As Gold prices lurk at levels near two-month highs, Silver is sneaking up on the markets. In less than 30 days, silver, as of this writing, has climbed more than 8% to $19.00 per ounce. But Shhhh! No one is supposed to know.
Some say silver is way undervalued as compared to gold and expect more catch-up moves like we have seen the last month. Rumor has it, the silver supply is grossly overstated. If this is ever confirmed publicly, watch out.
It may be exactly this that has caused silver's rise. In an article by Patrick Heller on August 17, he says, If you still own COMEX silver contracts, you need to realize that they may not represent a silver investment at all.
Indeed, global gold demand is on the rise, but silver too is worthy of our attention. In the case of both, some serious questions regarding supply are surfacing. It has been well publicized that the U.S. Mint has announced at least twice in the last 24 months that it is out of gold. Even today, if you visit the site, you will observe their notice that production of certain gold coins remains suspended.
Of the two metals, a supply shortfall in gold is likely more difficult to cover as it is easier for investors to opt for delivery and store physical gold than physical silver. For example, 100 ounces of gold wouldn't even fill a soup can and would go virtually unnoticed in a mattress. On the other hand, an equivalent dollar value of silver, some 6400 ounces, could cause chronic back pain or a permanent kink in the neck.
Often times, this is why investors choose silver ETFs or futures contracts to make their silver investments. Silver inventories can be cumbersome to manage. This creates a grey area in silver supply reports. Again, according to Heller, COMEX silver contracts can be settled by cash payment or by shares of stock in the SLV silver exchange traded fund (which also is suspected of owning too little physical silver to cover its contractual obligations).
You can see how, if cash is used to settle contracts more often than is physical delivery, supply deficiencies could go unnoticed for a long time. If there is any truth to what Heller has observed, we could be in for a major move in silver prices if news leaks out.
Other dynamics also come into play. Because gold is no longer priced at a level where many people can make monthly additions to their precious metals holdings, I believe more people are turning to silver as a more affordable alternative. As physical demand rises, that puts more pressure on physical supplies used to cover contracts.
If silver continues rising, we are likely to hear more and more experts come forward with a plethera of explanations as to why. As you listen, keep this supply question in the back of your mind. It is likely to remain a silent sign of things to come as flat out confirmation could create a move equal in splendor to silver's 1980 move. One that if adjusted for inflation could send silver prices over $100 an ounce.
And if you find cause to weigh the advantages of holding physical silver over a purchase of contracts or shares of an ETF, you should also consider holding physical silver in your IRA. In this case, actual physical silver is held in a depository with your name on it. It's not a contract or other piece of paper representing an interest in an amount of silver. It is silver.
To follow real time silver prices along with gold, visit LearCapital.com to download a free real time gold and silver price ticker. It's called Exact Price and it can be your personal spot price reporter accessible right from your desktop.