Update N° 22 / November 30,
2011
Silverinstitute
Silver/Ounces
in US$
|
Buy
Date
|
Amount/oz.
|
Buy
Price
|
Total
(USD)
|
Price
Today
|
Value
Today
|
November
15, 2002
|
10,000.00
|
4.54
|
45,400.00
|
|
|
Total
|
10,000.00
|
4.54
|
45,400.00
|
32.16
|
321,600.00
|
Profit
|
276,200.00
|
|
|
|
|
Profit
(in %)
|
608%
|
|
|
|
|
OUR
LONG-TERM RECOMMENDATION
|
BUY
|
|
|
OUR
SHORT-TERM RECOMMENDATION
|
HOLD/BUY
|
|
|
1980 to 2011: From bear to bull
In 1980, the price of one
ounce of silver reached $ 50. Today, the purchasing power of the US dollar is
substantially less than in 1980. The price of one ounce of silver would have
to rise to $ 135 to reflect the value of the US dollar thirty years ago.
The long-term picture of the silver price
The bull market of the silver
price started towards the end of 2002. On the way from $ 4.02 to the recent
high of $ 48.42 (an increase of 1,100%), several significant corrections took
place, the most severe one in 2008 when the silver price sank by 56% only to
jump 440% to a new high since the bull market started. "The bull market
is not over. However, at present, a correction seems to be overdue.", we
wrote in March. It is time to consider re-entering the market (if you have
sold).
"Extremes never last but
no extreme is an absolute extreme and there is no guarantee that the extreme
of 2006 will actually be repeated.", we wrote in our last report. The
2006 peak was in fact surpassed in March 2011, followed by a sharp
correction.
In the past, excluding 1980,
it would have paid off to play the extremes, always assuming that one can buy
back at the right moment which is far from easy. A long-term investor may
feel better simply remaining invested as he believes that prices will
eventually go much higher.
The medium-term picture of the silver price
Critics of technical analysis
include well known fundamental analysts. For example, Peter Lynch once
commented, "Charts are great for predicting the past." Warren Buffett has
said, "I realized technical analysis didn't work when I turned the
charts upside down and didn't get a different answer" and "If past
history was all there was to the game, the richest people would be
librarians."
Fundamental Considerations: THE RISING SILVER DEMAND
Silver is unique. Its natural
beauty is legendary. Its range of applications is exceptionally broad. As a
precious metal, it has been a source of human adornment since the beginning
of time. Such as a component of fine tableware, appropriately called
silverware. As a light-sensitive element, it has revolutionized preservation
of memories in the form of photographic images. More recently, its unique
properties comprising of anti-bacterial qualities, corrosion resistance,
malleability, ductility, reflectivity and conductivity have opened new
possibilities for a myriad of other industrial applications.
The demand that pushes the
silver price higher
World Silver Demand in millions of ounces (Source: World Silver Survey 2011)
Implied Net Investment demand,
industrial demand and demand for coins cause the silver price to increase.
Without it, the silver price would never have performed as it did. Industrial
demand and demand for coins and medals are expected to grow further.
The Gold / Silver-Ratio
The gold/silver ratio has been
steadily declining since its high in 1990 and reached a recent low early of
this year when the silver price just about touched $50 an ounce. Since then
the ratio has rebounded almost 30 points. This ratio may well move lower as
the silver price is poised to recover from its oversold level.
Silver is again our
preferred precious metal!