Thursday, 9 December 2010

When to buy silver again?

After hitting a high of US$30.70 /oz, silver has been retreating. It last traded at US$28.36 /oz.

If we look at a very simple 1 year chart for silver, its price has been supported by the 200d MA until August when it bounced off and has been approximating the 14d MA since. If we believe the strong uptrend could continue, we might want to buy in a small position when silver is nearer US$27.00 /oz.  That would also be about a 10% pull back from the high of US$30.70 /oz or a 5% pullback from current levels.

UOB Silver Savings Account is now selling silver at S$37.87 /oz.  A 5% pull back from current levels would bring it to S$36.00 /oz (not accounting for exchange rate fluctuations).

A correction could allow up to 20% in pull back from the peak. That would approximate US$24.00 /oz. Personally, I see stronger support at that level and because I am already vested in the metal, I am in no hurry to add to my position now. US$24.00/oz or approximately S$32.00 /oz would probably see me buying more.

Tuesday, 7 December 2010

How is my investment in silver doing?

Whenever people ask me when I would sell my investments, my answer very often is that I would sell at a price I would not buy at.  Of course, that makes sense at an intuitive level but how do we execute it?

Personally, my investment in silver has appreciated by about 60% in less than 9 months. I think that silver still has plenty of potential to move higher but this should be over a longer time frame of years. You could read my other blog posts on the subject of silver and how high I think it could go.

However, silver's price has gone almost parabolic in recent weeks and this is unlikely to be sustainable. I am expecting a pull back to support. When will it happen? Your guess is as good as mine but if it happens, that is when I would buy more.

Although I didn't have to sell any of my investment in silver, I sold some yesterday because I happened to be at UOB which is rare since I do almost everything on the internet these days. So, if the anticipated retreat in price happens, I would have extra money to buy more silver.

I took photos of the transaction slips which show my buy price in March (S$24.26/oz) and sell price ($38.86/oz) yesterday:

Silver is going higher in time but it will most likely climb a wall of worries and I would buy on pull back. I believe in having more silver in my investment portfolio.

Friday, 19 November 2010

Silver in 2011.

To buy an ounce of gold from UOB will now cost S$1,975 while to buy an ounce of silver will now cost S$35.49. Gold fell from yesterday while silver rose. This supports the idea that silver is more likely to appreciate at a faster pace than gold, all else remaining equal.

In a presentation Wednesday to the Silver Institute in New York City, GFMS forecast an average silver price of US$19.94 this year, a gain of 36% year-on-year.

Despite what currently appears to be a substantial year-end correction in the price, GFMS Chairman Philip Klapwijk said he expects the silver price to trade over US$30 per ounce in 2011, "with the annual average likely to easily surpass the current all-time high of US$20.98/oz."

"However, we are doubtful such elevated levels will be sustained throughout the year, as a result, we seen an annual average either side of US$28 as more likely," GFMS said. "We could also add that a retreat from the over US$30 would not necessarily imply an end to the multi-year rally in 2011."

Read article here.

Related post:
Buy more silver on weakness.

Saturday, 13 November 2010

Gold and silver: Correction time.

On 6 Oct, Jim Rogers suggested that "Gold could correct for a few months [but] the bull market in gold is not over - far from it".  So, wait for a correction to buy more gold.

A correction could be anywhere from 10% to 20% decline in price.  Anything more than 20% would suggest the start of a bear market. Gold has retreated to US$ 1,365.40 /oz in the last session after going to an all time high of US$ 1,412.75 /oz.

Just as a rough gauge, 10% correction would see gold at US$ 1,271.48 /oz while a 20% correction would see gold at US$ 1,129.60 /oz. On 6 Oct, I said that "In case of a correction, I see immediate support at US$1,250 an ounce, followed by US$1,200 an ounce."  I would buy more then.

What about silver? For me, it is quite easy as silver generally tracks the movement of gold although imperfectly. When I buy more gold, I would buy more silver.

Related post:
Buying gold? Wait for a correction.

Tuesday, 9 November 2010

Gold and silver at record highs.

On 7 February 10, I mentioned that my research showed that silver was very undervalued and was trading at the higher end of the Gold:Silver ratio since 1980. At that time, silver was US$15.15/oz while gold was US$ 1,052.20/oz. Anyone who bought some of these precious metals then would be deep in the money now.

To buy a 1oz Gold Bullion coin now from UOB would cost S$2,029.00.  To buy 1 oz of silver in UOB's Silver Savings Account would now cost S$36.44!

Gold rose to a record high for the fourth straight session on Tuesday, as inflation worries and euro zone sovereign debt woes continue to lure investors to precious metals. Spot silver hit a new 30-year high just below US$28, and palladium extended gains to a new nine-year peak of US$712.75. Spot gold rose to an all-time high of US$1,412.75 an ounce, before easing to US$1,410.45. 
Read article here.

