JPMorgan and HSBC now being sued over silver manipulation Thursday, October 28, 2010 Adve rtisement Text Size: From Bloomberg: HSBC Holdings Plc and JPMorgan Chase & Co. were accused in an investor's lawsuit of placing "spoof" trading orders to manipulate silver futures and options prices in violation of U.S. antitrust law. The investor, Peter Laskaris, alleges that starting in March 2008, the banks colluded to suppress silver futures so that call options, or the right to buy, would decline, and put options for the right to sell would increase, according to the complaint filed yesterday in federal court in Manhattan. The collusion was also intended to maintain prices at levels at which some options would expire as worthless, Laskaris claims. The banks placed so-called spoof trading orders, or the "submission of a large order which is not executed but influences prices and is then withdrawn before it reasonably can be executed," according to the complaint. The Commodity Futures Trading Commission began probing allegations of price manipulation in the silver futures market in September 2008. At a hearing in Washington on Oct. 27, CFTC Commissioner Bart Chilton said there have been "fraudulent efforts to persuade and deviously control" silver prices and that violators should be prosecuted. Joseph Evangelisti, a spokesman for New York-based JPMorgan, declined to comment. Juanita Gutierrez, a spokeswoman for London-based HSBC, also declined to comment. Separate, Similar Complaint A separate, similar complaint filed yesterday on behalf of investor Brian Beatty, and naming the same banks as defendants, claims a whistleblower contacted the CFTC last year and reported the banks' conspiracy to suppress prices of silver futures to profit from "enormous" short positions in silver futures. The banks reduced their collusive trading and their holdings in the futures market after a government investigation of silver futures manipulation began in March, according to the complaint filed by Laskaris, which seeks class-action status. Since the banks cut back on their silver futures trading, prices have increased about 50 percent, the suit alleges. "These price changes directly result, at least in one substantial part, from defendants' reduction in their concentration and other reductions of their unlawful activities in the silver markets since the government investigation," according to the Laskaris complaint. Comex Trades Laskaris described himself as a New York resident who traded in silver futures and claims damages based on the collusion. The trades at issue in the complaint were made on the Commodity Exchange Inc. division of the New York Mercantile Exchange, Laskaris said in the complaint. Beatty, a resident of Connecticut, makes the same claim. Christopher Lovell, a lawyer representing Laskaris, didn't immediately return a call seeking comment after business hours yesterday. Chilton spoke at an Oct. 27 hearing in Washington on regulations to implement the Dodd-Frank financial overhaul, which became law in July and gave the commission a year to establish rules governing the $615 trillion over-the-counter derivatives market. Silver futures for December delivery fell 42.6 cents, or 1.8 percent, to close at $23.404 an ounce on the Comex in New York yesterday . The price has gained 39 percent this year. The cases are Laskaris v. JPMorgan Chase & Co., 10-08157, and Beatty v. JPMorgan Chase, 10- 08146, U.S. District Court, Southern District of New York (Manhattan). To contact the reporters on this story: Joel Rosenblatt in San Francisco firstname.lastname@example.org; Bob Van Voris in New York at email@example.com. To contact the editor responsible for this story: David E. Rovella at firstname.lastname@example.org. For some time, silver has been known as the “poor man‟s gold.” Meaning, silver demand tends to increase when gold gets too “expensive.” The gold price has stubbornly stayed above $1,000 for over six months now and spent much of that time above $1,100. You‟d be lucky to pay less than $1,200 right now for a one-ounce coin (after premiums), an amount most workers can‟t pluck out of their back pocket. But Joe Sixpack just might grab a “twelve-pack” of silver. What would perhaps lend evidence to my theory is if gold sales were down in the face of these higher silver sales. The U.S. Mint reported a decline in gold bullion sales of 20.8% this past quarter vs. the same quarter in 2009. Further, other world mints have seen sharp declines in gold bullion coin sales as well: the Austrian Mint reported an 80% drop in sales for the first two months of the year and the Royal British Mint a 50% decline in gold coin production for the first quarter. What‟s even more dramatic is the difference in the dollar value of the sales. Gold Eagle sales in the U.S. dropped $10,263,500 from a year earlier – but silver sales increased by $61,855,290. So, not only did silver sales make up the drop in gold sales, they exceeded them by $51,591,790. Is the rush into “poor man‟s gold” underway? Why the answer to that question is significant is that a shift toward silver for this reason could signal we‟re inching closer to the greater masses getting involved in the precious metals arena. And that – for those of us who‟ve been invested for awhile now – would be music to the ears. Because when they start getting involved, the mania will be underway, and from that point forward, it‟s game on. I‟m not saying the mania is starting, and I actually think we could see another sell -off before things take off for good. Gold could dip to $1,000 and maybe even $950, with silver going to the $14 -$15 range. But as clues like these begin to build up, we‟ll know we‟re getting closer. (And any drop to those ranges would clearly be a major buying opportunity.) Everyone talks about gold, myself included, but a meaningful portion of one‟s precious metals portfolio should be devoted to silver. The market is tiny, making the price potentially explosive. Remember that in the „70s bull market gold advanced over 700%, but silver soared over 1,400%. Don‟t be a “poor man” by ignoring gold‟s shiny cousin. Irresponsible fiscal and monetary policies worldwide make currencies a bad investment and commodities a good one, says investment icon Jim Rogers. "All governments around the world are debasing their currencies," he says. "There may come a time when we all have to have all of our money in real assets." While Rogers owns gold himself, he notes that the precious metal has soared since the beginning of 2009 — to the tune of 26 percent. "Anything that goes up that far, that fast should consolidate and rest," he told CNBC. "I like to buy what's cheapest. Silver is cheaper than gold, on a historical basis; natural gas is cheaper than oil." With speculators rushing into oil and gold, now’s a good time for investors to stay on the sidelines, Rogers says. As for the currency market, Rogers anticipates the Chinese currency, known as the yuan or renminbi, will soar in coming years along with China’s economic strength. "I e xpect the renminbi to double, triple, quadruple over the next few decades," he said. "Just as the Japanese yen . . . went up 400 percent over the past few decades against the dollar, the renminbi will too." The short term trend for the currency is less certain. Chinese officials appear to be in conflict over whether to let the renminbi appreciate. The central bank appeared to recently signal that the currency would soon rise. But other officials said afterward that China won’t be bossed around by the United States. Due to increased demand from industry and investors, silver exports from China are expected to drop about 40% this year. And that's actually an improvement; customs data show exports plunged almost 60% through the first eight months. China exported about 3,500 metric tons of silver in 2009, but has exported only 970 tons through August of this year. What a lot of Westerners don't know is that China ended export "rebates" two years ago to stem the shipment of natural resources leaving the country. As a result of the regulation, silver exports decreased in 2009 but are nothing like what they're experiencing this year. In other words, the large drop in exports is a direct result of a huge increase in demand within China itself. According to one Chinese banker, the spike in demand is coming from all areas – jewelry, investment, and industrial. In his words, it's led to a "physical market shortage in the Far East." How important is this? China is the world's third largest producer of silver (after Peru and Mexico), so the amount of silver coming to the global marketplace this year will drop by more than 74 million ounces. This represents roughly 8.3% of total annual global supply from 2009. If worldwide demand continues at its current pace, where is the extra metal going to come from? This alone tells us the price of silver will move higher. The next item I sleuthed out was that the U.S. Mint is expected to release a new five-ounce silver bullion coin this year, the first ever. The coin will be three inches in diameter and have a composition of .999 fine silver. I've read the five-ounce bullion coins will be near-exact replicas of the America the Beautiful quarters. There will reportedly be five different designs, and the mint plans to produce 100,000 of each. I can't wait to see them. The coins will be classified as bullion, meaning they should be available to the same dealers already authorized by the mint. So our recommended dealers in BIG GOLD should have them (see our October issue for the list). This will likely create excitement in the silver market, especially when you consider its affordability. At $23 silver, the five-ounce bullion coin will cost $115, plus premium. One ounce of gold runs $1,340 as I write, while five ounces will cost you $6,700 plus commission. Perhaps most bullish is the fact that silver is vastly underpriced when compared to gold. Look at it this way: gold is currently priced 57% above its 1980 nominal high of $850; silver would have to more than double to reach its 1980 nominal high of $48.70. And that's excluding any inflation-adjusted calculation. Yes, silver's spike was partly a direct result of hoarding by the Hunt Brothers, but my question to the skeptics is this: what's keeping us from seeing similar stockpiling today? What if there are several Hunt Brothers out there? It's true that central banks don't buy and store physical silver, so one source of demand that's common for gold isn't present for silver. But let's keep things in perspective: demand for all forms of silver is rising, and we see no reason the trend won't continue. And with indicators like decreasing supply from China and increased attention from a new bullion coin, I say the big picture on the silver price is extremely bullish. This silver sleuth says, buy some silver on the next dip. There's lots of reasons you won't regret it. Crux Note: BIG GOLD is Casey’s go-to service for all things gold and silver, as well as select large- and medium-cap precious metals producers, and much more. But the price of this must-read advisory is about to increase. Click here to learn how you can get BIG GOLD for only $39/year before the price goes up... About Coins Years ago, I headed up the publishing division of a company (that will go unnamed) with a separate division selling coins. I was there when the coin business started, and while not involved, was impressed at its rapid growth in the heady days of the 1970s gold bull market. Then something happened. While the founder was a strong advocate for hard money and sincere in his intent to do the right thing by his customers, as the coin business grew, he increasingly recruited "professional" managers to run the firm – hired guns whose sole focus was boosting the bottom line and, by so doing, their bonuses. And the business hired more and more "professional" salespeople – the sort of folks who know how to squeeze a client good and hard. As the company's sales soared, fueled by hard-hitting marketing, the founder's good intentions began to weaken under the onrushing flood of cash that began to wash in. In time, the entire conversation at the coin division switched from "What’s good for the customer?" to "What coins can we sell with the biggest mark-up?" On those occasions when I was invited to comment on what was going on, I did what I could to argue against the corporate culture that had developed, but my impassioned and increasingly angry fights with the managers of the coin division couldn’t win out over the millions in profits being made. As much as I enjoyed my job, the situation became so degraded, I had no choice but to resign. Now, let me be clear. The company broke no laws and, in fact, did nothing that I suppose most businesses on to a good thing might not do... Marketing was generating lots of prospects, and the sales force was selling. The problem was that the product line had moved from selling highly liquid government-issued gold and silver bullion coins to selling illiquid "modern rarities," an oxymoron if there ever was one. Whether "proof" Mexican silver dollars, "treasure" coins, or privately minted commemorative coins, the one thing you could be sure of was that the mark-ups were huge. Which meant that, in the absence of an active collectors market – which, when it comes to "modern rarities," just doesn't exist, and never will – the coins were very unlikely to ever provide a reasonable return on investment, let alone be a good asset to preserve capital. Quite the opposite, they were almost certain losers. Buyer Beware In the ABC video, you'll hear a sound bite from a client of Goldline who spent $5,000 on "collectible" coins, saying that he wanted to buy bullion, but that the sales guy "kinda, sorta talked me into buying these other coins." Soon thereafter, the buyer decided to sell those coins and, when he did, he took a 42% loss. Which, he points out, was a big hit to his net worth. You can probably spot all the things wrong in that paragraph, but I'll do it anyway. First, the disgruntled former client says he was looking to buy bullion coins, but the sales guy switched him to a "collectible." Whose fault is it that he allowed himself to be swayed? Quoting Nancy Reagan, when dealing with a salesperson, often times the best thing to do is "just say no." Second, if taking a loss of about 42% on an investment of $5,000 really hurts his net worth – he shouldn't have been buying illiquid coins in the first place. Third, buying any "collectible," or pretty much any asset, at full retail and then turning right around and selling it, is invariably a sure-fire ticket to a quick loss. Finally, who is to say that the coin dealer that bought the coins off the client didn't lowball him? That, too, is part of generating a profit in the coin business. While I feel sorry for the former Goldline client, he really can't blame anyone but himself for that loss. He didn't do his homework or stick to his guns when the salesman tried to move him up to a higher-margin product line. As for the company, I don't know them, but I do know that they spend a lot on marketing and celebrity endorsements. It doesn't take a genius to figure out that money has to be recouped from somewhere – specifically, the clients. Which is why I strongly suspect that, yes, the company's salesmen are especially aggressive. And that they try very hard to load their clients up with high-margin coins. But my concern is not with an uninformed buyer or a hard-selling merchant – the world has plenty of both… always has, always will. Rather, my concern is only for you, dear reader. And so I will recap some lessons from this article, and based on my own brush with the business. First, if you're going to become a coin collector, don’t think you can stumble into it and enjoy any measure of success. Do your homework – then do some more – before actually laying out your hard-earned cash. Fortunately, there are a lot of useful resources out there for you to rely on… pricing guides, auction results, and numismatic groups, to name just a few. More important, however, is that if you are not going to be a collector, then stay away from anything but U.S. or Canada-minted bullion coins, or bullion bars issued by the widely acknowledged mints such as Johnson Matthey. Crux Note: Each day in Casey's Daily Dispatch, David Galland brings you an informative and entertaining overview of the markets, the economy, and politics... all from his unique and often contrarian perspective. Casey's Daily Dispatch is absolutely FREE and comes right to your inbox, five times a week. To sign up, click here. More from Casey Research: The Forgotten Metal Analysis | Commodity T echnical Analysis | Written by optionsXpress | T ue Oct 05 10 12:01 ET