Silver: What Factors Affect the Silver Price?

silver barHere are some of the factors that affect silver prices:

Like gold, silver prices are affected by many of the same factors that affect gold, including the global economy, the strength/weakness of the U.S. Dollar, and supply and demand. But the price is more volatile than the gold price and, compared to gold, is more affected by industrial needs and by jewelry demand.

INDUSTRIAL DEMAND

The following is a brief list of industries that require silver for production; automobiles, photovoltaics, photography, televisions, computers, electronics, superconductivity, water purification, solar, medical use, silverware manufacturing, coins and medals and of course, jewelry. Silver has extensive industrial uses, whereas gold does not.

In late 2012, The Silver Institute issued a report that estimates future industrial demand. Currently, with the continuing sluggish global economy, a downturn in industrial demand is forecast for 2012. However, a forecast recovery in 2013 will see these losses entirely recouped. Industrial demand is particularly strong for automobiles, photovoltaics, televisions, and personal computers.

ESTIMATED FUTURE DEMAND

The report predicts that during 2012-14, some silver industrial market segments will outperform, including the use of silver in ethylene oxide (EO) plants, which already experienced strong demand in 2012. Silver oxide is used as a catalyst to produce EO, which is then used as a key ingredient in a range of products such as polyester. It is projected that photovoltaic off-take to broadly stabilize in 2013 and robust demand in the use of silver in photovoltaics is anticipate in 2014.

Looking ahead, the report projects an estimated 6% rise in silver industrial demand, creating a new record high in 2014, which will account for an estimated 57% of total silver fabrication that year. A steadily improving economic outlook, strong growth in the automobile sector, and a recovery in the housing and construction industry are primary reasons for the forecasted uptick in demand, according to Thomson Reuters GFMS, which produced the report for the Silver Institute.

CHINA AND SILVER

Regionally, over the past 10 years, the most notable change has occurred in demand from emerging markets, mainly China. China Chinaaccounted for just 8% of global  industrial demand in 2000, compared to a strong 18% contribution in 2012, and is expected to grow further. The report notes that U.S. industrial demand will remain particularly elevated, enhancing its position as a leading manufacturer of high-end silver materials.

SILVER MINING COSTS

Finally, one strong factor affecting the silver price is the mining cost of getting it out of the ground, which has been estimated at being in a range from $22 per ounce to $30 per pounce. Yields are falling, year by year, which puts upward pressure on mining costs; the average silver yield of the top six silver mines has declined 38% since 2005.

(Source: The Silver Institute) 

Gold: What Factors Affect the Gold Price?

Here are some of the interlinked factors that affect gold prices:

THE STATE OF THE U.S. ECONOMY

financesIf our economy slows, it can negatively affect the economies of other countries, and also commodity prices including gold bullion. But if a U.S. slowdown is accompanied by a federal stimulus plan, gold prices may increase. If the economy picks up and strengthens, gold prices can decrease.

FISCAL 2013, THE DEBT-CEILING, SPENDING CUTS, GOLD PRICE

The inability and unwillingness of the Fed to address the financial crisis fully is bearish for the U.S. Dollar and has short-term implications for gold. Gold should outperform both as real money and as a safe haven.

U.S. STOCK MARKET FEAR & CONFIDENCE

Gold analyst Jim Sinclair has famously portrayed gold as the ‘barometer of fear and confidence’, and a form of insurance. Under normal conditions, as the stock market becomes increasingly risk-averse (fear), gold gets a boost. When market traders are buoyant and optimistic (confidence), gold-selling can cause the gold price to dip. Note however that there have been one or two largely unexplained exceptions to this phenomenon.

FEDERAL MONETARY POLICY AND GOLD PRICE

Quantitative Easing’, an unconventional monetary policy used by central banks, seems to correlate with the price of gold. The more QE there is, the higher the price of gold rises. There is definitely a positive relationship between the gold price and the U.S. Dollar money base.

A FEDERAL CREDIT-RATING DOWNGRADE

A further downgrade of the credit-rating, characterized in early January 2013 on Fox News by Steve Forbes of Forbes Magazine as ‘inevitable’, is likely to raise the price of gold.

MAJOR GLOBAL CURRENCIES AND GOLD PRICE

The U.S. Dollar is a benchmark for trading against other currencies. Other major world currencies include the European Euro, global currencyJapanese Yen, British Pound, Swiss Franc, Canadian Dollar, Australian Dollar, New Zealand Dollar and South African Rand. As these currencies start to appreciate against the U.S. Dollar, gold prices tend to rise and vice-versa.

CENTRAL BANK BUYING & SELLING OF GOLD

Significant purchases or sales of gold by global central banks, or by a signatory of the Central Bank European Gold Agreement, affect the gold price. More and more nation’s central banks are accumulating gold.

EUROPEAN DEBT & FINANCIAL CRISIS

Should the European debt crisis worsen, or a circumstance evolve that threatens the stability of the Eurozone, the gold price would be affected.

CHINA & INDIA GOLD IMPORTS

China and India are two of the leading gold importers. Such emerging nations are more likely to view gold holdings as financial security. Volatility with their respective currencies or economies could therefore affect the gold price.

CHINA SELLING U.S. TREASURIES

If China sells U.S. Treasuries persistently, then this will be an indication of the deterioration of the U.S. Dollar as a credible global monetary instrument.

MARKET INTERVENTION BY CHICAGO MERCANTILE EXCHANGE (CME)

If the CME lowers margins on silver and gold contracts, gold prices can rise. If it raises margins, gold prices can decrease.

INDIA’S DIWALI WEEK

gold barThe five-day Diwali Festival in mid-November is traditionally the time when Indians en masse buy gold jewelry, coins and bullion, with as much as 6,500 kilos sold in one day. This is an annual ritual that is considered by many Indians to bring good luck.

OIL PRICE AND GOLD PRICE

Although the price of oil is a measure of uncertainty and stability, fluctuations in the price of oil do not always affect the gold price in a direct way. If there is civil unrest in a Middle Eastern oil-producing nation and this affects oil production, global oil markets and global financial markets will be affected and there will be upward pressure on gold prices.

INTERNATIONAL CALAMITIES, NATURAL DISASTERS, TERRORIST ATTACKS, ETC

In general, such events do not affect the price of gold until ramifications from them seep into global financial markets. Some people thing that gold prices move on ‘emotion’ alone, but in reality, that is seldom the case.

GOLD ENDURES

There is one certainty in an uncertain world. If you own an ounce of gold at the start of global turmoil and market disruption, you will still own an ounce of gold once the dust settles. Value is in the mind of the beholder and physical pure gold has never been anything but valuable.

Liberty Reserve’s Money Mayhem

It’s strange that money laundering – money-cleaning, really – should have a negative connotation. After all, the U.S. Treasury Printing Moneyprints a flood of currency backed only by faith in the U.S. Government. That’s $85 billion a month of brand-new dollars, conjured out of thin air: there is nothing as clean as crisp new paper money…..

LIBERTY RESERVE

But Liberty Reserve, a global currency exchange based in Costa Rica, was closed down in early June on the suspicion of money-laundering the ill-gotten gains of cybercriminals, organized crime and even terrorists. Although based in Costa Rica, U.S. officials used a provision in the Patriot Act to target Liberty Reserve and other co-transacting organizations, this being the first time this provision has been used to prosecute a provider of virtual currency.

Operating outside the confines of international banking regulations, the aptly named Liberty Reserve provided the freedom of a simple, seamless and anonymous global monetary system, a network which conducted 55 million global transactions over 7 years, amounting to $6 billion.

THE PULLED THREAD UNRAVELS

And therein lay the problem, because a user need only provide an e-mail address to open an account, without any verification of identity. You could open an account as ‘Ukrainian Mafioso Viktor’, call your account ‘Cocaine Distribution’ and still sleep soundly. There was no identity verification process, no paper trail and no collection of banking information (account names and numbers). For a trustworthy global money exchange to operate securely and safely, the identity of each participant has to be properly verified, and the issuing/receiving bank accounts have to be confirmed, things that Liberty Reserve failed to address. In complete contrast, Anthem Vault recognizes that these two conditions are the sine qua non of safe and secure online transactions.

