China Industrial Commodities Collapse As Sentiment Tumbles To 15-Month Lows

Unlike the QE-lite-driven exuberance in Chinese stocks of the last few weeks (which faded dramatically overnight), China’s industrial commodities (with near-record inventories) and seeing prices collapse. This may shock some who espy PMIs and government-created trade data and proclaim, China is fixed. In fact, as JPMorgan’s China Sentiment Index (JSI)shows, things are anything but bright as it fell to the lowest since June last year (at 48.3 in August). Sales and margins are tumbling – despite supposedly lower input costs. Lastly, those focused on spot Yuan movements (strength in recent weeks) have suggested this also confirms China strength – inflows – but looking out 12-months shows the market is expecting a dramatic devaluation from current levels in the Chinese currency is coming.

This post was published at Zero Hedge on 08/26/2014.

India Imports 2559 MT Silver In 5 Months

While silver has been widely used as money in history, at the beginning of the 19th century gold became the dominant metal in trade. At the end of the 19th century central banks erupted around the world and began holding gold in reserve to back their currencies, the international monetary system in this period is known as the classic gold standard. When the last remnants of the gold standard were officially left behind n 1974, and the world was on a fiat standard, central banks held on to their gold. This can only be explained as insurance in case the fiat standard wouldn’t succeed, concomitant admitting there is a reasonable chance fiat money will fail.
Nowadays central bankers sporadically tell us about the true function of gold in the international monetary system. This is only logic if one realizes they (/the US) preferred to minimize the role of gold, in the hopes the fiat standard would provide them maximum flexibility to manage the monetary system. Jelle Zijlstra, president of the central bank of the Netherlands from 1967 to 1982, wrote in his autobiography of 1992:
Gold as the monetary cosmos’ sun.
To analyze gold’s gravity in its ultimate role as the sun in our monetary system I try to be acquainted with all the planets in orbit, black holes nearby and comets crossing the solar system. For example: foreign exchange markets, inflation, quantitative easing, too big to fail banks, derivatives, oil, geo-politics, the media, technical analysis, commodities and silver. I certainly do not pretend to be an expert in all fields (the cosmos), but to make a long story short; while always attributing more importance to gold I recently decided to pay more attention to the global silver market. Few events happen in isolation these days and I did some interesting findings with regard to the silver market worth digging into. In this post we’ll be examining some data from India.
Silver Because of the pressure on the current account deficit the Central Board of Excise and Customs of the Indian Government, raised the gold import duty in January 2013 from 4% to 6 %, in June to 8 % and in August to 10 %. The silver import duty was raised in January 2012 from 1,500 Rs/Kg to 6 % of the silver price and in August 2013 to 10 %. Since the import duties, or tariffs, were raised, the price of gold in India developed a higher premium (excluding the import duty) than silver, as can be seen in the charts below.

This post was published at Bullion Star on 21-08-2014

Physical Gold & Silver Activities Are Revealing (Part 2)

May 13, 2013

In the first five months of the year, the physical movement of precious metals in the wholesale arena has been a bit precarious. Physical gold holdings seem to be depleting, while silver holdings are growing. In our first pair of charts, the so-called COMEX-approved warehouses have seen a dwindling of gold to the tune of 3 million ounces. On the other hand, the warehouse inventories of silver have grown by 22 million ounces. (Click on charts to enlarge.)

Daily Change in Physical Gold Held by COMEX Warehouses
Daily Change in Physical Silver Held by COMEX Warehouses

JP Morgan’s bullion depository can account for about half of the depleted 3 million ounces of gold, which is not surprising given their futures activity. Combined with the activity over at the Scotia Mocatta depository, 90% of the physical off-take of warehouse gold inventories are identified.

Daily Changes in JP Morgan’s Gold Bullion Depository
Daily Changes in Scotia Mocatta’s Gold Bullion Depository

But since JP Morgan is issuing the majority of gold deliveries in the futures market, why isn’t all the gold coming from their own vaults? Why involve Scotia Mocatta? Are they partners in this effort?

