recent Price Action Suggests Ultimate Top of $5,000/ozt.  http://www.munknee.com/2011/06/golds-recent-price-action-suggests-ultimate-top-of-5000ozt/
8.  Gold to Repeat?  http://www.munknee.com/2011/07/gold-to-repeat/
9. Which Index is the Best to Use: the HUI, XAU or the GDX?   http://www.munknee.com/2011/06/which-index-is-the-best-to-use-the-hui-xau-or-the-gdx/
10. Gold & Silver Warrants Index (GSWI) Update  http://www.munknee.com/2011/06/gold-silver-warrants-index-gswi-update/

Editor’s Note:

• The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
• Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

Gold

So says Brian L. Wilson  in an article* which Lorimer Wilson, editor of www.munKNEE.com, has further edited ([  ]), abridged (…) and reformatted below  for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Wilson goes on to say:

A: Gold

Fund: SPDR Gold Trust (GLD)

Gold has been the primary go-to commodity for inflation hedging for years now. As the primary store of wealth throughout history, its recent appeal as a safe haven against currency debasement has driven the price up significantly in addition to its increasing demand. Despite the commodities selloff which has crushed silver and oil spot prices, gold has been more resilient. Looking at its price history, this makes sense as gold has had steady appreciation for years. If a bigger correction ever did come, gold investors may have more time to exit their positions.

With a recent turnaround in the value of the U.S. dollar, whether gold still remains an attractive asset at the… 1500$/oz. [see this article (1) for the correct designation of ozt. not oz.]  level is largely up to speculation rather than any easily understandble economics. [While] some will argue that gold has reached the bubble stage – and the widespread popularity of the yellow metal does add to this argument – [gold is, nevertheless,]… the most popular hedge against impending inflation.

[The graph below shows the MACD and the RSI for gold over the past year

The MACD Trend for Gold

MACD measures how the 12 and 26 day exponential moving averages behave relative to each other. [For a more detailed description of this indicator and others in the trend category read  this article (2) entitled "Yes, You Can Time the Market – Use These Trend Indicators."] Positive MACD will indicate upward price acceleration for instance.

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In the case of GLD, one can see that there is accelerating downward pressure in the gold market. The 12 day EMA (exponential moving average) is dropping faster than the 26 day can keep up, signaling that:

The selling [in gold] is going to stay and possibly accelerate in the near future. The declining 12 day EMA is a strong bearish signal, but this kind of downward pressure isn’t sustainable for very long.

The RSI Momentum for Gold

The RSI measures momentum through an equation which factors in gains and losses made in 14 periods (days in this case). In layman’s terms, it describes what the market is doing. High is buy, low is sell.  [For a more detailed description of this indicator and others in the momentum category read  this article (3) entitled "Ride the Market Waves With These 6 Momentum Indicators."]

One can see that the gold market became overbought at the end of April, before dropping to a more even territory in just a week.

Right now gold is neither overbought nor oversold, so RSI suggests sideways trading for now.

The Volatility Indicator for Gold

GLD’s chart [above], with some key moving averages and bollinger bands [For a more detailed description of this volatility indicator read  this article (4) entitled "Here’s How to Time the Market!"] added in provides another view which suggests that:

Gold will remain somewhat immune to the volatility of the commodity markets in the near future...

While the 10 day moving average is in a steady decline (approaching the 50 day average and crossing the 20 day), the drop is not steep enough to signal any drastic changes in the foreseeable future and paints:

 A neutral, albeit slightly bearish, picture for the short term price action of gold.

A steadily increasing 200 day moving average signals that gold is retaining its overall strength as an asset class for the long term. In addition, the 50 day line is oscillating well above it. This is a somewhat bullish signal for the long term, as the slow momentum is still upwards using moving average analysis.

Overall, weighing all technical data:

Gold is showing immunity to drastic price changes and will likely trade steadily downwards in the near future but should reverse as selling dissipates…

As such, this provides a good opportunity for gold bulls to add to their position in the coming weeks, assuming that the trend can reverse in June.

B: Silver

Fund: iShares Silver Trust (SLV)

The latest hot commodity to hit the market, Silver, has only recently enjoyed the enthusiastic demand that has propelled gold’s price for the last few years. Becoming unstable in late April, it suffered a massive crash– not too dissimilar to its cliff-drop in the 1980′s. Now that the correction is slowing down, can technical indicators point to a reversal, or at least a price floor?

