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  • Profile photo of IntrigueIntrigue
    Member
    @intrigue
    Join Date: 2010
    Post Count: 208

    I couldn't find the right place for my question but thought the finance guru's would know!

    I am wondering about those holding physical silver. My learnings tell me that those that hold (or most of those that hold) do so to preserve the value of money.

    I have watched this metal for a couple of years now and I note that it is finally returning to the price that it was at the time I started looking. The talk is all much the same as it was then. So I wonder what if anything have those people gained over that time.

    Lets say a purchaser (of silver) has a house mortgage that they are repaying @ 7% (for example) by not putting the funds in an offset the silver purchase is effectively costing them 7% right. So either they predict a big spike in price that will change the profits or an alternate big change…. which leads me to my question.

    If a consider silver as a wealth storer. I cant get my head around what the mean re: the australian dollar. What if the Aussie dollar went back down to say 50c vs US. Does my silver value go down respectively (there are two prices on the silver sites one in US one in AUD).

    Then I guess I could think that if they put the funds in the house mortgage this may have been lost via a reducing equity?

    Anyone following my confusion that may be able to help me understand…

    Thanks

     

    Profile photo of xdrewxdrew
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    @xdrew
    Join Date: 2010
    Post Count: 479

    The price of rubber nose dongles is up.

    Seriously .. with the price of rubber being pushed up by a lack of supply .. the price of rubber nose dongles .. has gone through the roof !

    INVEST IN RUBBER NOSE DONGLES .. THE NEW TRADABLE CURRENCY OF THE 21st CENTURY !

    sounds kinda ridiculous huh?

    now substitute silver for the words RUBBER NOSE DONGLES.

    Why assume that silver is any better than any other traded commodity?

    Its more affordable than gold, but it also lacks the one thing that gold does have ..  a very small supply base. Silver also decomposes over time .. it rusts into an oxide over time.

    Its no longer used in photography .. (the use of silver nitrate in film development is now nearly non-existant), it is no longer used as a form of metal for currency .. (and hasnt been used as such for over 50 years), and thanks to the ease of mining procedures in the actual capture and extraction of the metal .. its no longer really either as rare as it used to be or as sought after as it used to be.

    Like any commodity .. if you buy low and sell high you will make money on it. Like any commodity .. its only as valuable as what other people will place on it .. on a regular basis.

    Diversify into silver when its low .. and again .. sell when its high. But dont treat it as being stuff for under the mattress .. or a higher value commodity than what it actually is. It remains a readily saleable commodity at most times. That doesnt mean that buying high and expecting it to go higher has ever been a solid investment strategy.

    I have bought and sold in several collectible and commodity markets. I have purchased stamps .. coins .. banknotes .. comics .. baseball cards .. football cards .. silver coins .. silver bars .. gold coins .. gold bars ..  gold and silver jewellery .. semiprecious stones .. and diamonds.

    In each market there has been a time when a particular item or set of items is significantly undervalued. And that is either based on rarity .. percieved rarity .. consumer demand  .. or hype. At that time .. its always been worth buying in. And on the other side .. the hype .. percieved rarity .. continues until the item is OVERVALUED. And at that point .. i make my judgement call and sellout.

    I relate this .. because this is the same thing you need to be aware of when selling a property into the market. There will be a price you will be prepared to accept .. based on what you paid .. and there will be overpaying .. and realising a loss. And each of these is based on recognising your market correctly.

    Treat silver as the commodity it is .. rather than allocating it as a safety net for troubled times. Diversify your safety net .. so that there is less chance of you losing out on a single commodity.

    Profile photo of DWolfeDWolfe
    Participant
    @dwolfe
    Join Date: 2009
    Post Count: 1,253

    Hi Intrigue and xdrew

    Great post, just had to say that silver is used in digital photo processing, such as when you get your photos printed in a shop, they do however save the processing liquid and reclaim the silver from the liquid. May still have some value….

    Just a point there yes

    Cheers

    D

    DWolfe | www.homestagers.com.au
    http://www.homestagers.com.au
    Email Me

    Profile photo of FreckleFreckle
    Blocked
    @freckle
    Join Date: 2012
    Post Count: 1,681

    Silver in US$ terms is up nearly 400% in the last 4 years.

    In AU$ terms a little over 200% (indicates rising AUD vs USD)

    Silver is traded and priced in US$.

    If the AU$ falls the price of silver in AU$ rises accordingly. Its a hedge against a falling AUD. 

    Profile photo of xdrewxdrew
    Participant
    @xdrew
    Join Date: 2010
    Post Count: 479
    Freckle wrote:
    Silver in US$ terms is up nearly 400% in the last 4 years.

    Silver is up over the last 4 years for a good reason. People are nervous about investing in anything else .. especially with a president who successfully CONFISCATED Chrysler and flogged it to the Unions. That still doesnt make it a sound commodity.