Now let’s take a look at the diversion of the two most popular precious metal ETFs, GLD and SLV. Since the beginning of 2013, the GLD ETF has reduced its physical gold holdings by 9 million ounces. During the same period, the SLV ETF had grown its physical silver holdings by 21 million ounces, though in recent weeks SLV has also shown signs of diminishing physical holdings.

Daily Change in GLD Physical Gold Holdings
Daily Change in SLV Physical Silver Holdings

On top of the physical migration, there also seems to be growth in the naked shorting of these funds. In the last month, the number of shares that have no physical backing has almost doubled for both GLD and SLV.

Number of GLD Shares Short
Number of SLV Shares Short

Ted Butler has pointed out numerous times that the existence of these shorted shares could indicate that the funds are reneging on their fiduciary responsibility to maintain sufficient metal backing. Furthermore, the short situation allows market prices for the metal to remain suppressed because the funds are refusing to purchase the metal, opting instead to allow naked shorts to exist for extended periods. Nevertheless, those shorted shares represent 1.5 million ounces of gold and 5 million ounces of silver that are missing from the physical equation.

An obvious observation here is that the naked shorting is making the physical off-take in GLD look worse than it actually is, while the build-up in SLV is made to look less impressive.

Still, the 9 million ounce reduction of physical GLD holdings (even if the naked shorts are taken into consideration) presents a quandary: Just where did that physical gold end up? Because at least up until today, those ounces have not shown up in any of the visible markets. It either never existed in the first place, was secreted off to some foreign location, and/or now exists in some mighty strong (and quiet) hands, like those of JP Morgan. (It is an interesting coincidence that Germany’s request to repatriate its gold included 300 tonnes held by the New York Fed.)

Physical Gold & Silver Activities Are Revealing

May 14, 2013

The Volcker Rule was supposed to be implemented and enforced by now. As part of Dodd-Frank, the rule set out to establish limitations on proprietary trading by financial institutions. But the “big banks” have successfully delayed its implementation. The “Too Big to Fail” industry is not only making money with their prop desks, but also helping to keep the illusion of a sound dollar. Using evidence provided by, of all places, the CME and its daily delivery reports, one particular firm is shown to be isolated in the efforts to keep precious metal prices contained.

Every trading day, the CME releases a report like this one, identifying the details behind all futures contracts being executed for physical delivery.

So who’s doing the selling and who’s doing the buying?  Data from these reports show that since at least the beginning of 2013, JP Morgan has been on the opposite side of the trade against most of the other players in gold and silver.

These first pair of charts show the net daily change in physical deliveries by all futures traders who are either issuing (delivering) or stopping (receiving) metal, excluding JP Morgan’s client and proprietary trading desks. (Click on the charts to enlarge.)

Daily Change in Net Gold Accumulation via All Futures Trading Entities other than JP Morgan
Daily Change in Net Silver Issuance via All Futures Trading Entities other than JP Morgan

If JP Morgan’s activities are ignored, on a net basis there’s more accumulation of physical gold rather than selling and that trend has consistently grown since the beginning of the year. For silver however, it’s the opposite – more selling of physical silver than buying.

Now let’s find out who everyone is buying gold from and to whom much of that silver is being delivered. The following pair of charts show the same data, limited only to JP Morgan’s client & proprietary trading desks.

Daily Change in Net Gold Issuance by JP Morgan
Daily Change in Net Silver Accumulation by JP Morgan

These charts are perfect mirror opposites, which is expected since the issues and stops for every trading day should always be a zero-sum result. But what is alarming is the consistency of the trends and the magnitudes of the issues and stops. One entity has been steadily increasing its supply of gold to the market, which now stands at 2.2 million ounces. That’s over 70% of all the gold deliveries year-to-date (about 3 million ounces). And that same entity has taken a net delivery of 4 million ounces of silver from other traders, which is less intensive as it only represents 10% of the 35 million ounces delivered year-to-date by the entire market.

Let’s break it down further. JP Morgan’s prop desk has a net issuance of 1.5 million gold ounces since the beginning of the year. That represents 50% of the total gold deliveries year-to-date. And in silver, they had been buyers until April 29 when they issued 7 million ounces from their proprietary account. On April 29th, that 7 million ounces represented 25% of the 28 million total ounces of silver delivered by the market year-to-date. (It’s interesting to note that it was also 100% of all the deliveries made that day!)