Fundamentals With all the focus seemingly on Gold these days, many traders seems to have forgotten that Silver has been one of the largest gainers this year. While not a pure defensive play like Gold, Silver can be seen as a hybrid metal. It has value both as a precious metal and an industrial metal, which makes it more sensitive to economic conditions than Gold. If the global economy is truly on its way back to form, the upside potential for Silver could exceed other precious and industrial metals. Industrial growth in the BRIC nations, namely China and India, could result in an uptick in Silver demand. We are moving closer to the Christmas shopping season, which could fuel demand for electronics and, in turn, Silver. The US Dollar has been on the decline for the past several months, and a rebound in economic activity favors emerging and growth currencies over more established nations, further bolstering commodity demand. The price of Silver has moved straight up for over a month now, so some traders may begin to view the market as overbought. Technical Notes Turning to the chart, we see the December Silver contract moving higher, without any correction or significant consolidation since late August. This type of parabolic move is oftentimes followed by a sharp pullback in prices. In general, the longer a market moves without a correction or consolidation, the more dramatic the pullback tends to be. Some traders may look for a reversal pattern to form on the chart, especially if the run-up accelerates. Trading Ideas Silver fundamentals have improved and will continue to improve, barring a double-dip recession. The chart does show that prices may be overbought and due for a pullback. For these reasons, some traders may wish to consider entering into a bull call spread, for example, buying the Dec Silver 22.25 call (SIZ022.25C) and selling the 22.50 call (SIZ022.5C) below the current market at 0.085. The spread risks the initial cost of $425 for a potential profit of $825 if the price of the December Silver contract closes above 22.50 at expiration. optionsXpress Latest Analysis from this Author Breakout or Breakdown? (Thursday, 28 October 2010 10:28 ET) Oil Prices Fail Again to Take Out $85 Resistance (Wednesday, 20 October 2010 09:31 ET) Can't Keep a Good Bull Market Down (Friday, 15 October 2010 10:37 ET) Are Traders Embarking on a New Gold Rush? (Wednesday, 06 October 2010 09:41 ET) FOMC Statement Looks "Golden" to Traders (Thursday, 23 September 2010 09:23 ET) Gold Just Keeps Truckin' (Monday, 20 September 2010 10:22 ET) Gold Spike! (Friday, 17 September 2010 11:02 ET) Factory Produced Rally (Thursday, 02 September 2010 10:51 ET) Gold Tug-O-War (Tuesday, 31 August 2010 10:07 ET) Large Supplies, Slow Demand Sink Crude (Tuesday, 24 August 2010 10:33 ET) Silver, like other precious metals, may be used as an investment. For more than four thousand years, silver has been regarded as a form of money and store of value. However, since the end of the silver standard, silver has lost its role as legal tender in the Unit ed States. In 2009, the main demand res ulted  from industrial applications (40%), jewellery, bullion coins and exchange-traded funds. Contents [hide] 1 Sil ver pri ce 2 Fa ctors influencing the pri ce o 2.1 La rge tra ders or investors o 2.2 Indus trial, commercial and consumer demand o 2.3 Hedge agains t financial stress 3 Investment vehicles o 3.1 Ba rs o 3.2 Coi ns and rounds o 3.3 Exchange-traded funds o 3.4 Certi fi ca tes o 3.5 Accounts o 3.6 Deri va ti ves, CFDs and spread betting o 3.7 Mining companies 4 Ta xa tion 5 See also 6 References 7 External links  Silver price Like most commodities, the price of silver is driven by speculation and supply and demand. Compared to gold, the silver price is notoriously volatile. This is becaus e of lower market liquidity, and demand fluctuations between industrial and store of value uses. At times this can cause wide ranging valuations in  the market, creating volatility. Silver often tracks the gold price due to store of value demands, although the ratio can vary. The  gold/silver ratio is often analyzed by traders, investors and buyers. In 1792, the gold/silver ratio was  fixed by law in the United States at 1:15, which meant that one troy ounce of gold would buy 15 troy  ounces of silver; a ratio of 1:15.5 was enacted in France in 1803. The average gold/silver ratio during  the 20th cent ury, however, was 1:47. The lower the ratio/number, the more expensive silver is compared to gold. Convers ely the higher the ratio/number, the cheaper silver is compared to gold. 30 year history of market pr ices for silver.   Silver price (yearly cum. avg. ) Gold price (yearly cum . avg. ) Gold/silver Year US$/ozt US$/ozt ratio 1840 1.29 20 15.5 1900 0.64 20 31.9 1920 0.65 20 31.6 1940 0.34 33 97.3 1960 0.91 35 38.6 1970 1.63 35 22.0 1980 16.39 612 37.4 1990 4.06 383 94.3 2000 4.95 279 56.4 2005 7.31 444 60.8 2009 14.67 972 66.3 2010 (thru October 13) 24.38 1379 56.6 From September 2005 onwards, the price of silver has risen fairly steeply, being initially around $7 per troy ounce but reaching $14 per ozt. for the first time by late April 2006. The monthly average price of silver was $12.61 per troy ounce during April 2006, and the spot price was around $15.78 per troy ounce  on November 6, 2007. As of March 2008, it hovered around $20 per troy ounce. However, the pric e of silver plummeted 58% in October 2008, along with ot her metals and commodities, due to the effects of  the credit crunch.  Factors influencing the price  Large traders or investors The large spike in 1980 w as a result of the Hunt brothersfailure to corner the mar ket and Silver Thursday. The silver market is much smaller in value than the gold market. The London silver bullion market turns  over 18 times less money than gold. With physical demand estimated at only $15.2 billion per year, it is possible for a large trader or investor to influence the market. For ex ample: From 1973 the Hunt brothers began cornering the market in silver, helping to cause a spike in 1980 of $49.45 per troy ounce and a reduction of the gold/silver ratio down to 1:17.0 (gold also peaked in 1980, at  $850 per troy ounce). In the last nine mont hs of 1979, the brothers were estimated to be holding over  100 million troy ounces of silver and several large silver futures contracts. However, a combination of changed trading rules on the New Y ork Mercantile Exchange (NYME X) and the intervention of the Federal Reserve put an end to the game. In 1997, Warren Buffett purchas ed 130 million troy ounces (4,000 metric tons) of silver at approximat ely $4.50 per troy ounce (total value $585 million). On May 6, 2006, Buffett announced to shareholders that his company no longer held any silver. In April 2006, iShares launc hed a silver exchange-t raded fund, called the iShares Silver Trust (NYSE: SLV), which as of April 2008 held 180 million troy ounces of silver as reserves. In April 2007, Commitments of Traders Report showed that four or fewer traders held 90% of all short silver fut ures contracts totalling 245 million troy ounces, which is equivalent to 140 days of production. According to Ted Butler, one of these banks with large silver shorts, JPMorgan Chase, is also the custodian of the SLV silver E TF. Some silver analysis have pointed to a potential conflict of int erest, as close scrutiny of Comex documents reveals that E TF shares may be used to "cover" Comex physical metal deliveries. This led analysts to speculate that some stores of silver have multiple claims upon them. On 25 September 2008 the CFTC relented and probed the silver market after persistent complaints of  foul play. On September 1, 2010, Bloomberg reported that JPMorgan Chas e will be closing their  Proprietary Trading Desk.  