4 Reasons Why Silver is the Most Undervalued Commodity

[webmaster]

Subject:4 Reasons Why Silver is the Most Undervalued Commodity
By: Dr. Jeffrey Lewis

Overview: Silver prices still have a long way to rise before reaching their top. From industrial applications to its relative value, it’s easy to make the case that silver remains one of the most undervalued commodities.

Link: http://news.silverseek.com/SilverSeek/1264140240.php

[tyler1717]

Silver one day will be looked at as the best investment in a super long time. Unfortunatly that time hasn't come yet. I find it strange that the author didn't mention silver is the most surpressed metal in the world. I saw a government chart on inflation in the last thirty years and it says gold should be worth five hundred and silver should be worth thirty dollars. Of course the government low balls inflation but even they say silver should be higher.

[Mike Phillips]

Dr Lewis' post is on target. An additional argument for silver is systematic and will have a major impact. Most large institutional funds are preparing their asset strategies to cope with unanticipated (or even anticipated) inflation. We know that we are at a 50 year low in inflation. We also know inflation is cyclical. We don't know when it will increase, but we know it will increase at some point; first via "cost push" and later "demand pull". Funds have long horizons and their asset mix takes a while to alter. Hence they are planning and starting their moves now.

So institutional funds are allocating a component of their assets to commodities and to precious metals as inflation hedges. As these funds don't actually consume the commodities in question, the main impact will be to put them on a bigger and permanent contango in the futures markets. This will benefit producers and hit users and corporate profits. But with silver and gold there may be an incremental demand by way of institutional hoarding (tough to hoard sugar). So this financialization (hate the word!) of commodities and accumulation of PMs is a tripple whammy for silver. Demand as a commodity, demand as a PM, and hoarding as a PM.

2012 scare mongering (rational or not) will also start to impact hoarding of PMs next year.

If we get position limits in Comex as well, so much the healthier for the markets, but we don't need them to support the price. The CFTC needs to act quick or they will be overtaken by events. They have no excuse now. The President has spoken and given them all the political cover they could ever need. The short squeeze will not be too damaging as long as the commercial boys take their whupping like men in the early going.

[maplesilverbug]

A few points:

Industrial Fundamentals -- agreed. Lately I've been thinking more and more of silver as more of a consumable commodity rather than a store of wealth (such as gold*). And as more and more of our society turns from the mechanical to the electrical (remember when you actually had to get off your ass to change the channel?!!?)...I think silver will have solid underpinning.

Relative Cost -- huh?! "2008 was a record year for virtually every commodity across the board. Oil soared as high as $147..." Yeah, and what...no mention that the price of oil was heavily manipulated up to its record price? Perhaps traders just found it more cost effective to manipulate other commodities other than the tiny silver market.

Silver Gold Relationship -- bunk. This is NOT a reason to put money into silver! It's a purely made-up stat! Why not choose oil/silver ratio, or nasdaq/silver ratio (since so many of those companies use silver in their products!). It's a good tool for doing swaps.

Rounding... -- "...before Wall Street realizes what a true bargain silver is." Uh, yeah, ok. Isn't WS the ones doing all the manipulating of the silver market (if you so choose to believe)? And really, why would WS give a shit about a $1+ billion silver market when they are getting $800 BILLION from the government/tax payers FOR FREE!?!?

*(can anyone explain to me WHY gold is a commodity?!? why aren't diamonds a commodity as well? they have industrial uses beyond jewelry... thanks.)

[Mike Phillips]

Good post.

Diamonds ARE a commodity. Industrial diamonds. As are industrial sapphires and rubies (both corundum). There is a huge difference between synthetic corundum and the real thing. Un heat treated natural rubies and sapphires represent IMHO a great tangible investment. And yes, you can tell the difference!

[What is Truth?]

Just to play devil's advocate I thought I would add a few on the other hands to the article. But before you jump down my throat, remember I'm holding a heck of a lot of silver too. ;)


4 Reasons Why Silver is the Most Undervalued Commodity

By: Dr. Jeffrey Lewis



-- Posted 22 January, 2010 | Share this article| Discuss This Article - Comments: 4 Source: SilverSeek.com



Silver prices still have a long way to rise before reaching their top. From industrial applications to its relative value, it’s easy to make the case that silver remains one of the most undervalued commodities.