Fundamentally, silver has become popular for many of the same reasons as gold [but]  this doesn’t explain why silver performed so spectacularly February, March, and April especially. Simply put, bullish sentiment on the white metal has been through the roof all year. With outlandish estimates by some analysts saying that the metal will be worth $200 [ per ozt.] in a few months, [read this article (5) that has used fractal analysis to forecast that silver is going to $52.80 to $56 dollars before the end of June and this article (6) using Elliott Wave analysis sees the price of silver will reach $52.58 within the same period]  it’s easy to see why there were so many buyers. Gold had enjoyed a huge run in the last few years, and it was argued that even though silver had gotten significantly more expensive in 2010, it was still very cheap. While this is true on a gold to silver price ratio [read this article (7) for both a historical perspective on the silver:gold ratio and what it might mean for the future price of silver should gold go parabolic to $3,000, $5,000 or even $10,000 per troy ounce in price in the years ahead] the… [major] rise in its price made a short term correction necessary. Fundamentally, after its nasty correction thus far in May:

Silver is close to where it “should” be and may be within buying range for aggressive traders.

The MACD Trend for Silver

The MACD indicator [as shown above] demonstrates just how drastic silver’s decline was. It’s visible from the big chunk of negative MACD one can see for the entire month of May thus far. The 13 day moving average fell right through the $26, dropping like a rock for two weeks straight. MACD suggests that the acceleration in the price drop of silver may have hit a peak already, but is not over yet. Based on this stochastic:

Silver will remain bearish until MACD returns to positive territory and begins a positive acceleration.

The RSI Momentum for Silver

RSI paints a less drastic picture, but remains bearish in looks. The silver hysteria kept the ETF’s RSI in overbought territory for most of April. In hindsight, this crash was inevitable! The kind of buying momentum propelling silver in April was nothing short of mass hysteria.

The picture will stay bearish until RSI heads into buying territory again, as there has been a complete 180 [degree turn] in the silver market which may take some time to dissipate.

SLV’s chart [above] contains some possible clues as to where (and maybe when) silver may settle. While the 10 day moving average has blown right through the 50-day moving average, the 200-day is slowly drifting upwards. The current selling pressure is as unsustainable as its parabolic rise in April.

If silver does drop all the way to the 200-day average (where it should find support from technical traders), SLV will bottom around $30 a share – assuming a smooth deceleration of the drop. This seems more likely than any other alternative.

[The "Bump and Run Pattern" of technical analysis in this article (8) recently suggested that $33 would be the low for silver while this article (9) by Martin Armstrong suggests that silver might go as low as $23.50 to $26.50 with a yearly support level of $28.]

Crude Oil

Fund: US Oil Fund (USO)

Oil has had an interesting year thus far. Mubarak, and later Gaddafi were big drivers in oil’s massive run earlier this year as well as fear of uranium issues. Bearish sentiment on the dollar has also had some impact on oil, as those looking to diversify their inflation hedges chose oil investments alongside the precious metals…

Energy enjoyed the spotlight for the months of February and March. The political uprisings in the Middle East have caused a newfound fear of oil supply shocks, and the Fukushima incident has caused immense amounts of skepticism of the viability of nuclear power. Due to all this and more, oil has increased tremendously in price. Overall, it has been stated many times this year that the oil supply and demand equilibrium never justified the incredibly high $112/bbl that we saw just a few weeks ago. With projections of increasing oil consumption, especially by the BRIC nations, is the current price hovering around $100/bbl going to stay? The short term remains hard to forecast with the volatility of the broader commodities market. This is where technical analysis can be useful.

The MACD Trend for Crude Oil

MACD analysis on USO shows a very strong acceleration in the fund’s downtrend. The initial acceleration enjoyed by oil bulls in March (from geopolitical unrest) seems to have finally corrected with the same level of volatility. This indicator points to:

Short and medium term declines for oil until it reverts to zero, similar to silver. The picture, at least for now, is bearish but the decline is unsustainable at this speed.

The RSI Momentum for Crude Oil

RSI indicates that:

Oil is in selling territory, and may remain so for a while as it looks like it may prod even deeper.

USO’s chart [above] shows just how dramatic the selling in oil assets has been. Based upon modern history, USO has always shown strong support at its 200-day moving average. We will see in the coming days whether this will hold true, as it will be a hard test based on the current momentum. The moving averages are all in decline, with the 10-day blowing through the 50-day in an abnormally steep decline.

If the 200-day moving average holds, the current drop will bottom out close to $37.50. If the price manages to fall through this floor it will likely cause technical traders to consider shorts in the position. With little else to base USO trades on for the time being, psychologically important price levels are crucial to determine direction.

Technicals look bearish on oil for the time being, but watch for a bottom. The selling simply can’t last forever.

Conclusion

Overall, Gold, Silver and Crude Oil show no signs of reversal yet. Those looking to establish commodity positions may want to sit on the sidelines a bit longer.