Related post:
Buy more silver on weakness.

Silver hits a new high!


Monday, 8 November 2010

Gold, silver and oil.

The bounce in the U.S. dollar did little to crimp demand for commodities. Gold, a traditional hedge against inflation, powered to a record above $1.398 an ounce.

Oil prices held above $87 a barrel near a two-year high and silver hit a new 30-year peak.

Read article here.

Gold may also remain in favour with investors, as the threat of inflation in faster-growing economies, coupled with a big surge in global money supply, could encourage buying in the precious metal.

Read article here

Friday, 5 November 2010

Gold set another record high.

Gold for December delivery settled at a record high of US$1,383.10 an ounce, up US$45.50, or 3.4 percent.

Many analysts expect the price to continue to climb, perhaps hitting US$1,450 an ounce by year end. "Next year, who knows? If this continues like this we can march on higher," MF Global senior commodities analyst Edward Meir said.

In other metals contracts for December, silver jumped US$1.607 to settle at US$26.043 an ounce, copper gained 12.7 cents, or to settle at US$3.9120 a pound and palladium rose $32.05 to $674.75 an ounce.

Read article published Thursday, November 4, 2010 at 1:33 PM by SANDY SHORE, AP Business Writer, here.

Sunday, 24 October 2010

Buy silver.

Silver is a real asset, with real value, just like gold, as its supply is finite.  Fiat currencies, on the other hand, do not have any intrinsic value and more could be produced at will.  So, we expect silver to at least keep pace with inflation and in an inflationary environment, an investment in silver should protect our wealth from being eroded.

From MoneyWeek, 24 April 09:

Indeed, well over half of the annual silver supply is now used by industry (in sectors ranging from medicine to aerospace), compared to around 11% for gold. In precious metal upswings, it tends to outperform gold: the "same drivers as gold driving a smaller market ensures that", says Franklin Sanders of The Money Changer.......

.....Once sentiment turns, however, silver can tumble rapidly...

From Mineweb, 5 Nov 09:

The longer term trend channel for silver began on March 21st, 2003 at a low of $4.35 and has upper resistance of $51 and lower support at $12. Such volatility has always been very high because, with the silver market only about 2% that of gold, even a small amount of money flowing into silver has a huge impact.

The medium term trend channel began with a lengthy March through August 2007 consolidation base of $13 - $14 and currently has upper resistance at $32 and lower support at $13.

The Gold:Silver ratio has ranged from 14.9-to-1 in January 15, 1980 at the time of the record high gold and silver prices to 99.8-to-1 on February 22, 1991 when the price of silver was particularly depressed.

The current short term trend channel began in November 2008 at $8.79 and currently has upper resistance at $22 and lower support at $15.50.

Do I have a target price for silver? Silver reached its peak in value on 15 January 1980 when 1 oz of gold could purchase only 14.9 oz of silver.  Based on today's price of gold at US$1,324.40 an ounce, it would mean US$88.89 an ounce for silver!  Mind boggling, isn't it? That would be 4 times higher than the current price!  Of course, I am not suggesting that silver would hit that price anytime soon, if it does go that high at all. I am merely putting things in perspective. Remember where the price was in February?

There is a very easy way to gain exposure to silver in Singapore through a Silver Savings Account with UOB. Just like gold, I am buying silver with an aim to protect my wealth with the increased likelihood of higher inflation in the coming years.  It will not be for trading.

Gold as an insurance against inflation

Why buy gold? For me, gold is just another form of insurance against inflation. Real assets such as crude oil, Asian real estate and commodities are also used to hedge against inflation.

Gold will hit US$2.5k eventually and, probably, go higher in the years to come. The current inflation adjusted value of gold compared to the high achieved in 1980 should be about US$2.4k now. We are about halfway there. If we believe that inflation is going to be a big issue in the coming years, it's a no brainer that gold is on a long term uptrend.

However, I'm not overzealous about gold because I am not living in the USA or HK, making US$ or HK$. I am living in Singapore and making S$ which will appreciate against US$ and HK$ in time. This makes gold investment less compelling for me.

Real value of gold.

To look at gold as a hedge against inflation, we have to look at the real value of gold over time. For example, if someone bought gold at the peak in 1980, he would still have lost money after taking inflation into consideration today.

If someone had bought gold in 1914, he would have gained about 200% in the course of the last century after taking inflation into consideration. It is not an amazing return.

Everything must be put in context. I am a buyer of gold today but I will be a seller of gold one day, I'm quite sure.

With US government printing money and with almost 0% interest rate, inflation is likely to become a serious problem in future. As mentioned by Jim Rogers many times over, gold will probably see US$2,000 an ounce again.

The following chart is taken from an article on inflation adjusted value of gold by Barry Ritholtz - October 7th, 2009, 11:30AM: