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Silver Coin Shortage Could Lead to Silver Price Spike

Commodities / Gold & Silver May 26, 2008 - 08:10 AM GMT

By: Mark_OByrne

Commodities Gold was up 3% last week and silver surged nearly 8% (more on silver below) and in normal circumstances profit taking would be expected in the early part of this week. But with oil remaining near record levels and inflation concerns increasing significantly, gold (and silver) may again surprise to the upside. Oil was up by 4.6% last week and is up another 1% today. Gold and silver will outperform oil in the coming weeks.


Gold was up $7.70 to $925.60 on Friday and silver was up 32 cents to $18.24. Gold traded up in Asia but has moved sideways in early trade in Europe. The dollar is slightly weaker against most currencies except the euro and sterling which it is slightly higher against and this is supportive of gold.

Today's Data and Influences

Today, the markets will be quiet with the U.S. Memorial Day and UK bank holiday and markets will look for direction from commodity and currency markets. There is a busy schedule for the rest of the week which should result in another hectic week in the markets.

The eurozone's flash PMIs for May are due for release this morning and will be watched closely. Both the services and manufacturing indices are predicted to dip from previous levels, supporting the view of a slowing in the pace of activity. At the same time, however, inflation and stagflation concerns mean there is little chance of a near term rate cut from the ECB.

Silver Coin Shortages and Rationing Could Spread to Entire Silver Market Resulting in Sharply Higher Prices

This weekend's article in the Wall Street Journal is essential reading for anyone wishing to understand the silver market: http://online.wsj.com/article..

“The government rationed food during World War II and gasoline in the 1970s. Now, it's imposing quotas on another precious commodity: 2008 dollar coins known as silver eagles.

The coins, each containing about an ounce of silver, have become so popular among investors seeking alternatives to stocks and real estate that the U.S. Mint can't make them fast enough. In March, the mint stopped taking orders for the bullion coins. Late last month, it began limiting how many coins its 13 authorized buyers world-wide are allowed to purchase.” . . .

The rare shortage offers a glimpse into the growing love of a commodity known as "poor man's gold." With more silver mined than gold traditionally, silver has always been far cheaper than gold and today has less than 2% of gold's value.

But silver is growing in popularity, and some investors are betting that its value will surge as inventory shrinks. Big investors are loading up on silver eagles, which are the only American silver coins allowed in individual retirement plans. For small investors, they are an accessible way to get into the metal boom.

This WSJ article confirms that silver in smaller denominations is in very, and increasingly, short supply which will result in higher prices in the coming months and investors would be wise to invest in silver now prior to the coming price spike.

As knowledge of shortages in the silver coin and small bar market enters the mainstream there will be powerful and possibly unprecedented demand for silver eagles and all forms of silver in smaller denominations in the coming weeks.

The silver market remains a tiny finite market (all of the above ground refined silver in the world is only worth at today's prices roughly a miniscule $9 billion <500 million ounces X $18>) and if even a fraction of the world's increasingly skittish investment capital flows into the silver market prices will rise to multiples of the current price.

Gold Investments continue to believe that silver should surpass $25 in 2008, its non inflation adjusted high of $48.70 per ounce before 2012 and its inflation adjusted high (as many other commodities including oil already done) of some $130 per ounce in the next 5 to 8 years. These are conservative estimates.

Silver

Silver is trading at $18.21/18.26 per ounce at 1200 GMT.

PGMs

Platinum is trading at $2177/2187 per ounce (1100 GMT).
Palladium is trading at $453/458 per ounce (1100 GMT).

By Mark O'Byrne, Executive Director

Gold Investments
63 Fitzwilliam Square
Dublin 2
Ireland
Ph +353 1 6325010
Fax  +353 1 6619664
Email info@gold.ie
Web www.gold.ie
Gold Investments
Tower 42, Level 7
25 Old Broad Street
London
EC2N 1HN
United Kingdom
Ph +44 (0) 207 0604653
Fax +44 (0) 207 8770708
Email info@www.goldassets.co.uk
Web www.goldassets.co.uk

Gold and Silver Investments Ltd. have been awarded the MoneyMate and Investor Magazine Financial Analyst of 2006.

Mission Statement
Gold and Silver Investments Limited hope to inform our clientele of important financial and economic developments and thus help our clientele and prospective clientele understand our rapidly changing global economy and the implications for their livelihoods and wealth.
We focus on the medium and long term global macroeconomic trends and how they pertain to the precious metal markets and our clienteles savings, investments and livelihoods. We emphasise prudence, safety and security as they are of paramount importance in the preservation of wealth.

Financial Regulation: Gold & Silver Investments Limited trading as Gold Investments is regulated by the Financial Regulator as a multi-agency intermediary. Our Financial Regulator Reference Number is 39656. Gold Investments is registered in the Companies Registration Office under Company number 377252 . Registered for VAT under number 6397252A . Codes of Conduct are imposed by the Financial Regulator and can be accessed at www.financialregulator.ie or from the Financial Regulator at PO Box 9138, College Green, Dublin 2, Ireland. Property, Commodities and Precious Metals are not regulated by the Financial Regulator

Disclaimer: The information in this document has been obtained from sources, which we believe to be reliable. We cannot guarantee its accuracy or completeness. It does not constitute a solicitation for the purchase or sale of any investment. Any person acting on the information contained in this document does so at their own risk. Recommendations in this document may not be suitable for all investors. Individual circumstances should be considered before a decision to invest is taken. Investors should note the following: The value of investments may fall or rise against investors' interests. Income levels from investments may fluctuate. Changes in exchange rates may have an adverse effect on the value of, or income from, investments denominated in foreign currencies. Past experience is not necessarily a guide to future performance.

All the opinions expressed herein are solely those of Gold & Silver Investments Limited and not those of the Perth Mint. They do not reflect the views of the Perth Mint and the Perth Mint accepts no legal liability or responsibility for any claims made or opinions expressed herein.

Mark O'Byrne Archive

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