Note from SG&S:
I've compiled a couple of articles together from this source this week because I felt they were both informative and apropos to the rise/fall/rise of silver spot we've seen in the last week. Many of you have commented on this; and, as investors, we all scratch our heads and say, "What's going on here?".
From my readings, it's clear the volatility is a reflection of 1) what's happening with US currency devaluation 2) what's going on in Asia, and more specifically, China and 3) what's happening with the manipulators (short-sellers) of precious metals in this country. (I will provide more info about this manipulation next time).
Without going into a lot of detail, let me summarize most expert writings of the last week: gold and silver are showing a lot of volatility, which is to be expected due to the issues of destabilization & devaluation of US currency, and we may still see some downward trend for the short term. However, longer term, there will be an upturn of price again and a climb to new heights… hang on for the ride! Silver will follow Gold… and often out-perform it.
As for my observations since I've been in this business: People tend to purchase NOT when price is low but when price rises. I find this inexplicable and counter to what conventional wisdom would dictate. Let me speak frankly when spot rises, Tea Party Silver will be forced to increase our prices as well. (We've had to do this in the past week, but have dropped prices back to previous rates now as spot has dropped back). The prudent thing to do would be to purchase on these down-turns… and on upcoming sales and introductory rates.
China: The World of Gold and Silver Demand Is Changing
Aug. 31, 2009
When the Chinese decide to invest, it causes ripples across the world...
TWO YEARS AGO on August 21 2007, China's government allowed its citizens to invest in an entirely new asset. It allowed them to invest in Hong Kong-listed stocks.
Hong Kong is a special region of China. It's one of the most dynamic, capitalistic places on Earth. The move from the government was a move toward "investment freedom" for the Chinese people.
On that day, Hong Kong's benchmark stock index rose 8.74%. Over the next two and a half months, it skyrocketed from 11,000 to over 20,000. It was a chapter in a story that you should get used to over the coming years; when the Chinese decide to invest in something, it causes giant ripples across the world. And this sort of situation is starting to happen again, this time in Precious Metals, and especially Silver.
The Chinese have a centuries-old affinity with Silver. It began in the 1500s with the explosion of trade with Mexico via the Spanish galleons. These sailing ships were the super-tankers of their age. They made one voyage per year, carrying tea, silks, and spices from Asia to Mexico. The ships returned to Asia with Gold and Silver. After the Chinese threw off imperial rule in 1912, the country used Silver money. Today, the Chinese word for "bank" (Yin Hang) means "Silver Okay". And now that China is becoming one of the richest, most dynamic capitalistic countries on Earth, this story is about to take a modern twist. The Chinese want Silver again.
Thanks to a decade of wealth accumulated by regular Chinese citizens, there is plenty of cash to chase good investments. As the famed global investor Jim Rogers points out, these people are the best capitalists in the world. They are great savers. Chinese people want their money to work for them...so they invest.
I recently watched a China Central Television piece on Gold investing. According to the program, there are some 400 million households in China, with an average ownership of about 0.1 ounces of Gold. The average Gold ownership in most emerging countries works out to about 1 ounce per household. The Chinese are beginning to make up that gap. From 2006 to 2007, domestic demand for Gold rose 60% to around 700,000 ounces. Experts continue to urge citizens to put 3% to 5% of their net worth in Precious Metals; and that is a conservative suggestion. Chinese government statistics show the average urban Chinese household has about $1,300 in disposable income to invest. While that doesn't seem like much, when you add up all those households, there's about $36 billion that could move into the next big investment opportunity - Precious Metals.
The government is now actively encouraging its citizens to Buy Gold and Silver. They recently unveiled Silver bullion for investing. The premise is that Gold was approximately 50 times more expensive than Silver in 2007...but is now 65 times more expensive. Silver is a bargain. The government is promoting Silver bullion as an investment for regular citizens. And remember, a bunch of Chinese students laughed at US Treasury Secretary Tim Geithner this year when he claimed the dollar was safe. The Chinese know the value of real assets...real money like Gold and Silver.
What does this mean for Silver prices? It's impossible to say. But here's a little math that interests me. According to the Silver Institute, demand for Silver in 2008 (for industry, jewelry, and investing) was 832 million ounces. At today's price, that's an $11.5 billion market...or about one-third the annual discretionary capital available in China alone.
The most important thing to understand about this situation is the Chinese people become freer every time the government loosens up a restriction. These people couldn't legally buy Silver bars before. Now, they can. They're becoming richer...and they will continue to do so for decades.
Add this to a world already waking up to the grand currency debasement of the West, and you have a recipe for the continuation of the big bull market in Silver and other Precious Metals.
Don't Take Our Advice …
Sept. 21, 2009
The last time I signaled a major move pending, short-term technical indicators pointed downward, entirely contrary to a long-term bullish fundamental outlook that has only gathered strength in the meantime. After dipping to $870 per ounce in the weeks that followed, Gold held the $900 line throughout the notoriously weak summer months, and now has forged ahead to over $1000 Oz testing it all time highs while Silver has delightfully moved up some 20% plus in the same period of time. Both metals are well positioned to forge new all-time highs.
Precious-metal investors are tracking a hurricane, with a deteriorating U.S. dollar as its eye, a destructive wind of toxic derivatives swirling about, and a downpour of continuing reverberations for the economies in its path. It doesn't look so good from our perspective for the more traditional markets.
While the degree of certainty over a hurricane's track decreases as one projects further into the future, I believe the opposite holds true for Gold and Silver. I claim no prescience over tomorrow's Gold or Silver price, but my research continues to support an expectation that gold will surpass the $2,000 mark before this storm subsides and Silver will reach its all time high, well over $50 Oz.
I could point to technical analysis of Gold and Silver's contracting Bollinger bands and inverse head-and-shoulders formation, or the fascinating discussions and Elliott wave analysis that suggest an imminent breakout for both, but in truth Gold and Silver are about as predictable in the near term as Robin Williams with a movie script. Still, the irreverent speculator inside me can't help agreeing with John Embry, chief investment strategist for Sprott Asset Management:
"I think there is a very small probability that Gold will fall below $900 in the very near term. Monetary debasement is driving investment demand, western central banks are running out of available supply, eastern central banks, who are awash in dollars, want to buy and mine supply is cratering. We are close to lift off and the Gold price at worst will trade at several multiples of the current price."
Seasoned precious-metal investors maintain a staunchly long-term focus, and constantly hone their fundamental understanding to inform and tweak price expectations as the bull market roars onward. Choosing price targets will always be an exercise in speculation, and as with any storm those forecasts will remain subject to change, but that long-term focus is instrumental to success the way satellites are indispensible to meteorologists.
The truth is folks that you just 'gotta' step up to the plate and get involved. Buy into this market and create yourself a little sense of urgency. Fire all the guns up and begin to get motivated about the transfer of wealth that is occurring right now in front of your eyes. Silver and Gold are at the forefront of that transfer of wealth and I want you to take advantage of that.