Industrial, commercial and consumer demand The traditional use of silver in phot ographic development has been dropping since 2000 due to the growth  of digital photography. However, silver is also used in electrical appliances (silver is the highest known conductor of electricity), photovoltaics (one of the highest reflectors of light), clothing and medical uses (silver has antibacterial properties). Other new applications for silver include RFID tags, wood  preservatives, water purification and food hygiene. The Silver Institute have seen a noticeable increase in silver-bas ed biocide products coming onto the market, as they explain: Currently we’re seeing a surge of applications for silver-based biocides in all areas: industrial, commercial and cons umer. New products are being introduced almost daily. Established companies are incorporating silver based products in current lines - clothing, refrigerat ors, mobile phones, computers, washing machines, vacuum clearers, keyboards, countertops, furniture handles and more. The newest trend is the  use of nano-silver particles to deliver silver ions. The expansion of the middle classes in emerging economies aspiring to Western lifestyles and pro ducts  may also contribute to a long-term rise in industrial and jewellery usage.  Hedge against financial stress Silver, like all precious metals, may be used as a hedge against inflation, deflation or currency devaluation. As Joe Foster, port folio manager of the New Y ork-based Van Eck International Gold Fund, explained in September 2010: The currencies of all the major countries, including ours, are under severe pressure because of massive government deficits. The more money that is pumped into these economies – the printing of money  basically – then the less valuable the currencies become.  Investment vehicles  Bars A traditional way of investing in silver is by buying actual bullion bars. In some countries, like Switzerland and Liechtenstein, bullion bars can be bought or sold over the counter at major banks. Physical silver, such as bars or coins, may be stored in a home safe, a safe deposit box at a bank, or placed in allocated (also known as non-fungible) or unallocated (f ungible or pooled) storage wit h a bank or dealer. Silver is traded in the spot market with the code " XAG". When settled in US D, the code is " XAGUSD". Various sizes of silver bars: 1000 oz troy bars – These bars weigh about 68 pounds avoirdupois (31 kg) and vary about 10% as to weight, as bars range from 900 ozt to about 1,100 ozt (28 to 34 kg). These are COME X and LBMA good delivery bars. 100 ozt bars – These bars weigh 6.8 pounds (3.11 kg) and are among the most popular wit h retail investors. Popular brands are Engelhard and Johnson Matthey. Thos e brands cost a bit more, usually about 40 cents to 2.00 dollars per troy ounce above the spot price, but that price may vary with market conditions. Odd weight retail bars – These bars cost less and generally have a wider spread, due to the extra work it takes to calculate their value and the extra risk due to the lack of a good brand name. 1 kilogram bars (32.15 ozt) 10 ozt bars and 1 ozt bars (311 and 31.1 g)  Coins and rounds Amer ican Silver Eagle bullion coin. Buying silver coins is another popular method of physically holding silver. One example is the 99.99% pure Canadian Silver Maple Leaf. Coins may be mint ed as either fine silver or junk silver, the latter being older coins with a smaller percentage of silver. U.S. coins 1964 and older (half dollars, dimes, and quarters) are 25 grams per dollar of face value and 90% silver (22½ g silver per dollar). All 1965- 1970 and one half of the 1975-1976 Bicent ennial San Francisco proof an d mint set Kennedy half dollars are "clad" in a silver alloy and contain just under one half of the silver in the pre-1965 issues. Junk-silver coins are also available as sterling silver coins, which were officially minted until 1919 in the United Kingdom and Canada and 1945 in Australia. These coins are 92. 5% silver and are in the form of (in decreasing weight) Crowns, Half-crowns, Florins, Shillings, Sixpences, and threepence. The tiny threepence weighs 1.41 grams, and the Crowns are 28.27 grams (1.54 grams heavier than a US $1). Canada produced silver coins with 80% silver content from 1920 to 1967. Other hard money enthusiasts use .999 fine silver rounds as a store of value. A cross between bars and coins, silver rounds are produced by a huge array of mints, generally contain a troy ounce of silver in the shape of a coin, but have no status as legal tender. Rounds can be ordered wit h a custom design stamped on the faces or in assorted batches.  Exchange-traded funds Silver exchange-t raded funds represent a quick and easy way for an investor to gain expos ure to the silver price, without the inconvenience of storing phy sical bars. Silver ETFs include: Cent ral Fund of Canada (TS X: CEF.NV.A, NYSE: CEF), which has 45% of its reserves physically held in silver wit h the remainder invested in gold. iShares Silver Trust (NYSE: SLV), launched in April 2006 by iShares, which invests exclusively in physical silver. ETFS Physical Silver (LSE: PHAG), launched in April 2007 by E TF Securities, which is backed by allocated silver bullion. In July 2009, ETF Sec urities launched ETFS Silver Trust (NYSE: SIV R) in New York.  Certificates U.S. $5 Silver Certificate. A silver certificat e of ownership can be held by investors instead of storing the actual silver bullion. Silver certificates allow investors to buy and sell the security without the difficulties associated with the transfer of actual physical silver. The Perth Mint Certificate Program (PMCP ) is the only government-guaranteed silver-certific ate program in the world. The U.S. dollar has been issued as silver certificates in the past, each one represented one silver dollar payable to the bearer on demand. The not es were issued in denominations of $10, $5, and $1 and can no longer be redeemed for silver.  Accounts Most Swiss banks offer silver accounts where silver can be instantly bought or sold just like any foreign currency. Unlike physical silver, the customer does not own the actual metal but rather has a claim against the bank for a certain quantity of metal. Digital gold currency providers, such as GoldMoney, and internet bullion exchanges, such as BullionVault, offer silver as an alternative to gold.  Derivatives, CFDs and spread betting Derivatives, such as silver futures and options, currently trade on various exchanges around the world. In the U.S., silver futures are primarily traded on COME X(Commodity Exchange), which is a subsidiary of the New York Mercantile Exchange. In November 2006, the National Commodity and Derivatives  Exchange (NCDE X) in India int roduced 5 kg silver futures. Firms such as Cantor Index, CMC Markets, IG Index and City Index, all from the UK, provide contract for differenc e (CFD) or spread bets on the price of silver.  Mining companies These do not represent silver at all, but rather are shares in silver mining companies. Companies rarely mine silver alone, as normally silver is found within, or alongside, ore containing other met als, such as tin,lead, zinc or copper. Therefore shares are also a base metal investment, rather than solely a silver investment. As with all mining shares, there are many other factors to take into account when evaluating the share price, other than simply the commodity price. Instead of personally selecting individual companies, some investors prefer spreading their risk by investing in precious metal mining mutual funds.  Taxation See also: Taxation of precious metals In many tax regimes, silver does not hold the special position that is often afforded to gold. For example, in the European Union the trading of recognized gold coins and bullion products is VAT exempt, but no such allowance is given to silver. This makes investment in silver coins or bullion less attractive for the private investor, due to the extra premium on purchases represented by the irrecoverable VAT (charged at 17.5% in the United Kingdom and 19% for bars and 7% for bullion products with face value, e.g. US Silver Eagle and Maple Leaf, in Germany). Other taxes such as capital gains tax may apply for individuals depending on country of residence (tax status) and whether the asset is sold at increased value.  