Daily Change in Net Gold Issues by JP Morgan’s Proprietary Account on the Futures Exchange
Daily Change in Net Silver Issues & Stops by JP Morgan’s Proprietary Account on the Futures Exchange

JP Morgan’s client account has issued nearly 700K gold ounces so far this year. Their clients’ silver stash, however is still accumulating.

Daily Change in Net Gold Issues by JP Morgan’s Client Account on the Futures Exchange
Daily Change in Net Silver Issues & Stops by JP Morgan’s Client Account on the Futures Exchange

In their gold trading, it doesn’t look as if JP Morgan is trading against their own clients. On the contrary, they seem to be working in concert. But in silver, their prop desk hasn’t made a move since the first day of the May contract delivery, when they dropped those 7 million silver ounces. A large chunk of that went to their own clients, who’ve continued to accumulate in the first weeks of May.

So here we have physical evidence beyond that which has been continually displayed in the CFTC’s COT & BPR reports. The same conclusion can now be reached via the physical or paper market perspectives.

Just imagine if JP Morgan’s prop desk had been terminated as the Volcker Rule went into affect. Who would have supplied all that gold to the market? Without the prop desk, the futures contracts would have been distributed more evenly across the market. There’s no doubt that prices of precious metals would be a lot higher without JP Morgan’s concentration.

We invite readers to verify all this for themselves. Historical reports may be difficult to find, as the CME’s web site doesn’t appear to make them available, though they do provide high-level summaries by month and year-to-date. But here’s a zip file containing all their daily reports since the first of the year, which give all the juicy details.

Read part 2 of this gold and silver physical situation.

FERC Suspends JP Morgan’s Power Trading Unit

JP Morgan ChaseJP Morgan’s electricity trading desk will essentially be sidelined for 6 months next year because of actions taken by the U.S. Federal Energy Regulatory Commission (FERC).  According to the Los Angeles Times, the regulations authority accuses JP Morgan of misrepresenting facts and filing false information in its reporting and communications with the California Independent System Operator known as Caiso.

This all stems from August last year, when FERC started investigating JP Morgan Ventures Energy Corp. for alleged abusive bidding activities and potentially manipulative trading practices in the energy markets. Then, earlier this year in July, FERC sued JP Morgan because it had refused to turn over internal emails FERC had requested during its investigations.

Of course JP Morgan officials deny any wrong-doing, excusing any reporting deficiencies as inadvertent mistakes that were made in “good faith.”  But in its decision, FERC states “no showing of the respondent’s intent or mindset is necessary in order to demonstrate that a violation” has occurred.

So here we have a regulatory agency that has the integrity and courage to stand up to the banking giants when they see clear violations and market manipulation. If only the CFTC would take notice. In their 4+ years of investigating the alleged silver market manipulation by JP Morgan, nothing has resulted.

In his letter to subscribers, Ted Butler included the following:

While we hear excuses from the CFTC about the need to prove intent before bringing charges of manipulation against JPMorgan in silver, FERC insisted that intent was a side issue. FERC’s got it exactly right, in my opinion. If someone is messing with the market, there is no need to pussy foot around intent; stop the messing around first and then sort out the details later.  We can decide in time if JPMorgan is manipulating silver intentionally or by accident; the important point is to first stop the manipulation. Not every homicide is premeditated and to be prosecuted as murder one; some homicides are manslaughter and not premeditated. That doesn’t mean we tolerate people killing people if the intent isn’t clear. Likewise, JPMorgan is clearly manipulating the price of silver by virtue of their concentrated short position and status of being the dominant seller of new short contracts. First the CFTC should make them stop; then charges can be decided upon.

 But then again, there aren’t any FERC members within the inner circle of elite central planning known as the Plunge Protection Team.

An Opinion on Clive Maund

June 8, 2012

After the precious metals were hit hard after reaching a high of $1920/ounce on September 6, 2011, the market has been in a mini-bear mode ever since.  The fundamentals for high precious metals prices were still in place and indeed they are even stronger today.  So, what caused the rout?

Through other reading on the net, I got word that Clive Maund had successfully called the price decline in advance for his subscribers.  I had also heard that he had previously correctly predicted the May 1, 2011 silver smack down.  I thought perhaps my negative judgements on technical analysis were premature and that maybe I could learn something from this prospective sage.

So I decided to try his service.

After signing up, he did correctly call the bottom and advised his subscribers to get out of their short positions at pretty much the perfect time.  However, since then, Clive’s success rate reveals that he’s no sage – indeed, he and his unwitting subscribers are more likely the poor stooges on which the commercial players are feeding.

Admittedly, the markets since September, 2011 have been difficult, especially for buy-and-hold investors.  Volatility has been extreme and it’s been a trader’s market, if anything.  The problem for Clive’s subscribers is that he changes his mind frequently and it’s not always clear whether new positions are in addition to or instead of older positions.  When the trade goes bad, he’s rather silent, even leaving his subscribers in the dark.  But when a call ends up to be correct, he’s quick to advertise.  In fact, sometimes he advertises his calls in reports available to the general public, usually when subscribers already have their positions in place, but not always. Specifically, more than one time he has reversed a decision and went public immediately, before subscribers were able to get out of their positions, leaving them potentially exposed to opposing actions by public readers of his report.

A good example of silence after a bad call was Clive’s alert on the natural gas sector in the beginning of February 2012. His charts showed a major reversal coming in the sector and advised subscribers “buy aggressively.”  To be fair, the report advised that stop-losses be set “directly below support” shown on the chart.  Still, after recommending buying natural gas along with specific investments in GaStar Exploration (GST), United States Natural Gas Fund (USNG), and ProShares Ultra DJ-UBS Natural Gas ETF (BOIL), when the market went the opposite direction almost immediately, not one word from Clive to subscribers went out.  He assumes his subscribers’ stop-losses were set and gives no further report on what happened or why his original analysis was incorrect.

If Clive has a gift, I would guess that it lies in reading charts and converting that analysis into some technical perspective.  But he doesn’t stick to that technical analysis alone – he utilizes the emotional economic backdrop of the European/American crisis to justify his chart analysis.  In fact, his alerts to subscribers frequently portray the same scary themes one would expect from free services such as Bloomberg or ZeroHedge.

With all the problems in Europe at present, Clive’s calls have been echoing all the terror evident in the blogosphere. The emotion has run high in his reports on the precious metals markets.  Twice in less than a month starting at the end of May 2012, in his effort to show an imminent price explosion to the upside for precious metals, he’s used the term “This is it!”  His advice was to go long on GLD and SLV call options and even the 2X and 3X silver vehicles like AGQ and USLV.  Unfortunately, both times the prices went the other direction, causing him to send out a warning on possible price declines even further. And worse for his paid subscribers, his last warning was open to the general public – again making it even more difficult for subscribers to get out of their positions with minimal losses.  Just what are subscribers paying for, anyway?

Now, stepping back and looking at Clive’s technical analysis over the past 8 months, I have to wonder if chartists like Clive and their subscriber-sheep are really the patsies that the commercial traders have been fleecing in their market manipulations. When the simple folk invest in 2X and 3X gold and silver ETF vehicles, or take options positions in GLD or SLV, just who is taking the opposite side of those investments? Could it be the same small and large speculators in the commodities futures/options markets that always seem to get fleeced by the commercial institutions?

According to Ted Butler, who’s been studying the commodity futures/options Commitment of Traders (COT) reports for more than 30 years, commercial traders manipulate the market against the small and large technical traders whenever they smell blood – that is, when the commercials have a net short position and the the technical funds have a net long position. They ‘manage’ the market lower and trigger the technical funds’ stop-losses forcing even lower prices as the technical funds sell their positions.  The commercial traders easily soak up all these contracts at a profit on their short positions.

