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.
I think that we may be seeing the start of something big in silver and I have some ideas on how you can ride this wave, as silver goes to $20 an ounce, $25, and potentially higher.
In further edited excerpts from the original article* Sean Brodrick (www.uncommonwisdomdaily.com) goes on to say:
While Wall Street always seems to give silver short shrift, mom-and-pop investors are buying silver at a furious pace with the U.S. Mint selling more Silver Eagles in the first quarter of 2010 than ever before and it’s not just the small investors tucking silver coins away at home.
Last year, total silver ETF holdings grew by 122 million ounces. That’s nearly 1 in 5 of every ounce mined. How much do you think silver ETFs will add to their holdings this year? I’m not going to guess, but it’s just one of the many upward pressures on silver now. The other forces include:
#1) Supply Squeeze
The 2009 numbers aren’t in yet but in 2008 silver saw its demand [in]crease by 0.9% but, with above-ground stockpiles trending lower and silver miners not being able to meet the demand the world has had to rely on recycling to fill the gap.
Considering that the above-mentioned stockpiles include all the silver in ETFs, that trend is very interesting. In fact, even including the silver in ETFs, the above-ground stockpiles of silver amount to just 10 month’s worth of supply. That’s one-sixth the ready supply of a decade ago, when ETFs barely figured into the equation.
Now for some potentially bearish news on supply. Silver production will increase over the next few years when existing mines ramp up or new operations start so, to keep upward pressure on prices, demand will have to increase as well. I think that’s going to happen. For one thing, as I’ve showed you, investment demand is surging. For another …
#2) Industrial Demand
Silver is a precious metal, but it’s also an industrial metal used in everything from flat-screen TVs to zinc-lithium batteries and industrial uses for silver keep growing and growing. Silver is not only beautiful, it’s:
a) malleable;
b) the best conductor for electricity and heat of all metals;
c) reflective;
d) an anti-bacterial agent;
e) a chemical catalyst
f) used in the production of plastics.
And new industrial uses for silver come along all the time. As such, silver’s industrial status means that 50% of global production is consumed — used up, never to be seen again — every year.
Silver could and should go higher. There are also the scary reasons. For example …
#3) Potential Global Currency Crisis
I don’t have to tell you about the serious financial woes [debt] the U.S. and other countries are in… and the only way to get out from under that debt is to print money, or inflate out of it, and when central bankers turn on the printing presses gold and silver, and hard assets generally, escalate in price.
Smart traders realize this. Heck, mom and pop investors on Main Street realize this. That’s why they’re buying silver eagles with both hands. Sure, the U.S. mint set a new record in March but records are made to be broken.
If silver can break out to the upside the next stop should be its old high at $21.44 and if that overhead resistance shatters, we could see $25 silver pretty shortly after that. This may sound like pie in the sky, especially because silver is up 21% from its low this year on February 8th, and up a whopping 103% from its low back in November 2008 so let’s take a longer-term view.
What You Might Want to Buy
1. For a short-term trade, consider buying one of the ETFs that holds physical silver, like:
a) ETFS Physical Silver Shares (SIVR)
b) iShares Silver Trust (SLV) or
c) ProShares Ultra Silver ETF (AGQ), a leveraged silver fund, but be careful if you do because you can get burned if you’re holding that one at the wrong time.
2. If you’re a long-term buy-and-hold investor, save yourself the fees associated with an ETF and buy:
a) physical bars,
b) silver eagles, or
c) silver Canadian Maple Leafs.
You might sleep better holding the physical silver, too.
3. You can also buy individual silver stocks, too.
The historical ratio of the price of gold to silver is 16 to 1. Moving closer to that would give us a silver price of around $70 an ounce! I’m not saying we’re going there. I’m saying there’s no reason we can’t.
*http://www.uncommonwisdomdaily.com/is-silver-ready-to-surge-9174?FIELD9=1 (Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts offering the latest investing news and financial insights for the stock market, precious metals, natural resources, Asian and South American markets. They also offer a subscription service called Crisis Profit Hunter. To view their archives or subscribe, visit their site.)
Editor’s Note:
– The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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