See also Diamonds as an investment Full-reserve banking Four crucial twists in the case for inflation-friendly, growth-friendly silver... CASH-in-the-BANK is the nearest thing to "risk-free" that the finance industry offers. But bank savings now mean "sure-fire loss" thanks to sub-zero real rates of interest. The longer that interest rates stay below inflation, the more people will be forced to take more risks to defend what money they've got – and one higher-risk choice is Buying Silver. It's slowly becoming ever-more popular, at least amongst that handful of savers and investors who see tomorrow's inflation in today's monetary policy. Here at BullionVault for instance, and over the last 12 months or so, we've had more than 250 customers ask when we'll offer silver alongside our gold -dealing and ownership service. No other single comment or query from our 16,500 users comes close. So now, our new silver market means you can trade physical bullion – at live Silver Prices – and store it securely at low cost in specialist, private vaults outside the banking sector. You can start with a free ounce of silver today, if you wish. You'll be free of credit-default or bank- counterparty risk, leaving you exposed solely to the Silver Price. Before you register though, just why might you want to buy, own and trade physical silver anyway? The case for gold is increasingly plain, as Société Générale strategist Dylan Grice notes in his much- quoted Popular Delusions this week. Sub-zero real rates of interest, plus huge and irreversible government deficits – funded by central banks printing cash – make this rare, internationally recognized and tightly supplied monetary asset as highly appealing as a store of wealth as it has ever been through 7,0 00 years of known history. Silver, on the other hand, was ousted by gold bullion as the world's monetary anchor in the mid -to- late 19th century. But it remained a medium of exchange well into the 20th century, and long after gold had vanished from sight too, buried in central-bank vaults to be represented above -ground by paper notes only. Because silver is more than 17 times as plentiful as gold in the earth's crust, its use as money – both in coin and as a measure of value – is far more common in the historical archives as well. Whereas today, it holds much the same basic appeal as gold, but with four crucial twists: #1. Gold/Silver Ratio Historically (meaning from the dawn of recorded time to around 1900), one ounce of gold typically bought 15 or 16 ounces of silver, and pretty much everywhere in the world too. Today, that ratio stands at 65 times in the wholesale Spot Goldand silver bullion markets. (It's very much worse again if you're trading small bars and coins, thanks to dealer mark-ups and margins.) Many analysts and investors now expect the ratio to fall back towards its long -term mean, if not quite reach it. Even the 20th century average would see silver doubling in value against gold – which itself, of course, plenty of people now see going higher against the Dollar, Euro and Pound Sterling anyway. #2. Consumption Whereas pretty much all the gold ever mined in history is still available – closely guarded but ready- at-hand as jewelry, bars and coins – silver is somewhat closer to commodities like crude oil, soybeans or orange, in that it often vanishes in its use. Consumption rarely affects gold, but silver's lower value means recycling and recovering it isn't always economical. And because it tends to be a by-product of other mining operations (mostly gold or copper), rather than dug up for its own sake, analysts don't see silver's primary supply as responsive as gold or base metals to changes in price. #3. Industrial Demand Unlike gold, silver is predominantly used by industry today. So rather than offering deflation protection (as gold most recently did after the collapse of Lehman Bros.), silver is strictly inflation- friendly, with a number of fast-growing uses in both developed and emerging economies making it look very growth-friendly, too. Excluding silver investing demand, London's VM Group analysts now forecast an additional 350 million ounces of annual silver demand by 2020 thanks to: RFID tags for stock control and ID cards are "taking over from bar codes"; Solar panels – forecast to grow by 20-40 times in 10 years; Wood preservatives to replace arsenic; Wound care & other medical use, food hygiene, and anti-odor textiles – because silver, a biocide, inhibits bacteria. All this growth might soon eat itself, of course, if industrial demand forces silver prices sharply higher. But VM's forecast compares with total industrial demand of 450 million ounces in 2008, according to the mining-backed Silver Institute. Meaning the case for silver doesn't rest solely on monetary chaos. #4. Volatility On average, and across the last 42 years, a 1% move in gold is matched by a 1.75% move in silver, both up and down. Anyone expecting strong gains in gold, in other words, should expect exaggerated gains in silver, but with greater risk. Just check the spike of January 1980 for proof. Gold prices tripled in the last 6 months of the preceding year, but Silver Prices rose 5.7 times over, peaking at $50 an ounce. The subsequent drop was just as severe, and much longer-lived. What makes silver prices more volatile than gold? As US oil tycoons the Hunt brothers found when they very nearly cornered the world's near-term silver supplies and forced that $50 peak 30 years ago, silver is a very much smaller market by value. The wholesale bullion market in London – heart of the world's gold and silver trading – turns over 18 times as much money in gold as it does in silver each day. Physical demand each year, though nearly 8 times larger than gold by weight, is estimated to be worth barely 11% of global gold demand at $15.2 billion. Moreover, within those annual figures, gold's use as a store-of-value (meaning investment bars and coins, plus jewelry) accounts for 87% of annual demand according to the GFMS consultancy. In the silver market, only 35% of annual off-take goes to storing wealth (investment, jewelry, silverware). That makes silver much more dependent on industrial demand, and explains why – very occasionally – it more closely tracks movements in the price of copper than gold. Still, investors aren't (or shouldn't be) looking for "diversification" when they add silver to their gold holdings. Not in the sense of diversification that your financial advisor would use, just before you remind how much you're losing in the bank and how much you stand to lose on bonds should inflation take hold. The average daily correlation between gold and silver, right back to March 1968, has been +0.62 (rolling one-month basis). It would be +1.0 if they moved precisely in lock-step, and –1.0 if they moved precisely opposite. Gold's correlation with US stocks over both the last 40 and 10 years , for comparison, is almost exactly zero.Gold's famous correlation with the Euro has been +0.51 since the start of 2000. Whereas, during the bull market of the last 10 years, the statistical link between gold and silver has risen to average +0.68, and it's stronger again at +0.77 for the last 5 years. Silver, in short, tends to follow gold very closely – more closely than pretty much any pair of assets you can name over the long term – but with bells on. Risk-free it ain't, but neither is cash-in-the- bank. The appeal of Buying Silver to profit from inflation looks set to gain ground. You can start with a free ounce of silver here. Adrian Ash, 25 Mar '10 Adrian As h runs the research desk at BullionVault, the world's No.1 gold ownership and trading service. Formerly head of editorial at London's top publisher of private- investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern and FT Deutschland; Italy's Il Sole 24 Ore, and many other respected finance publications. Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News. Prec ious metals remain the most undervalued of all the asset classes. Precious metals, and particularly silve r, remain the most undervalued of all the commodities. Silver is even more undervalued than gold and is undervalued when compared to other strategic commodities such as oil and uranium. Silver is currently trading at just below $14 per ounce. Gold Invest ments continue to believe that silver will surpass $20 per ounce in 2007, its non inflation adjusted high of $48.70 per ounce before 2012 and its inflation adjusted high of some $130 per ounce in the next 8 years. The fundamentals reasons for our very bullish outlook on silver is due to continuing and increasing global macroeconomic and geopolitical risks; silver‟s historic role as money and a store of value; the declining and very small supply of silver; significant industrial demand and most importantly signif icant and increasing invest ment demand. Silver price: global macroeconomic and geopolitical risks Property markets and equity markets in the western world are near or at all time record highs. There is increasing macroeconomic and geopolitical uncertainty in the form of the sharp slowdown in the US housing market, increasing trade friction between the US and one of their prime creditors China (the negative impact of the introduction of US trade tariffs on Chinese paper products and the US‟ WTO piracy claim may not have been fully realised by and priced into the financial media and the markets) and the continuing geopolitical tensions with Russia, Venezuela and in Iraq, Iran and the wider Middle East. These factors look set to at least curb returns in most property and equity markets. Indeed these and other significant risks such as record debt levels in the western world, the huge and unprecedented US trade, budget and current account deficits and the massive fiscal profligacy of the Bush administration are not subsiding. These factors have ramif ications for the predominant global reserve currency of recent times – the US dollar. The IMF, World Bank and OECD have warned that the global economy faces increasing 'downside risks' including rising oil prices, falling stock markets and trade imbalances. The IMF‟s semi-annual World Economic Outlook (released April 5th 2007) said an economic slowdown in the US would have only a modest global impact if it were confined to the property sector. The IMF report warned, however, that the shock to the global economy could be more significant if the property downturn spread to consumer spending and business invest ment. This seems likely as the US consumer is more indebted now since 1933 with little or no savings whatsoever. The Comptroller Auditor General of the US, David Walker stated “last year (2006) was the first year since 1933 that Americans spent more money than they took home and, as you probably recall, 1933 was not a good year for the United States.” The US‟ national gross debt is $8,883,212,488,519 trillion ($8.8 trillion) and grow ing. When George Bush came to power US‟ national gross debt was $5.7 trillion. Even the most sanguine, tunnel-visioned bull would have to admit that the fundamentals of the US economy are bad and deteriorating. Other long term risks and challenges facing the global economy come in the form of the threats posed by a bird flu pandemic, peak oil and global warming. Silver price: historic role as a store of value Thus the monetary metals and safe haven assets of gold and silver are likely to continue to outperform other asset classes. Also they are likely to outperform ot her commodities such as the base metals, oil and uranium. These commodities would be likely to experience a fall in price were there to be a significant slowdown in the global economy which would create demand destruction. Because of their historic and continuing role as monetary or currency metals and as safe haven assets gold and especially silver are likely to outperform. This is because they are not simply commodities but also currencies which cannot be debased like our modern fiat paper and electronic currencies. Gold and silver has been used as money in more regions and countries and for longer periods of time than the relatively modern use of paper currencies. Interestingly, silver has been used in more regions and countries and for longer periods of time as money than gold. Nobel Laureate Milton Friedman, said of silver 'The major monetary metal in history is silver, not gold.” In Mexico today, there is a movement to return to using silver as money with a bill being put before by the Mexican Congress by Hugo Salinas. The currency of India is the rupee and it comes from the Sanskrit word „raupya‟ which meant silver or coin of silver. The French word for money is „argent‟ which came form the Latin argentum meaning silver. The franc was established as the national currency by the French Revolutionary Convention in 1795 as a decimal unit (1 franc = 10 decimes = 100 centimes) of 4.5 g of fine silver. Most countries in the world used silver for smaller denomination coins in the 19th Century and through the 20th Century up until the 1950‟s, 1960‟s and 1970‟s when currencies were gradually debased. Debase means to degrade, dilute or devalue. For instance, in the US up until 1965, silver dimes and quarters were made of 90% pure silver. In 1965, the US government debased and devalued the currency and reduced the silver content to 40% pure silver. These legal tender silver bags are still bought today by savvy investors. Silver price: declining supply Before looking at the demand side of the silver equation it is important to consider the supply side. In 1900 there were 12 billion oz of silver in the world. By 1990, the internationally respected commodities-research firm CPM Group say that figure had been reduced to around 2.2 billion ounces of silver. Today, that figure has fallen to about 300 million ounces in above ground ref ined silver. It is estimated that 95% of the silver ever mined has been consumed by the global photography, technology, medical, defence and electronic industries. This silver is gone forever. CBS Marketwatch published an article in March 2007 entitled „Silver may shine brightest among metals‟, in which Kevin Kerr wrote that “Due to current supply/demand trends, the amount of silver above ground is projected to shrink to a critically low level i n 2010. As supply shrinks, prices will keep rising steadily to new highs. Many in the invest ment world are unaware of this part of silver's story. Industrial demand has been outstripping mining supply for the past 15 years, driving above ground supply to historically low levels.” Silver production was flat this year and is expected to be flat again next year. Incredibly, the amount of mined silver has been less than its demand every single year for the last 15 years. This hasn't resulted in significantly higher prices yet because the world has been able to fill the gap from inventories and official government stockpiles. However, today the U.S. government's stockpile is all but gone, and sales from other official sources, such as China, Russia and India, are declining, too. The decline in refined silver stocks, from around 2.2 billion ounces in 1990 to around 300 million ounces today means that silver stocks are near an all time low. The supply of silver is inelastic. Silver production will not ramp up signif icantly if the silver price goes up. Supply didn't increase in the 1970‟s when silver rose 35 fold in price – from $1.40/oz in 1971 to a high of nearly $50/oz in 1980. Importantly, silver is a byproduct metal and some 80% of mined silver is a byproduct of base metals. Higher prices for silver will not cause copper, nickel, zinc, lead or other base metal miners to increase their production. In the event of a global def lationary slowdow n demand for base metals would likely fall thus further decreasing the supply of silver. There are only a handful of pure silver mines remaining. This inflexible supply means that we cannot expect signif icant mine supply to depress the price after silver rises in price. It is extremely rare to find a good, service, invest ment or commodity that is price inelastic in both supply and demand. This is another powerfully bullish aspect unique to silver. Silver price: significant and increasing industrial demand Another important factor as to why silver is likely to outperform other as set classes and commodities besides the declining silver supply is increasing industrial demand. Why is this indispensable metal in such demand? The reasons are simple. Silver has a number of unique properties including its strength, excellent malleability and ductility, its unparalleled electrical and thermal conductivity, its sensitivity to and high ref lectance of light and the ability to endure extreme temperature ranges. Silver has the highest electrical conductivity of all metals, even higher than copp er. It was used in the electromagnets used for enriching uranium during World War II (mainly because of the wartime shortage of copper). Silver has the highest thermal conductivity and optical reflectivity of all metals. Silver‟s unique properties restrict its substitution in most applications. Non invest ment demand for silver is based primarily on industrial demand including electrical, medical and photography and also in jewellery and silverware. Together, these categories represent more than 95 percent of annual silver consumption. In 2005, 409.3 million ounces of