Could it be that those small and large speculators are selling equities and options in the stock markets to the sheep, then taking the proceeds and buying commodity futures contracts with leverage?  Under this scenario, it’s the sheep, not the small and large commodity futures speculators that end up being fleeced – they’re only ‘betting’ the money they got from the sheep. But if the sheep end up making money, the small and large commodity speculators make even more money because they have leverage on their futures positions. So that’s the motivation for the small and large speculators to keep coming back for more in the rigged futures markets – they’ve got nothing to lose and much to gain.  It’s the sheep that always end up losing.

The prices of precious metals are currently set in these commodities futures markets. It is a paper contract that is traded, NOT the physical metal. This ‘mechanism’ cannot last forever.  At some point, the physical metal will become too scarce.

Conclusion: It would be much better if the sheep stopped following the advice of clowns like Clive, using paper vehicles to trade in the precious metals markets.  Instead of buying ETFs like GLD, SLV, USLV, AGQ, or worse buying commodity futures/options contracts with leverage, investors should go out and buy the physical metals.  When the physical metals are no longer available in the marketplace, the prices will have nowhere to go but up!  Until this happens, the commercials and trading institutions will continue to reap most of the paper profits.

Contact the author, JonK or comment below.

Eric Sprott on CNBC

Eric Sprott is interviewed on CNBC and gives some new perspectives on gold and silver investing for main-stream viewers.  He mentions how the central banks of the world do not like to see the price of gold go higher because that would be a sign of the true weakness in their fiat money as they continually print more to fight the contagion in their economies.  He also expects silver to out-perform gold and gives some interesting statistics for his reasoning.

Precious Metals Crash

The precious metals investor has to ask, “Why?” All the fundamentals that made gold and silver rise to the highs they saw in August are still in place. How can it all be erased in 3 days?

First of all, looking at a multi-year chart of gold performance, one can immediately see that the price rise was ascending at a much accelerated pace since July. Here’s the GLD chart which exemplifies this pattern.

Two year GLD chartThere were good reasons for gold to take off like it did – as political and economic problems persisted in Europe, the middle east and the U.S., things were looking bad. And nothing’s changed. In fact, much has gotten worse! For example, the Swiss have effectively pegged their currency to the Euro, which means there isn’t any true safe haven currency to flee to anymore. In the face of all that, why the sudden plunge in precious metals?

The “leap” in the slope shown in the graph above is more speculation of future prices, rather than an indication of current prices. And the markets love to take advantage of speculators on both the long and short sides when they can make money from it. And that’s exactly what’s happened here.

There isn’t a bubble in precious metals. Gold and Silver will continue to rise until the governments of the world stop their incessant spending programs and central banks stop accommodating them by printing paper money at will.

There are two levels of investing going on here:

  1. Speculators on the long term trend of gold and silver due to the fundamentals;
  2. Traders taking advantage of short-term, irregular trends in the market.

Keep your cool & stay the course. Watch the trends for good times to buy back into the market (like RIGHT NOW!!!!)

 

Buying Silver-Based ETFs

Using ETFs to Participate in the Precious Metals Bull Run
The number of available Exchange Traded Funds (ETFs) has dramatically increased over the past decade. They allow the common investor to participate in classes of investments that used to be accessible to a select few, specialized investors & institutions.

But the relative ease and convenience of an ETF doesn’t necessarily mean they are safe investments. In fact, quite the opposite – they can be quite volatile. And since they are a derivative of the underlying asset or financial instruments, every investor should understand that the ETF does not yeild any ownership of anything but a share of stock. (It is not as if the underlying asset or financial instruments are being purchased.) At best, any ETF can only propose to have similar price-performance compared to the underlying instrument.

While it is true that some ETFs provide for the exchange of stock shares for the underlying assets, this option is closed to most investors simply due to the minimum number of shares necessary to execute such an option.

Any investor wishing to participate in the precious metals bull market by utilizing the ETF arena should understand that it is not the same thing as owning precious metals. Instead, it’s a paper asset and should be treated as such. It should also be realized that all ETFs are not managed the same, nor are they even structured the same. On top of that, given any specific ETF, there will always be varying opinions among different analysts regarding the validity and expected performance of that same ETF. As an example, here’s an article discussing and comparing some of the prospects of the GLD, SLV, PHYS and PSLV ETFs.

