Silver Investing - What's Gold Got To Do With It?

Gold has had a ten-year bull run; one that has dwarfed the returns of the S&P 500, which is basically flat. Both gold and the S&P have had pull backs in the last ten years. The biggest pullback was suffered by the S&P, not gold. The consensus among mainstream market analysts seems to be that the S&P continue its climb, but that gold is in a bubble and subject to a deep correction.

But stocks are in a bubble, not gold. In the past 30 years, the S&P has risen about 1500%. But earnings have risen only about 300%. Earnings, or more correctly, expected earnings, is the fundamental basis for stock valuation. Putting a value on gold is much more difficult. But we can still look at the fundamentals of gold.

In 2010, for the first time ever, investor demand for gold surpassed jewelry demand. Industrial demand remains negligible. Why is investor demand up? Many reasons. One reason is that gold outperformed the equities markets in 2010. But there are many fundamental factors.

One is risk to the dollar, the world's reserve currency. If the dollar isn't safe, what other currency, what other country's bonds are safe? Many are turning to the safety they believe is inherent in gold.

Economic difficulties around the world and in the United States are growing. There are demonstrations and rioting over high unemployment and rising food costs in Middle Eastern countries. Unemployment remains high in the U.S., and there is no end in sight. Even Ben Bernanke warns that it could take five years or more for employment to return to health levels.

Government debt levels are high in most countries, and still growing. U.S. debt dwarfs that of any other country. No combination of countries can bail out the U.S., even if those countries weren't already struggling with their own sovereign debt issues. And the politicians continue to spend in most countries, increasing the debt even further.

How do governments spend money they do not have? Borrow-except the U.S. The U.S. cannot borrow enough at low rates, so the U.S. is lending to itself. In other words, the U.S. is monetizing its debt; printing money-which causes...

... inflation. Inflation is recognized in China. It is not yet recognized in the U.S. The National Inflation Association estimates that the real rate of inflation in the U.S. is at least 5%. With short-term U.S. treasuries selling for 2% - 3%, this means the real interest rate is experiencing a negative return.

Another fundamental; the threat of war. Think North Korea and Iran.

Doug Casey, a long-time, highly respected gold analyst, reports that gold production remains flat in spite of much higher prices and tightening supply.

Gold is not in a bubble. It has pulled back many times, and will again. But when the stock bubble bursts, and when the government debt bubble bursts, and when inflation sets in, gold will begin to form a price bubble.

What does all this have to do with silver investing? Silver is known as the poor man's gold. As the fundamentals for gold continue to drive prices higher, investors will be driven to silver. But the silver fundamentals are even stronger, especially supply/demand. Over half of the silver mined in 2010 was consumed by industrial demand. The physical supply of silver is very low.

Gold is getting a little attention; silver none. That is great for silver investing.

Learn how to protect yourself against the current (and impending) economic disaster with silver investing. For more information: http:www.esilverinvesting.com

Silver Investing And Black Swan Events

What is a black swan event? It is a rare, unpredictable event, like a black swan in nature. They are very rare, but every once in a long while, every once in a great many births, one appears. In the worlds of investing, economics, and politics, rare, unpredictable events are referred to as black swan events. What effect will such events have on silver investing?

What are the possibilities at this time in history? Here are a few I can think of:

Israel making a pre-emptive attack on Iran's nuclear facilities.

Iran attacking Israel.

A major bank failure.

Debt default by a country.

A successful major terrorist attack on a western nation.

A Korean war, possibly involving China and the USA.

A failed U.S. treasury auction.

A natural disaster that destroys one of the world's major financial centers.

A terrorist attack that destroys one of the world's major financial centers.

Assignation of a world leader.

Purchase of a great amount of gold by a country; possibly funded by the dumping of US Treasuries.

You may be able to think of others. You may think the chance of any black swan event occurring is very, very slight. But little doubt that the world is becoming more dangerous. Unrest is growing in many countries.

It is hard to conceive of a black swan event, except a sudden, unexpected outbreak of world peace, that would not good for the silver investing public.

I'm generally an optimistic guy. But when I devoted five minutes to thinking about potential events that would affect my silver investing, no positive events came to mind. And in my estimation, only positive events might be detrimental to the price of silver.

I believe the United States is in great economic peril, and within the next few years will drag the rest of the world into a severe economic depression. But if I am wrong, and world economies continue to expand, the already significant industrial demand for silver will only increase. And increased demand for silver is also good for silver investing.

