The Internet is filled with information on investing in gold and silver, and much of it is thinly-disguised advertising material. Here I’ve identified three reports that do have commercial interests, but are worth reading even if you have no intention of buying their products.
Are the Fundamentals of Silver Fundamentally Flawed?
In this free report offered by silver guru David Morgan, the fundamentals of silver are explored in great detail. Morgan explains that there are two entities that report on global silver inventories: the CPM Group and GFMS of the United Kingdom. The two firms vary greatly in their estimates of total existing silver—by around 33%.
CPM Group estimates there are around 400 million ounces of bullion silver in the world, while GFMS says the total is closer to 600 million. Of course, less than 400 million ounces can be pointed to and “proven,” and this is the basis for Morgan’s analysis. He uses the “best case” scenario of 600 million ounces and shows how virtually all of the world’s real silver is “investment silver”—leaving very little for industrial demand or other purposes. This makes for a very tight market.
Morgan also points out how investment demand for silver has soared with the introduction of new products such as ETFs: in the three years since the silver ETFs first hit the market, they’ve grown from using 130 million ounces of silver to more than 350 million ounces—what’s going to happen to the price of silver if demand continues to grow along this trajectory? What’s going to happen if Chinese citizens, who are being urged by their government to invest in silver, start taking that advice? Even if just 0.5% of China’s billion-plus population started buying silver, the price for the precious metal would go through the roof.
Jason Hommel’s Silver Stock Report
Jason Hommel’s Silver Stock Report is not a standalone report, but rather a free subscription service updated every week. The report is one of the most influential newsletters in the silver-investing world today. Some recent articles include “How I Got Into Silver,” “What Naysayers Are Saying,” and “Greenspan Misapplied Free Market Theory.”
An especially good article to read is Hommel’s “Wisely Avoid the Paper Silver Fraud.” In it, he says that over 99% of investments in silver are in “paper” silver—as opposed to real, physical bullion. The problem is that much of this “paper” silver is not backed by the real thing—it’s just imaginary. People with large investments in “paper silver” stand to get burned, just as the holders of fractional-reserve bank notes used to get burned by bank runs.
But the one most indispensable piece written by Hommel is his “Introduction to Silver,” which can be viewed at http://silverstockreport.com/introduction.html. Here he makes the succinct case for gold to be trading at much higher prices in the near future—and then shows why silver is indisputably a better investment than gold.
Is Silver’s Decline Just Starting?
This short, two-page report takes a contrarian view. It argues that silver will not be the commodity that governments turn to in the financial crisis, alluding that they may instead use gold to back their debt when their creditworthiness has become all but eviscerated. The report also claims that governments and central banks hold a relatively small amount of silver, compared to gold.
These are interesting points. However, the report is off the mark when it talks about how jewelry stores are suffering during the recession—only a small amount of silver is used in jewelry; most silver is used in industrial applications. To answer this, the report says that some firms are trying to use alternative hybrid metals to replace silver, but the fact is silver is the most indispensable metal there is—they’ll never develop a hybrid that can beat silver.
Finally, the report addresses the Hunt Brothers’ manipulation of the silver market in the early eighties. Why this is seen as bearish for silver is beyond me. The fact that silver swung from $1.50 to over $50 an ounce over a short period of time is bullish in my view—it suggests that it could do so again at some time, only this time, it should go a lot higher than $50.
Although I don’t agree with the general thesis of this report, it does raise some interesting questions. Besides, it’s always important to consider both sides of every story.