Image00001But one still wonders about Liberty Reserve. Forget for a moment the lack of identity verification or bank account verification. Extinguish for the moment the lurid images of Liberty Reserve’s Colombian drug-smugglers, Russian hackers, Bulgarian cybercriminals and Thai pornographers. Absent the foregoing, wouldn’t Liberty Reserve be something pretty interesting? With no government oversight or regulation and no money-transmitting license required, Liberty Reserve would surely rival the financial sector’s monopoly on moving money around the world.

PAPER MONEY

Let’s backtrack. In the distant past, it became apparent that hauling around bags of silver and gold for daily transactions was totally impractical. One day, someone of standing and repute in the local community decided to try something new. Instead of handing over silver and gold to his creditor, he wrote an IOU note for the full amount, a ‘promise to pay’ based on the full faith and credit of himself as debtor; as a respected member of the community, he had the moral authority to do this. Over time, IOUs evolved into paper money and trading with paper became commonplace. Eventually, the States and the Federal Government got involved and legal authority supplemented moral authority. But the moral authority was always paramount, because without an abiding faith in the ethics of the debtor, how could the creditor even sleep at night?

So how far have we really come? Today, the Fed has supreme legal authority, to the extent that no other currency than the U.S. Dollar is allowed or recognized as legal tender. But it has arguably lost the moral authority, since the world’s faith in the Fed diminishes daily. With the White House administration badly handling five major scandals currently and with polls indicating a majority of Americans distrust their government, where do we look for moral authority today?Gold Globe

The answer is silver and gold.

WHAT WE KNOW

U.S. Treasury prints $85 billion a month, a printing mania that devalues the dollar and promotes monetary mayhem. The U.S. Constitution authorizes gold and silver are to be used to backstop the nation’s currency, but neither is utilized and the Constitution is ignored.

Liberty Reserve moved $6 billion in 55 million global transactions over 7 years, becoming the darling of cybercriminals and organized crime. Good idea in a sense, but no identity or account verification and the wrong application.

Gold and Silver bullion is the only tried and true universally recognized store of value, globally traded safely and securely for over 5,000 years.

How Safe Is Your Safe Deposit Box?

A safe deposit box – incorrectly called a safety deposit box – held in a bank’s vault seems to be a pretty safe bet. But consider these questions:

  • Is the service free?
  • If not, what does the bank charge you?
  • Do they have your correct name and address on file?
  • Are the contents of your box adequately insured? Safe-deposit box contents have been destroyed by fire and flood, andPadlock have also been stolen.
  • Do you have an inventory of what your box contains?
  • Has anyone else had access to your box?
  • What happens to the contents of your box if you have not been to the bank in years?
  • What would happen if you were to die suddenly, or to die intestate (without a will)?
  • Do you know the Abandonment Laws in your state?
  • When financial chaos looms, who are the first to lock their doors?  (the banks!)

ABANDONED ASSETS

Unclaimed Property laws in the U.S. provide for half-yearly reporting periods at which unclaimed safe deposit box contents, in addition to other forms of personal property, are reported to the state’s Unclaimed Property Office. The items are then ‘noticed’ in a local newspaper, and finally the property is turned over to the state for safe-keeping until the rightful owner or heir makes a claim. At least, this is how it is meant to work, and the 50 U.S. states are currently holding more than $35 billion-worth of unclaimed property that they are mandated to safeguard until the rightful owner or heir is identified.

Piggy BankBut in 2008, a Good Morning America investigation revealed that some states aggressively seize property that remains unclaimed, and then they use the money to balance their budgets, even though state Unclaimed Property Offices are required to hold auction proceeds indefinitely in case the original owners or their heirs ever step forward. Statistically, states return less than a quarter of unclaimed property to the rightful owners.

Many states only require a bank to notify the owner of a safe deposit box by mail, when the box is considered abandoned (Anthem Vault uses mail and e-mail if an account holder cannot be located).

A state’s Unclaimed Property Vault – used to store non-monetary items of value such as jewelry, coins, and bullion – inevitably reaches capacity every few years. When the vault is full, the State Treasurer may decide to host an auction, and the proceeds generated from the sale of items are then recorded in the name of the safe deposit box owner. If the owner or heir is identified and verified, he/she may then be able to receive the entire proceeds from the sale of the items.

