Buying and trading silver
As a result, there are three
primary markets for silver:
* The ornamental market serves jewellery and silverware;
* An investor segment concerns silver bars and coins;
* And the industrial part includes photographic film and paper,
computer components, brazing alloys, pharmaceuticals and alternative
energy applications.
What works in your favour is that few people know that the
industrial sector is the biggest for sliver, while the investor
segment is the smallest.
The biggest dilemma - and opportunity - for speculators is that
silver is getting to be very hard to find. The fact of the matter is
US government supplies are long gone and they now need to purchase
silver just to meet demand for coin and bars. Central banks sold out
most of their supply of silver as prices languished.
Some ultra-wealthy investors such as Warren Buffett, George Soros
(through Apex Silver) and Bill Gates (through Pan American Silver)
have taken on significant silver positions. I hardly think that any
of these well-known investors might be the next Hunt brothers, but
more likely these masters of wealth see a profitable trade in having
major positions in silver where others don't.
The moral of the story? Silver has been undervalued for far too long
and now seems to be having a rebirth for smart investors who only
know the story of the Hunt brothers as something that happened a
long time ago.
The happy ending may be for those investors who are buying silver at
these levels; they just may end up living happily ever after, after
all.The Hunt Brothers
One of my favourite stories from the old-timers on the floor was the
story of the Hunt Brothers' Silver Market Debacle. I will share with
you the history of these events as told to me back then by COMEX
(the former Gold Exchange) members, traders and old-timers in my
first weeks of working on the floor.
In the late 1970s, two Texas oil barons with no shortage of money or
guts moved to corner the world's silver market. William Herbert Hunt
and Nelson Bunker Hunt had been accumulating silver for years, and
the only way they could make their scheme work was to partner with
some wealthy Arabs.
At first, their timing seemed brilliant. The Hunt Brothers had hit a
gusher, so to speak, when the price jumped in 1973 from $1.95 per oz
to $5 in 1979. During that critical six-year period, the Hunt
Brothers had amassed the equivalent of approximately half the
world's deliverable cache. They also managed to help drive the price
even further to above $54 per oz.
By March 1980, just when the Hunt Brothers were sitting pretty, the
Federal Reserve pulled the rug out from under them by changing
important COMEX trading rules. Suddenly, silver plunged 50% on March
27, 1980 - a day that will live forever in the hearts of us traders.
The high-flying Hunt Brothers had crashed big time. They became one
of the biggest bankruptcies in US history. And as if ending up the
poor house wasn't sufficient punishment, they went further down the
road to the big house, too - after their conviction of conspiring to
manipulate the market.
While it certainly was the end of the Hunt Boys, that wasn't
necessarily the end of silver.
A deep sleep
After the Hunt debacle, silver fell into a deep sleep - falling to
about $3.50 in the 1990s. It took a long snooze in that price range,
with the exception of a brief spike to the $7.50 range in 1998 when
Warren Buffet started accumulating it. During those years, probably
the only thing more boring than trading silver was watching water
boil.
Then something curious started to happen...
After bottoming out in November 2001 at $4.06, silver woke up -
soaring 63% to the $6.60 range. The rise was particularly
interesting when compared to gold, which itself has risen 80% from
the depths of February 2001. The difference was that gold is a world
currency, and silver is not. Gold's price is influenced by currency
markets, while silver's is driven strictly by supply and demand.(K
Kerr)
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