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If you believe in gold, invest in silver

There are signs that UK investors might be turning into silver bugs.

 
If you believe in gold, invest in silver

The case for investing in silver rather than gold has been made for decades - mainly in the US where silver investors seem to have formed a powerful lobby group - but now there are signs that silver might be catching on in the UK.

Investor interest in silver has accelerated over the last five weeks according to BullionVault, the UK’s biggest online provider of physical gold and silver accounts. BullionVault, which holds over £635 million of physical gold and silver for clients, mostly based in the UK, said the number of people opening silver accounts had increased by 23% with around 500 registrations.

Meanwhile the number of shares issued by ETF Securities' Physical Silver exchange traded fund (ETF) - included in Citywire Selection analysts' favourite commodities funds - increased from 25.7 million shares to 27.7 million between August and October, a 7.5% increase in the number of shares representing 61 tonnes of silver. ETF Securities also has a much smaller silver ETF listed in Australia which has seen the number of shares - and therefore the amount of metal in the fund - leap by 22% or three tonnes since August.    

Adrian Ash, head of research at BullionVault, said: ‘People who buy gold do so because they are fearful about what they think is going to happen to other assets. People who buy silver are acting very much more on a capital gains motive.’

He said that silver was not a safe-haven because while it rises faster than gold, it also tends to fall further. This volatility is particularly obvious over the short term as this chart shows.

As such investors are not buying silver to protect themselves, it is more a case of speculation or greed than is the case with fear-based gold investments. Ash said: ‘See the post- Lehman’s slump. Gold dropped by a third from top to bottom in 2008 but silver lost two thirds.’

According to Ash, one of the reasons for this volatility is that the silver market is much smaller than gold and so any buying or selling will impact prices more significantly. He said: ‘Turnover in the London silver over the counter market [where banks and institutions make large individual deals] is a twentieth of the size of the gold bullion trade. Daily dollar volumes on Comex [the US futures market] are five times greater in gold than in silver.’

This difference is also reflected in BullionVault’s gold to silver holdings. Despite the new interest in silver, the value of Bullionvault’s silver holdings are still dwarfed by its gold holdings with 85 tonnes of silver, worth about $65 million, and 21 tonnes of gold worth $924 million.

The case for silver depends very much on the case for gold. Ash said that figures over the last 42 years showed that for every 1% move made by gold, silver had moved 1.75%. However, there are concerns that the market may be subject to price fixing. US regulators have investigated complaints for two years but have yet to release their findings.

Although gold and silver prices have taken a knock over the last few days Ash believes that emerging market demand, particularly from Chinese households, should prevent a collapse in prices. According to WGC research, the Chinese investor could soon overtake the Indian market as the world's largest. Ash said: 'In the 30 months between January 2008 and June 2010 alone, according to WGC data, private households bought more gold (1057 tonnes) than the central bank reports in its entire hoard (1054 tonnes).' 

He added that the run-up to Christmas in the west was also traditional gold buying season.

12 comments so far. Why not have your say?

SilverDog

Oct 25, 2010 at 10:27

The biggest factor in the silver price volatility has been the monstrously huge uncovered shorts thrown at the market by the big commercials JP Morgan and HSBC. This is a fundamental issue, yet isn't even mentioned, leading the uneducated to assume silver is intrinsically volatile. Moves are afoot to end the cosy, US-government approved manipulation of silver prices which will change the whole ball game in favor of far higher prices. I also think it was inept to not even cover the huge amount of physical silver being bought up by private citizens, which is currently giving the LBMA and COMEX nightmares.

Hence an article lacking in fact, imho.

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mike spenser

Oct 25, 2010 at 11:44

Silver must be half price at the moment. Will it stay cheap, I do not

think so. Plus there may be a Bunker Hunt waiting in the wings.

I do not know anything anywhere that will depress the Silver price.

Also my 64yrs are telling me it will rise much further from here.

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Olympia

Oct 25, 2010 at 20:06

Silver Dog is correct about the suppression of the spot silver price. This has occurred for years through naked shorting of silver by JPMorgan, HSBC and other big money centers. The CFTC has sanctioned this activity because it has been bought off by the big boyz. What else could explain why they never enforce the rules and regulations that have been in place for decades. Like a coiled spring, when the shorting of silver ceases (for whatever reason) the price of silver will explode well beyond $50 per ounce. No one knows when, because the corruption in the world's financial sector is embedded so deeply that only a dramatic event of some kind will unshackle the suppressed price of silver.

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Chris McDaniel

Oct 25, 2010 at 20:20

I second Silver Dog's viewpoint. Governments manipulate gold and silver prices and one of their weapons is gold and silver ETFs. Most ETFs don't have the metal they claim to have, altho some do, and most have language in the prospectus that says you can't have the gold or silver anyway. If you are truly interested in gold and silver as stores of value, whch they both are, then begin reading GATA.org and see the hard documented evidence uncovered in the past 10 years on government manipulation of gold and silver. Why do governments manipulate gold and silver prices? Because gold and silver are sworn enemies of paper money, first hand defenses against the inflationary tyranny of central banks, and the only money that has survived 6,000 years of failed government-run economies. Ergo, governments hate the stuff and seek to depress it. And who is the prime accomplice to government in this criminal scheme? The answer is the media, willing to overlook the documented facts, or too lazy, unwilling or too stupid to do its own research. Gold and silver are not going up in value. It's paper money that is going down in value. I cannot understand why anyone would choose to own paper shares of gold and silver when they can own the real thing. Worried about thieves and criminals stealing your wealth? Then start worrying about banks, governments and most ETFs.

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John H Baker

Oct 25, 2010 at 23:08

Wow....looks like you guys across the pond have this silver thing pretty well figured out.....I agree with you 100%.....

Now, how about the press telling us what really happened to Andrew MacGuire back in March 2010, and the identity of the thug who tried to kill him...

I just hope your government isn't in on the "fix" too.

John B

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Peter Jason Taylor

Oct 25, 2010 at 23:16

We all agree so far.

If I am to remain a contrarian I shall have to change my mind.

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Victor Meldrew

Oct 26, 2010 at 00:52

I've got a few shares in Arian Silver in my SIPP, but there don't seem to be many others that could go in it. I've read that you should not trust some silver ETFs but I don't know how seriously to take that. I would like to find a good investigation of the market manipulation by someone with no axe to grind.

BTW there's a good article in the latest Money Week which links a rising gold price to negative real US interest rates.

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Chris McDaniel

Oct 26, 2010 at 02:37

OK, Victor Mildrew, here you go. The only axe to grind here is the free market fair price axe. If you (and the lazy financial media) really want to know what ETFs are up to with invested money, take a look at this GATA preamble to the Solari article and then see the well researched Solari study itself: :

Are leading precious metals ETFs based on undisclosed conflict of interest?

Submitted by cpowell on Mon, 2010-05-03 22:27. Section: Documentation

6:25p ET Monday, May 3, 2010

Dear Friend of GATA and Gold (and Silver):

Do financial houses HSBC and JPMorgan Chase & Co. have a conflict of interest in serving as custodians of the metal held by the major gold and silver exchange-traded funds, GLD and SLV, even as those financial houses are themselves holding major short positions in the precious metals? And does the failure of the prospectuses of those ETFs to note the short positions of their metal custodians constitute a material omission in violation of U.S. securities law?

Those questions are raised today in a compelling report written by Catherine Austin Fitts, founder and managing member of Solari Investment Advisory Services LLC, publisher of The Solari Report (http://solari.com/store/the_solari_report/), and a member of GATA's Board of Directors, along with her lawyer, Carolyn Betts.

Fitts and Betts note the increasing evidence that more claims to gold and silver have been sold than there is real metal to fulfill them. Of course GATA long has expressed skepticism about the precious metals ETFs and has wondered whether they are used in part for market manipulation, to make investor-owned metal available for shorting and price suppression at strategic moments, against the interests of the ETF investors.

The Fitts-Betts inquiry is titled "GLD and SLV: Disclosure in the Precious Metals Puzzle Palace" and you can find it at the Solari Internet site here:

http://solari.com/archive/Precious_Metals_Puzzle_Palace/

CHRIS POWELL, Secretary/Treasurer

Gold Anti-Trust Action Committee Inc.

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Francis Wilkinson

Oct 26, 2010 at 10:52

Don't confuse pieces of paper in the form of share certificates of profitable,producing companies holding vast reserves of precious metals under the ground with paper currencies. When the price goes up say 10% THE PROFITABILITY CAN GO UP 25% THANKS TO OPERATIONAL GEARING (assuiming fixed costs are stable). No security or insurance issues. I like stocks temporarily out of favour. African Barrick Gold is a great current example(produces silver also) of an oversold stock in a great area.

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Chris McDaniel

Oct 26, 2010 at 16:32

Hey, lazy financial media, have a looksee: This story on the Reuters Wire Tues Oct 26, 2010. Bart Chilton is one of the federal regulators (CFTC) who oversees segments of the gold and silver markets. He has been promising to make a statement for several weeks if in fact he foresaw the US Federal CFTC doing nothing after two years of 'investigation.' When he says 'attempts to influence prices', he means people stole money from investors.

Oct 26 (Reuters) - There have been repeated attempts to influence prices in silver markets, Bart Chilton, a commissioner at the U.S. futures regulator, said on Tuesday.

"There have been fraudulent efforts to persuade and deviously control that price," Chilton said in prepared remarks before a Commodity Futures Trading Commission meeting.

Chilton said he could not pre-judge the outcome of the CFTC's ongoing investigation of the silver markets, but said public deserves some answers to their concerns. ral

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Victor Meldrew

Oct 26, 2010 at 20:43

Thank you, Chris McDaniel, for the text and link you posted. I cannot find the opposing case, and I like to doubt, though in a respectful way. In terms of investment, I have avoided silver ETFs and gone the 'shares' route. I'm hoping (quite selfishly) that there really was huge manipulation and that the effect of it is still to unwind. Also I cannot see much downside if that is not the case.

I hope that isn't so lukewarm as to be annoying, I'm only trying to do the best I can with my laptop, internet connection, and however many of my brain cells that have escaped pickling.

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John Day

Mar 30, 2011 at 15:50

I have been studying the silver and gold manipulation and its apparent to me all of the big money players are involved, and are interwoven in a way that each has to stand by the other or the whole sceme is exposed and the entire rotten card deck collapses. So which player will admit the truth and expose all the other players? (players is a polite word for criminals and crooks), which they all are. The nation I loved and fought for has turned over its money control to a elite group of bankers called the Federal Reserve, in 1933, when it signed the Federal Reserve Act, who now siezes control of the whole media, political, judicial, and military systems of the United States and the world. Scary stuff, your dam right it is..So what can be done? Anyone have a answer?

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