When it comes to ETFs based on precious metals, there are a variety of different types:

  • Standard ‘bull’ ETFs linking the price of one share to the price of a specific amount of a precious metal. The price of the shares tend to move more or less in synch with the underlying metal’s price movements.
  • Standard ‘bear’ ETFs also linking the price of one share to the price of a specific amount of a precious metal. Only the share price tends to move in the opposite direction of the metal. (The share price goes up if the price of the underlying metal goes down.)
  • Leveraged ETFs seek to give double (or sometimes triple) exposure to share price movements of twice (or more) the amount of the underlying metal. Again, these can be either bull or bear type exposure. (Incidentally, these leveraged ETFs are becoming quite a concern to market regulators in Washington. A derivative of a derivative of the underlying asset doesn’t seem so friendly to free markets. This related article discusses the dangers of the derivatives market.)

Below are some of the more popular ETFs in the precious metals space. Please note that this list is not comprehensive and these are not recommendations, but provided for informational purposes only.

ETF Asset Description
GLD
Gold
SPDR Gold Shares tends to have share-price performance similar to the price movements of gold.
SLV
Silver
iShares Silver Trust tends to have share-price performance similar to the price movements of silver.
PHYS
Gold
Sprott Physical Gold Trust tends to have share-price performance similar to the price movements of gold.
PSLV
Silver
Sprott Physical Silver Trust tends to have share-price performance similar to the price movements of silver.
SGOL
Gold
ETFS Physical Swiss Gold Shares tends to have share-price performance similar to the price movements of gold.
SIVR
Silver
ETFS Physical Silver Shares tends to have share-price performance similar to the price movements of silver.
CEF
Gold & Silver
Central Fund of Canada tends to have share-price performance similar to the price movements of a proportional amounts of gold and silver.
UGL
Gold
ProShares Ultra Gold tends to have share-price performance similar to twice the price movements of gold.
AGQ
Silver
ProShares Ultra Silver tends to have share-price performance similar to twice the price movements of silver.
GLL
Gold
ProShares Ultra Short Gold tends to have share-price performance similar to twice the price movements of gold in the opposite direction.
ZSL
Silver
ProShares Ultra Short Silver tends to have share-price performance similar to twice the price movements of silver in the opposite direction.

Buying & Storing Silver Online

Online Purchase & Storage of Precious Metals
 

The technology available in today’s world certainly makes things more convenient. Using the Internet, everyone can now transact just about anything online. This includes the purchase and storage of precious metals.

In evaluating the different online precious metals services, one must consider at least the following criteria:

    • The service provider should have a track record that can be verified. Make use of the world-wide-web and search for news about the provider that may indicate financial or fraudulent activity. For providers in the U.S., you can check with the Better Business Bureau to see if anyone has lodged complains or if there are any lawsuits pending. In any case, do the homework and due-diligence necessary prior to investing. (And that is true for any investment.)
    • Geographically speaking, where does the provider store the metal? What are the political environments like in those countries where their vaults are located and what are the chances of government seizure of the precious metals held in those vaults? Some providers offer several different vaulting options, thus providing for geographical diversification and exposure to more than one country-specific market.
    • What are the fees associated with buy and sell transactions? It is normal for companies to charge commissions and fabrication fees, but excessive fees should be guarded against. A combined transaction fee of less than 5% is reasonable. Anything larger, depending on the situation, should be questioned. The fee structure should be understood prior to making any investments.
    • What are the storage fees? And on what basis (monthly or annual) are they charged. What form do the storage fees take? (Do they require a cash deposit to be held, or do they simply deduct a portion of the metal stored in their vaults from your account?
    • How closely to the provider’s spot-rate quotations for the prices of their metal compare with the overall precious metals market? This varies greatly among providers and should be understood prior to investing.
    • Another thing to look for is that the provider should regularly be publishing results of independent audits showing that they do indeed hold the precious metals they claim on behalf of their clients.
    • Finally, and this one is extremely important, there should be some method the provider offers to allow the cutomer to take physical delivery of the metal if desired. Not all providers offer this, which would make them an electronic-only bullion dealer. The terms under which a physical delivery can be requested as well as the fees involved should be completely understood prior to making any investment.

