Are you one of the many concerned about silver’s future? Just this week I heard a talking head mention the volatility in precious metal as 2012 closes its final chapter. She confidently mentioned why investors sell silver and gold to wisely buy equities now that politicians are on the verge of solving our fiscal cliff issue. Wall Street celebrates this great news with a year-end rally almost like they realize Washington has no other choice but to feed the giant that holds the wealth of Middle America. My concern, my truest concern, goes far beyond the fiscal cliff or the triviality of our mainstream media, I’ll explain.
I would like to take a moment and do something I rarely do. I want to make a prediction, a silver prediction that is, and I’m asking each reader to, well, read closely. By the way, this prediction has everything to do with my concern of the day.
While paper silver sells down…. physical silver disappears at near record pace. Because of this I’m concerned something “big” will cause a sleeping society to awaken to our fiscal reality. This reality has the potential to dry silver inventories nearly overnight.
For those new to physical silver I want to share a fact or three. The majority of silver on the market today is newly minted silver in the form of bullion, rounds and bars. The number of mints making silver bullion, rounds and bars are few. Most of you that own silver bought it through a third party (online bullion broker) and not from the mint itself.
Your source, the bullion broker, in all probability isn’t sitting on a huge inventory of silver in hopes you call for more. The price of silver fluctuates too much for silver sellers (brokers) to risk anything other than placing a “buy” order only after you ask for more. This means those brokering silver sales are limited to what’s produced or allocated from the few minting silver.
We will soon see days of silver rationing meaning those wanting to buy silver will be limited to a few ounces, at best, or only the highest premium and less desirable forms of physical silver.
Now here is where my concern takes over. People prudent enough to own physical silver have no intention of selling anytime soon, why should they? This December’s drop in silver means nothing to those sitting on physical silver. There is no way a person wise enough to protect with physical silver will sell it, one call to any silver broker will prove this as true.
The new-age bubble investor will run to silver not driven by wisdom but emotion. This is why so many scurried to buy silver not long ago when it hit nearly $50 per physical ounce. The combination of short inventories and the unwillingness of those holding silver to sell will create a shadow market in PM making the true value of physical silver hard to pinpoint. This value will be far beyond silver’s daily paper fluctuations we watch today.
This writer believes we have reached such a point but the monetary spread between physical and paper hides behind a splinter of availability (silver inventory), an inventory on the verge of disappearing.
WHAT ABOUT YOU?
My intention is to shout silver’s praises from the highest mountaintop so that as many folks as possible replace at least 10% of their net worth with precious metal. For those asking, 10% is a minimum and something closer to 20 – 25% is best (my opinion based on what I feel silver and gold’s actual physical values are today). Remember, I gain nothing financially if you buy a boatload of silver since I sell neither metal.
But the problem, or concern, is that the physical silver window is closing just as those who trust a fiat currency need PM (precious metal) most. To put it simply, there is not enough AFFORDABLE silver or gold to go around. This is why both metals will go higher as more individuals realize we bought into a temporary currency system that still stands only because of the ability to print more.
Today’s silver buyers are a crafty bunch. They silently buy boxes of silver with little mention to anyone outside the few trusted, very wise. Is this why the silver cookie jar suddenly nears empty? Not exactly, physical silver has a bigger problem than its sneaky buyers.
Mining silver is challenging in today’s world. A global market may thirst for silver but politics and environmental issues dictate how fast silver leaves the ground. This conflict worsens as demand and prices grow, how could it not?
While preparing this post I typed “conflict in silver mining” and then watched nearly 3,000,000 results pop up on my screen. South America’s mining industry rages with conflict as inventories cry for more.
This only proves the option to own silver is not infinite.
I urge you to keep the above facts in mind each time a drop in paper silver prices rattle your PM faith. The fiscal issues our Congress address today are long-term problems that will take many attempts to fix. This makes protective assets, like silver, a long-term protective measure that each person who wishes to sustain wealth must own. Why not add a few hundred ounces to your stash while the opportunity to buy cheap silver still exists?
COMMENTS & QUESTIONS:
QUESTION: You mentioned storing PMs in two or three locations as part of a proactive storage plan. One you recommended to another reader involves international storage which requires funds wired from a banking account. To my knowledge, the only way to someday retrieve this wealth is to have the funds (from PM sold) sent back to the same bank account. Here is the problem as I see it. What if the bank is no longer in business? What if the IRS decides my bank account is in their control regardless if I’m delinquent or not? Not sure I like the method for retrieval with international metal storage. Your thoughts?
TPS Reply: Awesome question so thanks for sending it over. “Yes”, I recommend that each person who owns physical PM to use an aggressive proactive plan for storage. This could include international storage but two words popped into my head as I read your email, DUE DILIGENCE. I commend your efforts to look at international storage through realistic eyes because the risks you describe are very real, but.
I won’t speak for companies like BullionVault or GoldMoney, but my understanding is most depositors can retrieve real metal as well as cash back into a registered bank account. This means they will send real PM back to those who request it (for a fee). Does this take 100% of the risk out of international PM storage, of course not? I know of no way to store PM that is completely risk free.
My advice is for each person considering international storage to take the time to ask “what ifs” before taking the plunge. I personally feel it is well worth the risk depending on where you live. Thanks for the questions.
QUESTION: You mentioned something about insurance for those who store PM at home?
TPS Reply: Yep, insuring PM stored in your home is a great option…. and one recommended. The last I checked the fee for storing $100,000 in bullion was around $500 per year, well worth the effort and cost in my opinion. I’ll send the info over.
QUESTION: Found your site on the internet looking for silver and gold information. I have so many questions I don’t know where to start and can’t afford the one-on-one consulting service you offer. In a nutshell, can you explain the steps to protect with physical silver?
TPS Reply: Would love to….. and thanks for spending time with TPS. You have taken the first step to financial freedom, so congrats. Research is the key to understanding the power of silver/gold and how they protect in times of huge currency creation. First, continue to educate yourself why silver and gold are so relevant today. Next, buy PMs as close to spot (paper) price as possible. I own bullion, rounds and bars…for what’s worth. Next, formulate a comfortable plan for storage that includes several options just in case one option fails. Next, forget the metal exists and live your life in the confidence that only comes from an independent nature that leads you to own a real asset like silver or gold.
DC Carlton is the founder of The Prospector Site and author of Why Silver and Gold Will Go Higher. Feel free to register here for his free online newsletter that provides precious metal insight rarely mentioned from mainstream media sources
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