Mexico’s proposed higher mining royalties could block nearly $7bn in investments
The Mexican government proposed raising mining royalties under the argument that metal prices have risen in recent years.
As can be seen by the price action of silver in the last week, prices of this metal can be very volatile. But, this is the nature of silver. And, this is one reason why I believe the upside in this metal is going to be quite spectacular.
Silver prices peaked in 2008 and thereafter have lagged gold. However, the fundamentals for silver are looking better every month, and I believe that as investors continue to diversify some of their assets into precious metals, silver will become a major beneficiary of this trend. As the price of gold becomes more expensive, investors are going to look to add silver to their portfolios.
Recently, I believed that the price of silver had finally broken through a key resistance of $19/oz. Almost, as soon as I mentioned this, the price dropped back to below $18/oz. While this looks as if the break above $19 has been a false break to the upside, I stick to my guns and remain confident that the price will soon trade above this level. The recent sell-off in silver has been primarily due the bullion banks, especially JP Morgan, who continually attempt to suppress the price of this metal. Currently, these bullion banks hold a large open short position on the US futures markets. This does not in any way reflect the true position in the silver market and it is a matter of time before this disconnect between the physical and the futures adjusts. And, when it does, prices are going to move higher; a lot higher.
Demand for silver is also coming in the form of coins and bars. For the month of June, the U.S. Mint sold 3,001,000 silver eagles, and year-to-date sales of this coin have been 18,168,500 silver eagles!
Investors’ demand for silver is also being reflected in equities. Fresnillo has increased by 30 percent this year which is one of the best performing shares on London’s FTSE 100 Index. Pan American, the fourth-largest producer, has advanced 13 percent this year on the Toronto stock exchange.
There are many ways investors can participate in the silver market. They can by silver bullion bars, coins, rounds, equities and silver exchange traded funds. However, I strongly recommend accumulating the physical before looking at the other investment instruments. One of the reasons why I recommend accumulating the physical is that at the moment there are too many stories out there implying that banks and funds don’t really have the silver they claim to have. True or not, once you have the physical in your holding, you know it is yours.
About the author
David Levenstein is a leading expert on investing in precious metals .He brings over 30 years experience in futures, equities, forex and bullion.
For more information go to: www.lakeshoretrading.co.za
Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice.
TECHNICAL ANALYSIS
The price of silver is still stuck in a range between $17.50/oz and $19/oz. It seems to me that each time it trades at the high, selling comes in, and when it hits the lows of this range we see buying. The break above $19/oz seems to have been a false break to the upside. However, prices at the bottom end of this range offer buying opportunities, and I believe that we will soon the break above the $19/oz. And, once the price has breached $19.50/oz then prices are set to trade towards $21/oz and then $25/oz.