silver were used for industrial applications, while over 164.8 million ounces of silver were committed to the photographic sector, and 249.6 million ounces were consumed in the jewellery and silverware („don‟t sell the family silver‟) markets. Jewellery and silverware are traditionally made from sterling silver. Sterling silver is 92.5 % silver, alloyed usually w ith copper. Industrial applications for silver have always been significant but have increased significantly in recent years. Industrial applications for silver have increased since 2001 to a record in 2005, according to London-based researcher GFMS Ltd. In their most recent report, they predict a 6% growth rate in industrial applications of silver in 2007. Silver is used in film, mirrors, batteries, medical devices, electrical appliances such as fridges, toasters, washing machines and uses have expanded to include cell phones, flat -screen televisions and many other modern high tech devices. Increasing industrial demand for silver is forecast due to strong economic growth in China, India, Vietnam, Russia, Brazil and other emerging economies in Eastern Europe, Asia and the world. Growing middle classes are now demanding the quality of life and standard of living enjoyed by many in the West and thus the demand for silver will increase. Silver is know n as the healthy metal and has many and increasing medical applications. While silver's importance as a bactericide has been documented only since the late 1800s, its use in purif ication has been known throughout the ages. 'Born with a silver spoon in his mouth' is also a reference to health as well as wealth. In the early 18th century, babies who were fed with silver spoons were healthier than those fed with spoons made from other metals, and silver pacifiers found wide use in America because of their beneficial health effects. Today silver is used in many health-care products. Specifically, the „silver bullet‟ is used by nearly every hospital in the world to prevent bacterial infections in burn victims and allow the body to restore naturally the burnt tissue. Increasingly, wound dressings and other wound care products incorporate a layer of fabric containing silver for prevention of secondary infections. Surgical gowns and draperies also include silver to prevent microbial transmission. Other medical products containing silver are catheters and stethoscope diaphragms. In a world that is showing increasing concern about the spread of diseases and pa ndemics such as bird flu, silver is being increasingly tapped for its biocidal properties. Research is ongoing on the use of silver and its compounds for therapeutic uses and on its potential use as a disinfectant in hospitals and other medical facilities. Silver has many unique properties which make it ideal and indeed essential in global industry – especially in the global photography, technology, medical, defence and electronic industries. Yet, silver is a finite resource and the supply of silver is increasing only very incrementally. Silver price: significant and increasing investment demand According to the CPM Group, there are some 300 million ounces of refined silver in the world. That means that with silver priced at $14/oz., there is about $4.2 bill ion (300 million oz x $14) dollars worth of silver in the world. This means that the total silver market capitalisation is a very small $4.2 billion. The increasing demand caused by invest ment demand is very compelling. Especially due to a number of key invest ment factors - the introduction of the iShares Silver ETF, the huge short position, the global liquidity bubble, the significant growth in the global money supply, the proliferation of millionaires, ultra high net worth individuals and billionaires, the proliferation of hedge funds and the exponential growth in derivatives. ETFs Invest ment demand for silver has also been rising rapidly the past few years with investors hedging themselves against rising inflation, possible currency devaluations and geopo litical and macroeconomic risk. The silver market is currently in a transitional period where invest ment demand is starting to have a real impact on silver prices. Much of the new demand comes from iShares Silver ETF launched in April 2006. The fund has so far attracted 120 million ounces of silver invest ment. It is up nearly 30 million ounces since the start of 2007. It's important to remember that the silver market is very small - only some 300 million ounces. That means the ETF alone now accounts for more than one-third of the global silver market, and growing invest ment into the iShares ETF should drive prices much higher. If even a small amount of money flows into the silver market from investors, ultra high net worth individuals (ultra-HNWIs), hedge funds, pension funds and institutions around the world, silver will almost certainly reach the nominal non inflation adjusted high it reached in 1980 of nearly $50 per ounce. Huge short position Perhaps the foremost analyst of the silver market today is Mr Theodore Butler. He believes that gold and particularly silver are the laggards in the commodity complex due to price manipulation. At over 300 million ounces, the largest 8 traders on the COMEX are short more silver bullion than exists in total know n world inventories, including total SLV holdings and total COMEX inventories. Butler sums it up succinctly, ”If there is one thing that separates silver from any other asset class, or any other item in any asset class, it is the presence of an unprecedented concentrated short position in COMEX silver futures. It is the existence of this concentrated short position that will, at some point, launch thesilver price to the heavens. This short position has grow n so large, and is held by so few entities, that it no longer matters how it will be resolved. It must be resolved and, whether that resolution involves default or buying by short covering, it will have the same bullish impact on price. You don‟t have to look any further than the concentrated COMEX short position as to why silver has not outperformed every other commodity. Just as it explains price under performance, it is telling you why there must be overperformance in the future. At some point, the price of silver must accelerate upward to price levels that are truly shocking.” Money Supply There is some $50 trillion worth of bonds and $40 trillion worth of paper money in the world. Money supply is increasing at extremely high levels globally. The annualised growth of some national broad money supplies are United States M3 up 10%, Eurozone M3 up 9.0%, UK M4 up 13%, China M2 up 15.9%, South Korea up 10.6%, Australia M3 up 13%, Russia M2 up a staggering 48%. This has given rise to increasing inflationary pressures, a huge liquidity bubble and to ripe valuations in many stock and property markets. Huge Inc rease in Billionaires, Multi Milliona ires and High Net Worth Indiv iduals There has been an unprecedented increase in wealth amongst a tiny segment of the population in recent years. The number of millionaires in the world is multiplying very rapidly and there are now approximately 9 million millionaires in the world. There are approximately 70,000 ultra- HNWIs who have a net worth of more than $30 million. Forbes recently estimated that there are now a record 946 billionaires in the world. In 2006, there were 178 new billionaires. These included 19 Russians, 14 Indians, 13 Chinese and 10 Spaniards, as well as the first billionaires from Cyprus, Oman, Romania and Serbia. Bill Gates and Warren Buffet are worth some $51 billion and $40 billion respectively. One man‟s net worth increased in one year by multiples of the total value of all silver in the world. Carlos Slim Helo, is a Mexican of Lebanese origin whose net worth increased from $20 billion in 2006 to almost $50 billion in 2007 or by some $30 billion. All the billionaires' combined net worth increased by $900 billion to reach $3.5 trillion. There are a total of 8.7 million millionaires around the world, representing a total wealth of a mind boggling $33.3 trillion. A trillion is an extremely large number and difficult for most to comprehend. It is one million million or 10 to the power of 12. It is an absolutely hug e number and it is important to remain conscious of the sheer size of this number. Conversely, the total value of all above ground stock of silver