PROCEDURES VARY BY STATE

Abandonment laws in many states have a much shorter required holding period for safe deposit boxes than Anthem Vault’s seven-year period. For example, the State of Georgia considers property in a safe deposit box to be abandoned only two years after the lock has been drilled out by the bank and the contents seized and turned over to the state’s Unclaimed Property Office. California has been severely criticized for the way it handles unclaimed property, and unclaimed property in Delaware is the third largest source of state revenue. All 50 states pay private contractors commissions to locate and seize accounts for them. Think about that. Do they pay contractors just so they can give the assets back to the rightful owners and heirs?

Furthermore, there is the principle of escheat, a common law which transfers to the state or federal government the property of a person who dies without an heir, even though modern U.S. law places a heavy emphasis on finding a viable successor to assume ownership, before escheating the property to the state or the fed as the last resort. For the laws in your own state, do an internet search for ‘State of …….. unclaimed property”.Vault Door

If you suspect you may have abandoned a safe deposit box in the past, or are the heir of someone who may have done so, search Cash Unclaimed or Missing Money or Unclaimed.

BE AS SAFE AS YOU CAN BE

Whether you have a lumpy mattress, a wall safe behind a painting or a safe deposit box in a bank, it pays to think carefully about how well your wealth is truly secured and safeguarded. Does anything compare to a non-governmental vault, completely outside the banking system?

Tell me about a vaulted and insured bullion account with Anthem Vault

A Dollar: What Is It Really Worth?

A dollar’s true worth will shock you. Superficially, the value of the U.S. Dollar can be gauged by Treasury Notes, current exchange rates, the level of foreign currency reserves (dollars held by foreign countries) and the value of today’s dollar as compared to previous years. Austrian school economist Ludwig von Mises was not really being glib when he said, “Government is the only agency that can take a valuable commodity like paper, slap some ink on it, and make it totally worthless”.

The last honest money issued by the Federal Government was the $50 Gold Certificate of 1913, which clearly stated on the front “United States Of America Fifty Dollars In Gold Coin, Payable To The Bearer On Demand.

DollarTREASURY NOTES

Today, the value of the dollar fluctuates according to demand for U.S. Treasury Notes, which are sold at a fixed interest rate and face value. When demand is high, buyers pay above face value, and get a lower yield. When demand is low, buyers pay below face value and get a higher yield.

CURRENT EXCHANGE RATES

The most common measure of the U.S. Dollar is its exchange rate, which compares its value to other major currencies. Currencies are traded in the foreign exchange market (forex), and the value of a currency can change because of the strength of the nation’s economy and the nation’s debt level.

LEVEL OF FOREIGN CURRENCY RESERVES

Foreign governments with an excess of dollars – usually the result of a country exporting to the U.S. more than it imports – hold them in foreign currency reserves. When the dollar declines in value, the value of the foreign country’s reserves also decline. That country then diversifies into other currencies which further reduces demand for the dollar, applying additional downward pressure on the dollar’s value. Foreign investors are currently diversifying their portfolios with more non-dollar denominated assets.

U.S. made goods become cheaper when the dollar declines, making them more competitive when compared to goods produced in other countries. Although this aids U.S. exports and economic growth, it also leads to higher oil prices because oil is priced internationally in U.S. Dollars. A declining dollar causes oil-producing countries to increase the price of oil, often by threatening to restrict supply.

THE DOLLAR: TODAY VERSUS YESTERDAY

An obvious reference point is to compare what a dollar buys today with what it bought in past years. For example, if you bought goods/services in 1913 that cost a dollar, those same goods/services today would cost $23.52. The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a ‘market basket’ of consumer goods and services. The percentage change in the Consumer Price Index (CPI) is therefore a measure of the rate of inflation.

DOLLAR DOLDRUMS

Federal printing presses are creating an oversupply of dollars at the rate of 85 billion a month and 13% each year. Too many dollars chasing too few goods and services leads to inflation. Backed by gold for 179 years, the U.S. Dollar was taken off the Gold Standard in 1971 when the Federal Government ceased redeeming dollars for gold. The dollar has lost 98% of its value since Federal Reserve Notes were issued in 1914, meaning that today’s dollar would only be worth 4 cents back then. When the price of an item increases, people think of the item being worth more, and not that the dollar is worth less. But the latter is often the true explanation, as in the increase in the price of a barrel of oil, because oil prices are quoted in U.S. Dollars.