There may be other considerations depending on the investor’s needs, but this should serve as a necessary first line of thought to be given to this type of investment.

Below is a table comparing the author’s personal experience with 3 of the more popular and reputable precious metal online storage providers.


SilverSaver(R) - Save Physical Silver and Gold
Positives:SilverSaver® is unique in that it offers its customers Rewards, which is a program that pays people for signing up friends and family.

  • Every time a referred client makes a purchase, the SilverSaver® Rewards program ensures that the referrer gets a small ‘kick-back’ (in gold or silver).
  • SilverSaver® stores it’s metal at First State Depository located in Wilmington, Delaware.
  • Easy sign-up. Adding bank accounts for transfers is easy too!
  • Customers can purchase either gold or silver on a one-time basis or on a recurring schedule.
  • Customers can sell their precious metals for cash at the daily SilverSaver® Base Rate without any fees or commissions. This is much better than other providers & dealers, which typically take 3-10% of the final sales amount!
  • Customers can take delivery of their gold or silver in many different forms (each having their own associated fabrication fees).

 

Disclaimer: The author of this article is using the SilverSaver® Rewards program and if you click through these links provided to SilverSaver® and create an account there, the author will benefit, but there is no extended cost to you.

Negatives:

  • SilverSaver® seems to be only available to U.S. and Canadian customers.
  • The storage fees seem reasonable (0.02%/month), but their premium (the amount the customers pay on top of the price of the physical metal in order to cover expenses and commissions) is based upon a graduated scheme, currently ranging from 2.99% to as much as 7.49%. But this amount is a combined amount over a two month period, so the more the customer buys, the premium rate gets better.
  • The SilverSaver® Base Price changes every business day according to the real physical market. SilverSaver® indicates that it is “historically comparable to internationally recognized silver prices such as the London Daily Fixed and the Handy & Harman Daily Fixed prices.” When a customer places an order, he/she only has an approximation of the Base Price they will end up paying for the metal. This is due to the fact that when an order is submitted, the actual Base Price for the date of purchase hasn’t been established yet. This may not be suitable for all investors, but for those wishing to utilize Dollar Cost Averaging during this precious metal bull run, it is a good investment mechanism.

GoldMoney. The best way to buy gold & silver
Positives:Once past the initial hassle of getting a GoldMoneyaccount set up (see below), the investor is rewarded with a vast array of investment options.

  • It is possible to invest in gold, silver, platinum & palladium.
  • Trading markets and vaults are globally dispersed – located in London, Zurich & Hong Kong.
  • Two different vault depository companies are used – VIA MAT and G4S.
  • Metals can be moved from one geographic location to another or from one type of metal to another (for a fee, of course).
  • Buying and selling metals can be done with a wide assortment of currencies – USD, CAD, GBP, EUR, CHF, JPY, AUD, HKD, NZD.
  • Premiums charged for precious metals depend on the geographical location of the market as well as the amount of metal being purchased. Most are reasonable expectations, given the variety of options.
  • Physical delivery is possible and in multiple forms.
  • Storage fees are mostly reasonable, but note that they vary according to geographic location and vault.
Negatives:

  • Setting up the intial account requires verification steps, which include creating photo copies of two forms of identification and submitting to GoldMoney prior to funding the account. This could also be viewed as a positive feature as it serves to protect both the investor and GoldMoney, but it is a bit time consuming.
  • GoldMoney is headquartered in the British Channel Islands (UK). So for most investors outside the UK, it is necessary to initiate an international wire transfer prior to purchasing any precious metals.
  • Since this is considered a “foreign financial account” by the U.S. Department of the Treasury, if the account has a value of $10,000 or more during the year, US investors must file form TD F 90-22.1 (FBAR), which is separate from the federal income taxes filed to the IRS. (More accurately, the $10,000 is an aggregate amount for the total sum of all foreign accounts the U.S. investor may own. If the total is $10,000 or more, every foreign account will need to be listed on the form above.)