    Freckle wrote:
    In AU$ terms a little over 200% (indicates rising AUD vs USD)

    The Australian dollar has become a safe haven due to its reasonable stability in times of crisis. It remains at an abnormal high (the TWI thanks to mining and raw animal sales has very much been export oriented)

    Freckle wrote:
    Silver is traded and priced in US$

    .

    Again … its just a commodity. The price of live sheep .. canola oil .. and sugar are all rated in $US currency .. so?

    Freckle wrote:
    If the AU$ falls the price of silver in AU$ rises accordingly. Its a hedge against a falling AUD. 

    Silver remains neither a hedge against the oncoming inflation .. nor a indexing towards holding US dollar value. The hype and merit towards silver as portrayed in the 'alternative' media .. makes it into a commodity its not. There is a time where its fairly valued. That was 1994. There is a time when its undervalued. That was 2006. And there is a time when it was overvalued.

    That was Nov 2011- May 2012.

    Profile photo of kong71286kong71286
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    @kong71286
    Join Date: 2009
    Post Count: 261
    xdrew wrote:
    Why assume that silver is any better than any other traded commodity?

    I believe Silver is better than other traded commodities because of its unique properties that make it hard to substitute:

    • Most reflective metal
    • Greatest conductor of heat and electricity
    • Strongly resists corrosion and oxidation
    • Second most malleable and ductile metal
    • Recently found to be an effective anti-microbial

    These characteristics make Silver very difficult to substitute, and means Silver does not have the self correcting mechanism that other commodities have

    xdrew wrote:
    Its more affordable than gold, but it also lacks the one thing that gold does have ..  a very small supply base. Silver also decomposes over time ..

    Various sources seem to suggest that the amount of above ground available Silver is lower than Gold, due to industrial consumption of Silver and hoarding of gold over the past few decades.

    Back in the 1950s there was 10 billion ounces of above ground available Silver and 1 billion ounces of gold, whereas today it is estimated there is less than 0.5 billion ounces of above ground available Silver, and over 7 billion ounces of gold

    xdrew wrote:
    Its no longer used in photography .. (the use of silver nitrate in film development is now nearly non-existant), it is no longer used as a form of metal for currency .. (and hasnt been used as such for over 50 years), and thanks to the ease of mining procedures in the actual capture and extraction of the metal .. its no longer really either as rare as it used to be or as sought after as it used to be.

    Next to Oil, silver is the most widely used commodity and has more than 10,000 uses, with more uses being discovered as technology advances. It is used in computers, cell phones, satellites, high tech weaponry, solar cells, jewelry, medicine, clothing, water purification etc… Demand for Silver for Solar energy is likely to increase drastically over the next decade.

    xdrew wrote:
    Diversify into silver when its low .. and again .. sell when its high. But dont treat it as being stuff for under the mattress .. or a higher value commodity than what it actually is. It remains a readily saleable commodity at most times. That doesnt mean that buying high and expecting it to go higher has ever been a solid investment strategy.

    Agree with you there. Although Silver could be on the verge of breaking out of the 200 day moving average, and resuming its bull run, the optimal time to have bought was about a month or two ago at the $26-$28 price range.

    xdrew wrote:
    In each market there has been a time when a particular item or set of items is significantly undervalued. And that is either based on rarity .. percieved rarity .. consumer demand  .. or hype. At that time .. its always been worth buying in. And on the other side .. the hype .. percieved rarity .. continues until the item is OVERVALUED. And at that point .. i make my judgement call and sellout.

    I relate this .. because this is the same thing you need to be aware of when selling a property into the market. There will be a price you will be prepared to accept .. based on what you paid .. and there will be overpaying .. and realising a loss. And each of these is based on recognising your market correctly.

    Good advice.

    xdrew wrote:
    Treat silver as the commodity it is .. rather than allocating it as a safety net for troubled times. Diversify your safety net .. so that there is less chance of you losing out on a single commodity.

    I strongly believe that physical metals should be a core component of any well balanced portfolio, and investors should consider holding at least 5-10% into Gold and Silver

    Profile photo of IntrigueIntrigue
    Member
    @intrigue
    Join Date: 2010
    Post Count: 208

    Hello all and thank you for your comments.

    Sadly I don't know how to do the quoting thing. Xdrew I understand what you say with respect to the AUD being a safe haven. You mention 'it remains at an abnormal high'. Are you saying you dont expect the AUD to drop anytime soon or rather it is abnormal and thus should return to normal?

    Freckle thank you for trying to help me with the $ question. Think I've almost got it. Today Silver is AUD 34.14  or 35.07US. lets say the price of silver was the same as it is today but the AUD was 50c to the US dollar. The silver is US would be worth the same $35.07 but in AUD it would be $70.14…. Am I right.

    Thank you to DWolf and Kong, I had hoped you would partake in the discussion.

    So with the debate on the strength and value of silver continuing. Would it be fair to say that one should only invest in such commodities when they have cash to invest with. I.e. the person that took money out of their offset to purchase silver, would find it hard to win as the price would need to rise at least 7% per annum to be in front?

