After sputtering along for the bulk of the year, silver has finally broken through…
Moments after Janet Yellen came out and reaffirmed that interest rates would stay low, low, low for the foreseeable future, both gold and silver took their biggest jumps of the year.
And it happened fast: silver prices rose 30 cents in 90 minutes, and silver futures hit a three-month high.
With Iraq unraveling fast and concerns over the Russia-Ukraine situation escalating, investors have been sufficiently scared enough to start piling back into precious metals as safe-haven assets…
In addition to the global turmoil, equities have continued their march to new all-time highs, and many investors are starting to see a top for the stock market.
There are many signs for this; stocks are sporting extremely high price-to-earnings ratios and paying out historically low dividends — both signs of a market top.
These are all great factors for precious metals investing, and silver ETFs in particular saw a tremendous amount of volume.
The iShares Silver Trust (SLV) had more than four times the three-month average volume, and ETFS Physical Silver Shares (SIVR) was over five times. That just shows big investors are finally starting to throw money back into silver as a safe haven.
Both of those funds returned an average of 4.5% overnight. All told, SLV is up over 6% over the last week, breaking $20.00.
Our favorite silver trust, Sprott Physical Silver Trust (PSLV), saw an almost 6% jump in just those two days:
We’ve been waiting for this kind of movement all year. This is a great sign — investors are finally getting back into silver. But what should we look for going forward?
The fundamentals are still strong for a continued rebound. Demand is still setting records. The Silver Institute just released its latest report, which reveals that 127.2 million ounces of silver bars were bought in 2013 — an all-time high and more than double the year before. Purchases of medals and silver coins also hit a record of 118.5 million ounces.
Commodities research group CPM has also seen demand creep up in the industrial space. Its latest report shows silver demand from electronics and batteries reaching a record high of 221.7 million ounces by the end of the year.
CPM also pointed out that even with depressed prices, there are plenty of reasons to own silver, especially long term…
“There are many economic, political, and financial problems still at large in the world, and they are
likely to negatively affect stocks, bonds, and other traditional investments. Buying and holding silver as partial insurance and protection against these hostile developments still makes sense, and represents
part of a sound investment strategy.”
So while we’re not necessarily backing up the truck quite yet, we are adding to our position in anticipation of a strong move up over the next year.
We think of silver as a long-term, buy-and-hold investment. We don’t typically sit around waiting for one big event or watching the daily news and technical analysis.
But there is one event for which we’re making an exception…
We are waiting with bated breath to find out what exactly is going to replace the London silver fix benchmark. As we told you last month, the ‘silver fix’ is shutting its doors on August 15th, and all precious metals companies involved in the trade are scrambling to figure out exactly how to price silver.
For 117 years, the daily silver price was contrived by a group of bankers who met at noon every day. Once they conspired with one another either in person or, eventually, over a phone call, they decided what they thought the price should be and published their consensus to the markets.
Most recently HSBC, Deutsche Bank, and Scotiabank were the three banks that made the call.
Now that the benchmark is going away, precious metals associations are scrambling to come up with a replacement. As I write this, the London Bullion Market Association is holding a seminar to consider ideas from many of the precious metals market’s main players.
They plan on announcing their final decision in July. We’ll bring you the news as it breaks.
In the meantime, I’d like to stress that an investment in silver is a long-term strategy, and we’re plenty confident that silver is a steal at these prices. And readers of The Crow’s Nest will be reaping double the gains as it rises.
