1980 to 2014: From bear to bull
Silver: the Indispensable Element
Silver has innumerable applications in art, science, industry and beyond.
At the highest level, though, demand for silver breaks down into three important categories:
- silver in industry,
- investment, and
- silver jewelry & décor.
Together, these three areas represent more than 95 % of annual silver demand. In 2010, 487.4 million ounces of silver were used for industrial applications, while over 167.0 million ounces of silver were committed to silver jewelry and 101.3 million ounces were used in coins and medals.
With unique properties including its strength, malleability and ductility, its electrical and thermal conductivity, its sensitivity to and high reflectance of light and the ability to endure extreme temperature ranges, it is an element without substitution.
The long-term picture of the bull market since 2001
The bull market of the silver price started towards the end of 2001. On the way from $ 4.02 to the recent intraday all-time high of $ 48.42 (an increase of 1,104%), several significant corrections took place, the most severe one in 2008 when the silver price sank by 57% only to jump 441% to a new all-time high.
The silver price is in an oversold position, as shown above, which is far worse than in 2008 or in 2001. Such extremes have always been followed by strong movements to the up-side. After 2008, silver rose more than 400% while some gold and silver shares jumped 2,800% (First Majestic Silver).
What the PMO Indicator shown above clearly demonstrates: extremes will always be corrected. In fact, we had great sell opportunities in 2006, 2008 and 2011. On the reverse side, 2001 and 2008 were unique buying opportunities.
At present, we again have such a buying opportunity! This is not the time to stay on the side-lines. You have to buy now!
Should you rather buy gold or silver shares instead of gold or silver?
First, there are a few basic facts that one has to know:
- Gold and silver stocks are more volatile than gold or silver.
- It is hard work to select the right companies and to monitor them.
- You should know the Management.
- You should have a long-term view.
As most do not have the time to devote several hours a day
- to employ a bottom-up selection process and fundamental, proprietary research to identify companies that are considered undervalued, based on growth potential and the assessment of the company’s relative value, and
- to seek exposure to overlooked and undervalued gold stocks across the world,
This work is best left to an experienced fund manager. The following chart reveals the risk and rewards of such investment:
The best silver shares:
The better option: The Sierra Madre Gold & Silver Venture Capital Fund
P. ZIHLMANN INVESTMENT · MANAGEMENT AG
phone: +41 44 268 51 10
The author has not been paid to write this article, nor has he received any other inducement to do so.
The author’s objective in writing this article is to invoke an interest on the part of potential investors in this stock to the point where they are encouraged to conduct their own further diligent research. Neither the information nor the opinions expressed should be construed as a solicitation to buy or sell this stock.
Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions in the stock - or to use their own brains.