IN THE FINAL ANALYSISGold

In short, our dollar-denominated monetary system is irretrievably compromised and loss of faith in the credit of the U.S. government, followed by sudden and unexpected currency failure, is certainly not impossible. Concerned over rising debt ratios, Moody’s, Standard & Poor’s and Fitch may soon be downgrading U.S. debt once again.

Postscript…….. You can download the free app What Is A Dollar Worth?  from the iTunes store, and the app will work on your iPhone, iPod Touch, or iPad. An Android version of the inflation calculator is also being developed. The app lets you enter an amount in dollars, then it compares values between 1913 and 2012 or any intervening year.

Gold: Wealth Champion in a Scary World (Part II)

global currencyWhen currency was backed with gold and silver, no one was concerned about a doomsday scenario in the financial markets. But today that is a constant concern, and gold will always trump paper. 

The financial crises we see taking place in Europe are not currency crises, but government spending fiascos compounded by banking crises arising from the tenuous state of fiat currency credit and debt ratios and a nascent lack of faith in the banking system.

ROTTEN APPLES

Arguments claiming the sighting of an increasingly strong dollar are just plain silly. Major currencies are like apples – the term comparing apples to apples comes to mind – but these ‘apples’ are all rotten. Some are quite rotten and others are rotten to the core. So comparing dollars to euros to pounds to yen is, in a sense, meaningless; together, they represent a basket of rotting apples. When you compare these currencies to gold, you begin to understand value.

If you measure the U.S. Dollar against gold, it becomes clear that, on average over a twelve-year period, the dollar lost 16% of its value each year.

GOLD: INFLATION FIGHTER

Gold is traditionally thought of as, among other things, a hedge against inflation. But because official U.S. Government figures peg current inflation since 2010 at between 1% and almost 4%, some might say that inflation is not a major concern. It is well-known that the Consumer Price Index (CPI) has been ‘adjusted’ since the early 1980’s so that it understates inflation which, when all factors are taken into account, is actually running at just below 10% each year. Now do you still think you don’t need to own gold?

Think about this. If gold is not the ultimate store of value, why do the world’s central banks have any gold in their vaults at all?

DISTRUST OF GOVERNMENT

Liberty ReserveRecent polls confirm that we live in an era of general distrust, and particular lack of faith and confidence in our government; financial mismanagement and misguided bailouts; taxpayer money squandered on Solyndra et al; a rigged CPI that understates inflation to achieve political gain; currency debasement to bail out a broken financial system; a trillion-dollar failed war on drugs; the multi-trillion dollar Ponzi schemes of Social Security and Medicare; the $3 trillion foreign wars in Iraq and Afghanistan that we cannot afford; the wasteful burden of inefficient regulation and pork-barrel projects; the Fast & Furious gun-running scandal; the government’s targeting of political opponents with IRS witch hunts; the government trying to extinguish freedoms such as gun control, the freedom of the Press and the right to a fair trial; NSA surveillance of millions of us; FBI drones overhead; biased preferences, quotas, special privileges and exemptions;  35,000 D.C. lobbyists; and of course, the general tax-and-spend myopia that heaps the unremitting financial burden on our grand-children.

Washington D.C. has difficulty delivering the mail, but the Feds think they are capable of controlling our healthcare system?

CONTROL

Two of the most frustrating issues for Big Government are its inability to control the masses and to control economic activity. The two-part pre-condition for the first issue is gun registration followed by gun confiscation; Stalin and Hitler both followed that path. The pre-condition for the second issue is the monopoly of a nation’s gold, something that was well understood and put into effect by Lenin, Mussolini, Hitler and even F.D.R. Gold therefore, is indisputably power as well as a store of value.

To paraphrase F.D.R. at his First Inaugural Address in 1933, “The only thing we have to fear is Fed itself.”

When the financial meltdown finally arrives – and it will be sudden and unexpected – would you rather have a loaf of bread, or a piece of paper saying the government or a bank owes you a loaf of bread?

The USA Today article included an innocuous-sounding statement that will unfortunately prove to be eerily prescient. “A dollar, ultimately, is worth what you think it is.”