By the way; if the United States somehow avoids severe economic malaise-that would be a black swan event, in my opinion.

Learn how to protect yourself against the current (and impending) economic disaster with silver investing. For more information: http://www.esilverinvesting.com

Silver Investing - Is It Too Late?

Less than a month ago, when silver closed above $20, I posted an article titled "Silver Investing--Is it Too Late at $20?" On Friday, October 1st silver closed considerably higher than $20. I reasoned when I asked the "$20 question" that because of the massive manipulative short position that has existed for over two decades, the upward price potential was tremendous - if and when the manipulation was phased out.

Briefly; JP Morgan inherited the short position when it took over the failed Bear Stearns at the request of the U.S. government. Almost a month ago, JP Morgan announced that it will be closing its commodities trading desks. Those who knew of the huge short position are curious to know if it will be phased out. Early signs are promising. For over three weeks there has been no sign of manipulation, despite the steady price increase during that time.

During the month of September the price of gold increased about 4.9%, while the price of silver advanced about 9.9%! The price of silver made multiple 30-year records the past week and a half. After years of underperforming gold, some say because of silver price manipulation, it is telling that silver is outstripping gold recently. The price of gold is up because of fear of inflation and economic woes. However, economic woes should affect an industrial metal like silver adversely. And fear of inflation should not affect silver more than gold. Perhaps the price of silver has really been set free.

Speaking of inflation, there has suddenly been talk of deflation recently. Don't let it fool you, even if the talk gets traction. There is huge money at stake on Wall Street. Wall Street is not positioned for inflation. And because the precious metals markets are so small relative to the equities markets, and there is so much money to move, it will take months. I won't go so far as to say the government and Wall Street are conspiring, but if the public fears deflation, both the government and Wall Street win. The government wins because they hold off inflation that much longer. And Wall Street wins big by having time to reposition for inflation, that they know will come.

Despite public talk of deflation, private fear of inflation has pushed the price of precious metals higher. And the gold to silver price ratio moved from 63 to 1 down to 59 to 1 the last few days. Perhaps silver investing is getting back to the fundamentals. It's not too late now.

Learn how to protect yourself against the current (and impending) economic disater with silver investing. For more information: http://www.esilverinvesting.com

Silver Investment - More Reasons Why it Makes Sense

Silver is consumed in industry more than ever before.

People think of silver in terms of its price and value. The truth is that the industry uses more and more silver year after a year, so if you're really looking into a good investment, then silver is definitely a good option. One of the main reasons why we use silver is jewelry. We make necklaces, bracelets and other jewelry out of silver because it is pretty, as well as valuable. People will never lose interest in silver jewelry, so as long as it's made, silver will be needed.

It is possible that you don't realize that silver is used in medicine to a great extent. Dentists use it for dental fillings, and since philosophers wrote about the healing attributes of silver, we use it in wound dressings, and even Band-Aid. The truth is that silver does help us heal better, and because of that the industry will always use it.

Of course we use silver in high technology items as I mentioned before. Almost everything around you, be it a printer, a desk lamp, or even a TV screen, has some silver in it.

Another way we use silver is to make money. It is funny to think that until 1960 for most of the U.S. coins were made in 90 percent silver. Watch the videos mentioned in the introduction for a good historical summary of why that was.

When currencies get weak people turn to precious metals.

There is a tendency whenever the economy is bad and currency loses its value for people to turn to precious metals such as gold and silver. It's close to impossible for silver to devalue over any significant period of time. People understand this, and that is precisely why they invest in silver when they feel that the value of their currency or any valuable currency in the world is dropping dramatically. When they fear an economic crisis, they go to silver and precious metal brokers and increase the bias of their portfolio towards safe value storage that precious metals offer.

That's a tendency displayed by every nation for many years. Use this knowledge for your own gain.

Silver price keeps increasing.

The last reason why silver is a great investment is that the price of silver keep increasing. As I've mentioned before, silver is becoming more and more valuable and in just a few short years, it has doubled its market value. In 2005, it cost $7 to buy an ounce of silver. Now, it costs $17-$19 to buy an ounce of silver. The trend that you see here will not change. The price of silver will always increase, and the fluctuations will be minor within the overall context of silvers increasing scarcity and increasing demand.

The general tendency will be that gold will become more valuable and silver will follow but also have additional increases due to its unique additional uses. It is best for you to spend some money on gold and silver now so that you have a solid investment that you can realistically get back with significant increase in value in just a few years.