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					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executed but influences prices and is then withdrawn before it reasonably can be executed,"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
atjrosenblatt@bloomberg.net; Bob Van Voris in New York at rvanvoris@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.


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.
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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


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   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
                                                                                                               [1][2]
    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

    [edit] 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
                                             [3]
    the market, creating volatility.

    Silver often tracks the gold price due to store of value demands, although the ratio can vary. The
                                                                                       [4]
    gold/silver ratio is often analyzed by traders, investors and buyers.                    In 1792, the gold/silver ratio was
                                                          [5]
    fixed by law in the United States at 1:15,                  which meant that one troy ounce of gold would buy 15 troy
                                                                                     [6]
    ounces of silver; a ratio of 1:15.5 was enacted in France in 1803.                     The average gold/silver ratio during
                                                    [7]
    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.


                                                        [8]                             [9]
                            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
                                                                                                [10]
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
                     [11]
the credit crunch.

[edit] Factors      influencing the price
[edit] 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
                                               [12]
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
                            [13]
$850 per troy ounce).              In the last nine mont hs of 1979, the brothers were estimated to be holding over
                                                                                           [14]
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
             [15]
foul play.          On September 1, 2010, Bloomberg reported that JPMorgan Chas e will be closing their
                                    [16]
Proprietary Trading Desk.

[edit] Industrial,         commercial and consumer demand
The traditional use of silver in phot ographic development has been dropping since 2000 due to the growth
                             [17]
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
                                                                 [18]
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
                                                     [19]
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
                                                                             [20]
may also contribute to a long-term rise in industrial and jewellery usage.

[edit] 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
                                                            [21]
basically – then the less valuable the currencies become.

[edit] Investment      vehicles
[edit] 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)
[edit] 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.

[edit] 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.
[edit] 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.

[edit] 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.

[edit] 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
                                                              [22]
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.

[edit] 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.

[edit] 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.

[edit] 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.

				
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