Links to Articles Referenced Above

1. What’s the Difference Between 1 Gold Karat, 1 Diamond Carat and 1 Troy Ounce? http://www.munknee.com/2011/03/whats-the-difference-between-1-gold-karat-1-diamond-carat-and-1-troy-ounce/
2. Yes, You Can Time the Market – Use These Trend Indicators http://www.munknee.com/2011/05/timing-the-market-using-trend-indicators/ 
3. Ride the Market Waves With These 6 Momentum Indicators http://www.munknee.com/2011/05/ride-the-market-waves-with-these-6-momentum-indicators/
4. Here’s How to Time the Market! http://www.munknee.com/2011/05/time-the-market-by-using-these-market-strength-and-volatility-indicators/
5. Goldrunner: “$52 to $56 Silver by Mid-year” Update http://www.munknee.com/2011/04/goldrunner-%e2%80%9c52-to-56-silver-by-mid-year%e2%80%9d-update/
6. Elliott Wave Analyst Suggests Silver to See $52.58 by Mid -June http://www.munknee.com/2011/05/elliott-wave-analyst-suggests-silver-to-see-52-58-by-mid-june/
7. Why Silver at $398.52 is a Realistic Parabolic Peak Price http://www.munknee.com/2011/05/silver/
8. “Three Peaks” Pattern Suggests Gold to Decline 17% into June! http://www.munknee.com/2011/05/%e2%80%9cthree-peaks%e2%80%9d-pattern-suggests-gold-to-decline-17-into-june/
9.  Martin Armstrong Asks: Will Silver Crash in 2011?  http://www.munknee.com/2011/05/martin-armstrong-asks-will-silver-crash-in-2011/

*http://seekingalpha.com/article/270525-what-s-in-store-for-gold-silver-and-oil?source=email_macro_view

Editor’s Note:

1. The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
2. Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

Technicals

Whole oceans of ink have been spilled detailing the good and not-so-good points of the closed-end fund CEF (Central Fund of Canada) and the twin ETF’s GLD (SPDR Gold Trust) and SLV (iShares Silver Trust) funds. My goal here is to distill the salient points down to the fewest words possible to help make your due diligence task somewhat less…well…tasking. [Let's go!] Words: 650

So says an article* posted by the editor of survivalus.blogspot.com which Lorimer Wilson, editor of munKNEE.com,  has further edited ([  ]), abridged (…) and reformatted below  for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. The article goes on to say:

1. To Audit or Not to Audit:

• CEF’s bullion reserves are audited by an independent firm, Ernst & Young LLP., twice per year.
• GLD and SLV on the other hand do not permit any such transparency. Echoing the former sentiments of disgraced trader Bernie Madoff, investors are just supposed to trust the “word” of the funds that the bullion is there.

2. Insurance:

• CEF’s gold and silver is fully insured by Lloyd’s of London.
• GLD and SLV fully acknowledge that their “reserves” are not insured against any happenstance that may prevent them from repaying their investors in gold or silver. They even reserve the right to compensate investors in US paper dollars if necessary.

3. Counter Party Risk :

• CEF’s reserves are fully allocated and segregated with the name of each investor attached to particular gold and silver bullion.
• GLD and SLV’s “alleged” bullion is unallocated and unreserved. There’s no telling just how many competitors you’d have to fight off to get any of your precious metals with these funds.

4. Conflicts of Interest:

• CEF has been in the close-ended fund business backed by gold and silver since 1961. Their directors are well respected in the precious metals market.
• The custodians of GLD and SLV are HSBC and JP Morgan respectively.

Where do I start with these two banks (above)? Well, let’s just say if there was a Who’s Who publication of precious metal naked shorters and market manipulators these firms would be prominently featured. How can you trust a custodian of your long interest metal fund who is accused of making fortunes by manipulating the metal prices downward? Anyone thinking of the fox guarding the chicken coop metaphor here?

5. Premiums Above Metal Price:

•  CEF, unlike it’s ETF step brothers, often sells at a premium to the price of gold and silver. If you’re a day trader that means you can buy and sell shares of the ETF’s more cheaply than you can with CEF [which gives a slight nod to]GLD and SLV. However, for my part, I’m in a long term holding strategy so a small premium is the least of my concerns.

Conclusion

Frankly, I see the [above] premium as just an outward manifestation of the inherent preference by sensible investors for a fund that has actual, real gold and silver backing it up rather than glittering ethereal promises of metals.

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As you might suspect, I own CEF and wouldn’t touch GLD and SLV with your…well…hand!

Other Articles of Interest on the Above Subject:

• Why GLD Is My Choice Over Every Other Stock and ETF:
• Gold Bullion ETFs: A Primer