Industrial Fundamentals



Industrial uses for silver are abundant. Ranging from electrical uses to photographic development, silver may be one of the most useful metals known to man.



However, silver prices have yet to reflect the growing applications and uses for the precious metal, despite so many fundamentals suggesting silver prices should rise. Silver's low price is mostly due to a poor economy, which has seen consumer spending go into a drought. With consumers buying less big ticket items, such as washing machines, computers, and other consumer-grade electronics, which all contain silver, the amount demanded from the industrial sector is under its average.



Luckily, economies do not stay in recessions or depressions forever, and consumer spending, as well as industrial silver demand, should skyrocket with any rebound. Silver's price should follow closely behind.



On the other hand many here say we haven't even started to see the depths of this depression so industrial demand may sink much, much lower.



Relative Cost



2008 was a record year for virtually every commodity across the board. Oil soared as high as $147, gold pushed towards $850 per ounce, and agricultural commodities rode the rally as well.



However, silver remained behind the pack, moving only as high as $15 per ounce, which is roughly one-third of its all time high set in the 1980s. In fact, silver was the only commodity that had not beaten its previous highs in the last three years.

On the other hand that may just mean that its price is being manipulatied downward and may continue to be for many, many more years.



When compared to energy commodities, gold and even stocks, silver remains heavily undervalued, despite a belief among economists and financial analysts that it represents one of the best investments in 2010 and beyond.



Silver and Gold Relationship



Gold and silver typically trade within a range of 20-70 ounces of silver to the price of gold. Today, the ratio is roughly 62.2 ounces of silver to one ounce of gold, which is the highest it has been in years. This ratio is often used by traders as an oscillator to decide when it is best to move from gold to silver or from silver to gold. When the ratio nears 70, investors buy silver and sell gold. When it nears 20, investors are selling silver to buy gold. This ratio, which has long been important to commodity traders and long-term investors alike, suggests silver is ready for a rally.

On the other hand silver is no longer a monetary metal held by any central bank in the world. All bets may be off concerning the old historic ratio of the past.



Rounding it All Up



Even after rising nearly 350% from its 2000's low, silver is still heavily undervalued when compared to a slew of other commodities, setting the stage for a continued explosion in price regardless of the changes in other commodity prices. Moving forward, silver has not only the fundamentals driving growth in consumption, but also investment, as more and more investors realize the untapped potential that resides in a healthy stock of silver.



There is little time to wait, as silver's explosion could be just around the corner. Should silver prices make a modest move from 1/62 of the price of gold to 1/40, investors will be rewarded with a healthy 50% in returns. The time to invest is now, long before Wall Street realizes what a true bargain silver is.

On the other hand another big drop in silver could be just around the corner too. In fact if wall street tanks it may take silver with it again.



Dr. Jeffrey Lewis



www.silver-coin-investor.com


Professor What is Truth?

[maplesilverbug]

Good post.

Diamonds ARE a commodity. Industrial diamonds. As are industrial sapphires and rubies (both corundum). There is a huge difference between synthetic corundum and the real thing. Un heat treated natural rubies and sapphires represent IMHO a great tangible investment. And yes, you can tell the difference!

Well shiver me timbers! I learned something NEW today! Thanks!

Is there an actual tradable market for ind. diamond/corundum?

[Mike Phillips]

I don't think so. There needs to be a tradeable market for rare earths, industrial diamonds and minerals like corundum.

[Emanuele280165]

Turning point in 2012 for silver, when Mr. Butler will have lost every hope to see it.

[PlataTruth]

Turning point in 2012 for silver, when Mr. Butler will have lost every hope to see it.

Care to expand oh first poster?

[What is Truth?]

Turning point in 2012 for silver, when Mr. Butler will have lost every hope to see it.

More like the manipulation of silver will end, it will spike up over $1,000 per ounce and then and only then, will the world come to an end as per the Myan prediction. :lol: