Here at MiningInvestor.net we have been assisting our clients to navigate through the unprecedented levels of heightened fiscal and geo political uncertainty as well as slowing economies worldwide and profit from the soaring gold prices. Currently, we are starting to like silver again. Similar to gold, silver has been simultaneously viewed as a high quality liquid asset, a currency alternative, a diversification mechanism, a trading “option” on gold and a vehicle to play on industrial demand speculations.
On Wednesday gold, silver and most metal futures traded lower. Precious metals lost some “shining” of their safe haven status as concerns about Greece eased after Merkel’s and Sarkozy’s decision to allow the country remain in the Euro zone . Gold declined $3.60, or 0.2%, to close at $1,826.50 an ounce on Comex. Silver lost $0.66 or or 1.6%, to close at $40.53 an ounce.
Currently, I only have 2 mild and short-term concerns about silver. The first one is mostly related to the fact that about half of its demand is coming from the industrial uses. Although I believe that the almost certain Greek fiscal default and potential Italian default has been fully priced in, the fiscal crisis of those countries will drastically affect the continent’s already weak growth and thus the industrial demand for silver will fall. My second mild concern is already in progress and is related to the speculative profit taking by the investors trying to lock in a 50% trading gain reached in the metal over the last 200 day trading cycle (see the performance chart below).
On the positive note, we believe that the market has fully priced in the European debt concerns and there is a stable support level for gold at about $1,800 and silver at about $40 an ounce. Those are the levels where we see the increased number of automatically generated hedge fund buying.
Another strong point is that we are entering the period of seasonal buying in silver. Equityclock.com notes that the period of seasonal strength for silver during the past 20 years has been from Sept. 16 to April 11. The “sweet spot” is from the end of October to the end of February. The trade has been profitable in 14 of the past 16 periods including 10 of the past 10 periods. Average return per period during the past 10 periods was 22.9%.
This seasonality is mostly due to the increased industrial demand. About 40% of silver is used in solar batteries, water purification systems, cellphones, circuit boards, plasma televisions and radio devices (RFIDs). These sectors are expected to grow at about 10% annually. Also, jewellery demand has been notably stronger in China and India during the fall season.
Let’s not forget that silver has been seeing an increased investment demand as a store of value ever since the first exchange-traded fund backed by physical bullion was launched in May 2006. Silver is trading very much like a gold proxy and acting as a currency hedge and a diversification mechanism (see the nearly perfect historical price correlation in the chart below).
Another notable positive event for the industry was that Australia’s first physical bullion exchange offering an over-the-counter spot market for gold, silver and platinum is set to launch early next month. The Australian Bullion Exchange will make direct bullion ownership available to retail and institutional investors from Oct. 4.
How does one leverage on those silver opportunities?
Currently the most actively traded silver ETF is the iShares Silver Trust (SLV/NYSE). Sprott Asset Management offers the Sprott Physical Silver Trust (PSLV/NYSE). Global X offers the Global X Silver Miners ETF (SIL/NYSE), an ETF that holds a diversified basket of 25 silver producer stocks including Pan American Silver, Silver Wheaton, Hecla Mining, Silvercorp Metals and Silver Standard Resources.
We recently profiled Silver Pursuit Resources (SPF-V). Silver Pursuit Resources is focused in Sonora State, Mexico, with a priority on acquiring, exploring, and developing underexplored mineral properties. The company is now active at two properties, La Quintera and La Luz.
- High grade silver recently confirmed by sampling program at La Quintera (March, 2011), a property with historic past production of 100+ million oz. silver. Veta Madre vein traced for over 4 km.
- All past mining conducted using artisanal hand mining methods and Silver Pursuit intends to subject property to rigorous modern exploration and mining methods.
- $1,250,000 Private Placement fully subscribed (closed February, 2011).
- Focus on Sonora State, Mexico.
- Important local business relationships are in place, along with cost-effective exploration infrastructure to move projects forward aggressively.
- La Luz Prospect optioned (August, 2010) with potential for Au, Co, Ni, Cu, Fe.
Please read full report on http://www.mininginvestor.net/company_profile/silver-pursuit-resources-ltd-spf-v/
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Disclaimer: This write-up is an opinion only based on the information that is derived from publically available sources that we believe to be reliable. The accuracy and completeness of the information is not guaranteed, nor in providing it do we assume any liability. The information should not be construed as investment advice. We assume no responsibility and no liability (including negligence) for the consequences for any person acting, or refraining from acting, on such information.