Dear Those who dare to ponder
We analyse here, the case for a long position in my favorite (sometimes overshadowed) Precious Metal – Silver (XAGUSD)
It is first important to understand the history & Economics of Silver trading. As traditionally, Silver was commonly accepted as a monetary metal, but more nowadays its principal uses are for industrial purposes & derivatives trading.
Isaac Newton set the monetary relationship between XAU & XAG at 15.5 times when he was the master of the Royal Mint (nearly 300 years ago). However, today the ratio is more about 75 times.
Key Fact
Supply of mined Silver & scrap recycling materials total 980 million Oz.
VsDemand of Silver is currently around 1,080 million Oz. (About 25% being bars & coins)Silver Institute study. circa 2014. It is clear that the characteristic of this white metal is hard to substitute with others. So…. the price can increase somewhat without actually reducing the industrial demand.
What contributes to a rise in the metals?
The notional thoughts of growing uncertainties among the major currencies economically are priced in a rise of Gold. The yellow metals seen traditionally as a hedge against uncertainty, as from the (almost) 2,000 oz high at the peak of the recession.
Will the ongoing EU Crisis & a USD reversal warrant this long position?
It stands to reason that Silver will also rise, according to the Newton based relationship and Silver’s price volatility relative to Gold is about 2 times higher… So in a rising market… a good idea would be to get a leverage buy on Silver. As the ongoing uncertainties within the EU & fears of a USD (bull-run) end… Is beginning to interest buyers who are chasing a bottom of both Gold & Silver markets…. Of course, however is the price of Gold falls, the losses of Silver can be expected to correspond greater.
Following the end of the gold standard and its replacement with government currencies, there have been many occasions when gold ownership has been banned. Today this may seem unlikely, but confiscation may become increasingly possible if monetary conditions deteriorate in the future. As silver is predominantly an industrial metal, it should offer protection against this possibility.
Silver trading at 5 year lows…
Dynamics of the W,X,Y Elliot Wave Structure :
In 2014… Investor demand outweighed supply by $113M. With Silver ETF trust fund holdings holding now record level highs in supply… However, some analysts think such a robust & consistent demand for Silver is crazy… As you can see from the chart above “retail investors” kept buying silver as it kept falling….
From $49.50 in 2011 to $12.40 in the spot market… A new, sudden & brief 5 year low!
Metally speaking… Technologies are now replacing the demand lost from smart phones… & the industrial uses of Silver is now once more questioned… However, many people look at Silver as an “indispensable metal” from solar panels to “Silver” touch screens…
Furthermore, if you look at this market from an “Eagles eye”… the fact is that it looks historically cheap in terms of Gold. Being a noble metal, Silver does not rust or corrode… it is the most conductive of all materials for electricity… With Global growth… you can build a solid case for Silver’s long-term value… But as short-term traders now… When Silver moves… It really moves as the 19% day rally proved back in December 14. Sane investors can fast track their Silver buying spree & check outwww.atom8.com for the lowest possible costs.
Peace & Love Guys -Anish
Any questions, let me know & your feedback is most appreciated…