Bullion Vault
Positives:Again, after the initial account set-up, Bullion Vaultoffers the investor a unique precious metals trading platform.

  • Trades can be made for either gold or silver.
  • Exposure to London, Zurich & Hong Kong markets.
  • The Bullion Vault web platform allows the investor to see live streaming markets in each geography. Bid & offer prices as well as market depth are visually displayed.
  • The investor is able to easily make trades instantly or may even place bid or sell offers, which is something other providers lack.
  • Storage fees are reasonable and are transacted using the available cash in the account.
Negatives:

  • Initial account set-up is time consuming and involves making copies of at least two forms of identification and submitting them to Bullion Vault.
  • Bullion Vault is headquarted in London, so an international wire transfer is necessary for most investors prior to purchasing any metal.
  • The same foreign account U.S. regulations apply as already mentioned above using form TD F 90-22.1 (FBAR).
  • Changing a funding bank account is not convenient. One must basically go back through the account set-up process again. Supposedly, this is to fight against money-laundering and to protect the customer as well as Bullion Vault.
  • Taking delivery of the precious metal is only possible if it becomes absolutely necessary due to bank insolvency or some similar catastrophe.
Information as of September 7, 2011

 

Buying Physical Silver

Taking Delivery & Storing Your Own Physical Metal
It is wise to have at least some percentage of your investment portfolio held in physical precious metals – metal that you can get your hands on easily in case of economic collapse. What over-all percentage is allocated to holding your own physical metal will be dependant on individual preference and circumstance.

The investor should be fully aware of the reasons why he/she is investing in the physical metal. The most obvious reason is that physical ownership protects the investor against the continuous debasement of paper money. So, it is probably best to have the physical metal in a form widely recognized & accepted among the citizens of the world. It is advisable to stick with internationally recognized bullion bars and coins such as the American Eagle, American Buffalo, Canadian Maple Leaf, Austrian Philharmonic, South African Krugerrand, Australian Kangaroo/Nugget, Chinese Panda & the Mexican Libertad. The reasoning here is that all these brands have well-known gold content and weight-to-size specifications that can easily be verified. Additionally, it is best to stay away from antique, specialized numismatic and commemorative coins unless the investor has extensive knowledge in those areas.

Basically, there are three steps involved in obtaining physical precious metals. All steps should be researched to the investor’s satisfaction before taking any action.

  • How much physical metal will be purchased?
  • From where will the metal be purchased?
  • Where will the metal be safely stored?

All of these decisions are closely tied together. It is advisable not to take any action until all three decisions have been made.

How much metal to purchase is a decision that depends on individual circumstances. But if one has a target quantity of metal they ultimately want to own, it is not always a good idea to buy it all in one big chunk. It is a fool’s game to try and time the market by trying pick the absolute bottom, so one shouldn’t even try. Instead, Dollar Cost Averaging is a good way to play the physical metals market. Buying in little tranches during the bigger dips along the way has been a successful strategy during the past decade, especially so over the past 2 years.

Once the quantity of metal has been decided, it must be determined from where, or from whom, the metal will be purchased. Significant amounts can be achieved by the average investor via bullion dealers or brokers. (See our links page for some recommendations.) For smaller quantities, especially spread out over time, it is also possible for the buyer to obtain some good deals on Ebay, provided the buyer does so with patience and a strict adherence to a sound bidding strategy.

Finally, one needs to decide what they’re going to do with the metal once it’s delivered. There have been horror stories regarding home burglary, which may scare some people away from having their metal stored in their own homes. And for some, the home-storage option is simply not possible. A safety-deposit box at a bank is one choice. Though, given the economic uncertainty of the banking system these days, some argue that private wealth should be kept out of the banking system entirely. Therefore, an alternative would be storing the metal with a firms such as Gold Silver Vault or First State.

In any event, having some physical metal which you can easily access if the need arises will be a blessing. Once the fiat currencies around the world have reached their intrinsic value (=zero), having something of tangible value in your hands becomes paramount to success, and may even make the difference between financial survival and complete loss.