is a very small $4.2 billion. If only a tiny fraction of these millionaires, ultra-HNWIs and billionaires dec ided to diversify out of their extensive property and stock portfolios and invest even a very small amount of their portfolios in silver it would result in the silver price increasing in price exponentially. Given the extremely strong invest ment fundamentals of silver this seems likely. Hedge Funds Globally, hedge fund‟s speculative capital have doubled to more than $2 trillion (or two thousand billion) in the last three years. Some hedge funds have started moving into the silver market. Charles Supapodok of Artemis Capital Management is seeking to raise a $300 million hedge fund to invest mainly in silver. Artemis Silver Fund, advised by Artemis Capital Management, will put 80 percent of the fund's holdings in silver. Again due to the incredibly small size of the global silver market if even only a percentage of the roughly 9,000 to 10,000 hedge funds in the world decide to take positions in the silver market the price will increase in value by multiples. De rivatives The Bank for International Settlements has estimated that the total value of derivatives contracts was $450 trillion at the end of 2006 (up from $260 trillion in June 2006) and is increasing exponentially. There is still a debate as to whether derivatives are a good or a bad thing. Ben Bernanke and most in the financial industry believes they are good as they create liquidity and help spread risk throughout the system. Greenspan was a little more sceptical and warned that they could create „moral hazard‟ as they did when LTCM collapsed in 1998 s ending shockwaves through the financial system. He also warned that they could lead to 'cascading cross defaults.' Warren Buffett is similarly not as sanguine: “Charlie [Munger] and I believe, however, that the macro picture is dangerous and getting more so. Large amounts of risk, particularly credit risk, have become concentrated in the hands of relatively few derivatives dealers, who in addition trade extensively with one other. The troubles of one could quickly infect the others. . . . Linkage, when it suddenly surfaces, can trigger serious systemic problems.” “The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Knowledge of how dangerous they are has already permeated the electricity and gas businesses, in which the eruption of major troubles caused the use of derivatives to diminish dramatically. Elsewhere, however, the derivatives business continues to expand unchecked. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts.” For this reason Buffett has called derivatives “financial weapons of mass destruction.” The systemic risk posed by the near infinite creation of hundreds of trillions of dollars of derivatives means that the finite currencies and safe haven assets of gold and silver are likely to be diversified into increasingly. If only a tiny fraction of the humongous derivatives market was to reallo cated into the silver market, silver would increase in value exponentially. Silver's price history Silver remains historically undervalued. Despite the incredibly bullish fundamentals outlined silver has so far underperformed nearly all the other commodities. Silver has gone from below $5 to some $14 and is up some 190% in the last 7 years. This seems like a lot but when compared to other commodities and metals it is very little: Oil is up from $10 to $63 or 600% and more than 6 fold. Zinc from $.35 to a high of $2.00,. now $1.50/lb or nearly 5 fold. Copper, from $.75 to a high of $4.00, now $3.58/lb or nearly 5 fold. Lead from $.20 to $.90/lb or nearly 5 fold. Nickel from $3 to $22/lb or more than 7 fold. Indium, Molybdenum, Selenium, Cobalt are all up 100 0% or 10 fold and more. Uranium is up a phenomenal 1300% or 13 fold. Many commodities are up between 5 and 13 fold. Silver is not even up 3 fold. If silver were to catch up with these other less rare and less precious metals, it would have to increase in value by some 500%. From the bottom at some $5/oz in 2001, that would result in silver being valued $25. Silver reached $50 brief ly in 1980 when just one billionaire Bunker Hunt (one of a handful of billionaires in the 1970‟s) attempted to corner the silver market causing the price to surge (in conjunction with many investors seeking to hedge themselves from the stagflationary 1970‟s). A lot of technical orientated analysts, investors and hedge funds are looking at this figure and as nearly all the other asset classes and commodities are all at near all time records there is every reason that silver will do likewise in the coming years. Silver is priced at some $14/oz today. The average price of silver in 1979 and 1980 was $21.80/oz and $16.39/oz respectively. In today‟s dollars and adjusted for inf lation that would equate to an inflation adjusted average price of some $60 and $44. It is for this reason that we believe silver will be valued at over $50 in the next 3 to 5 years. Why silver is the investment opportunity of a lifetime Finally, it is important to put today‟s total value of all above ground refined silver in the world - $4.2 billion – in context. $4 billion worth of Boeing planes was bought by Ryanair in 2005. $4 billion was the cost of stamp duty tax on Irish property in 2006. €8 billion worth of overseas commercial property was bought by Irish investors in 2006. Scottish Ministers are in charge of £2 billion (some $4 billion) of tax revenues. Macquarie, the Australian bank, recently acquired the O2 Airwave police radio business for £2 billion. The 2006 Sunday Times Rich List UK estimated that there were 20 people with a minimum wealth of £2 billion (some $4 billion) residing in the UK. Further context is provided in the fact that the actor Will Smit h has had a worldwide career box office of $4.4 billion. Microsoft is grow ing revenues at over $4 billion a year. In March and April of 2007, just two months, one man‟s wealth increased by $4 billion. Since Forbes calculated its 2007 wealth rankings, they recalculated that in two months the Mexican tycoon Carlos Slim‟s fortune rose $4 billion to $53.1 billion. Rarely are there 'no brainers' in life and very rarely are there „no brainer‟ invest ment opportunities. Invariably, „too good to be true‟ invest ments turn out to be just that. However, this is not the case with silver. It remains the invest ment opportunity of a life time. Silver is unique in terms of being both a monetary and an industrial metal and having the highest optical reflectivity and the highest thermal and electrical conductivity amongst all metals. Silver industrial and invest ment demand is increasing very significantly and meanw hile supply is falling. The fact that the huge majority of the investment public and financial services industry re mains ignorant of the fundamentals in silver means that the bull market in silver remains in it‟s early stages. Silver remains probably the most undervalued asset class. How to Speculate in Silver • Silver options and futures • Silver ETF • Silver mining stocks • Spread bet silver How to Invest in Silver • Perth Mint Government Silver Certificates • Allocated and unallocated silver accounts • 1000 troy oz bars – (weigh some 31 kgs) These bars are COMEX good delivery bars. • 100 troy oz bars – (weigh some 3.11 kgs) These bars are among the most popular with retail investors. Popular brands are Engelhard and Johnson Matthey. • 90% Silver Bags • 40% Silver Bags (Pre-1970 U.S. legal tender 90% and 40% silver coins, which were used as money until they were replaced by the precious metal free coinage introduced in 1970 and used today. Bags of U.S. dimes, quarters, half-dollars containing 90% silver or 40% silver are traded based on their precious metal silver weight.) Silver bars and silver bags can be taken delivery of but due to the volume, weight, difficulty to store securely and cost of insured delivery most investors buying silver in volume opt for unallocated and allocated silver accounts or government silver certificates due to their being no annual and ongoing storage/insurance fees. Mark O'Byrne is the Managing Director of Gold and Silver Investments Limited, Ireland's Asset Diversification and Wealth Preservation Specialist. He is regularly quoted and writes in the financial media and was awarded Ireland’s prestigious Money Mate and Investor Magazine Financial Analyst of 2006.