    It seems from what you are saying such a speculator would be better to play the rise and fall, or not at all?

    Profile photo of DWolfeDWolfe
    Participant
    @dwolfe
    Join Date: 2009
    Post Count: 1,253

    No worries Intrigue, I only have my opinions however, as I don't own any metal.

    Personally, I think if you are not using cash to buy silver/gold, shares etc that you may be put behind the 8 ball as these investments turn on a dime. At least with a cash investment you can get out at the drop of a hat, without any 'margin calls' from a lender etc if it goes south. You've got to make sure at that point that there is nothing better that you could do with that money, like investing in other metal, shares, property etc, because you need to hold the investment long term to see a good return. You'll also have to hold a fair amount to make a good return. With any holding costs (eg holding silver at the mint), the cost of interest.. you may find any gains being chewed up.

    While gold has stayed high due to hedging (and probably on the wish of a few people to return to the gold standard) silver seems to have stayed to some degree the spinster sister. Yes it has still had good growth. I'd like a few more opinions on this also.

    The Australia dollar will begin to drift down as the US begins to recover, that's the way these things work.

    The speculator could play the rise and fall, but they would have to play the game all day every day. One of the reason I lost interest in share trading.

    I've really only hit the tip of the iceberg in terms of learning about hedging, metals, plnty more to know.

    Cheers

    D

    DWolfe | www.homestagers.com.au
    http://www.homestagers.com.au
    Email Me

    Profile photo of kong71286kong71286
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    @kong71286
    Join Date: 2009
    Post Count: 261
    Intrigue wrote:
    Hello all and thank you for your comments.

    Sadly I don't know how to do the quoting thing. Xdrew I understand what you say with respect to the AUD being a safe haven. You mention 'it remains at an abnormal high'. Are you saying you dont expect the AUD to drop anytime soon or rather it is abnormal and thus should return to normal?

    Freckle thank you for trying to help me with the $ question. Think I've almost got it. Today Silver is AUD 34.14  or 35.07US. lets say the price of silver was the same as it is today but the AUD was 50c to the US dollar. The silver is US would be worth the same $35.07 but in AUD it would be $70.14…. Am I right.

    Thank you to DWolf and Kong, I had hoped you would partake in the discussion.

    So with the debate on the strength and value of silver continuing. Would it be fair to say that one should only invest in such commodities when they have cash to invest with. I.e. the person that took money out of their offset to purchase silver, would find it hard to win as the price would need to rise at least 7% per annum to be in front?

    It seems from what you are saying such a speculator would be better to play the rise and fall, or not at all?

    No worries mate smiley

    Just to clarify something though…

    It is not Gold or Silver that changes value, but it is the currency in which the are measured in that fluctuate

    An ounce of Gold will still retain its value 100 years from now, but a US$100 bill will most likely be worthless

    Profile photo of FreckleFreckle
    Blocked
    @freckle
    Join Date: 2012
    Post Count: 1,681
    Quote:
    xdrew wrote:
    Freckle wrote:
    Silver in US$ terms is up nearly 400% in the last 4 years.

    Silver is up over the last 4 years for a good reason. People are nervous about investing in anything else .. especially with a president who successfully CONFISCATED Chrysler and flogged it to the Unions. That still doesnt make it a sound commodity.

    Does for those making a quid out out of it.

    Quote:
    Freckle wrote:
    In AU$ terms a little over 200% (indicates rising AUD vs USD)

    The Australian dollar has become a safe haven due to its reasonable stability in times of crisis. It remains at an abnormal high (the TWI thanks to mining and raw animal sales has very much been export oriented)

    Agree on the safe haven thing but what's  'abnormal' these days?

    Quote:
    Freckle wrote:
    Silver is traded and priced in US$

    .

    Again … its just a commodity. The price of live sheep .. canola oil .. and sugar are all rated in $US currency .. so?

    Hmmm.. so what?

    Quote:
    Freckle wrote:
    If the AU$ falls the price of silver in AU$ rises accordingly. Its a hedge against a falling AUD. 

    Silver remains neither a hedge against the oncoming inflation .. nor a indexing towards holding US dollar value. The hype and merit towards silver as portrayed in the 'alternative' media .. makes it into a commodity its not. There is a time where its fairly valued. That was 1994. There is a time when its undervalued. That was 2006. And there is a time when it was overvalued.

    That was Nov 2011- May 2012.

    Not necessarily a hedge against inflation because its value doesn't always track with inflation adjusted values. I use it as a hedge against a possible fiat collapse or serious correction. Will it be effective – time will tell I suppose. In the meantime it continues to appreciate over the longer time frame. Is it a hedge against a falling AU$ – my guess is yes given that it's value is US$. Again we'll see.

    Fair value? What's fair value? Talk to ten people and they'll all give you a different answer. 

    It's primary use (60%) is industrial just like all the other metals out there. Where it differs is in its speculative use. The same could be said of copper at this point. 

    • Silvers industrial demand continues to grow. 355 mil oz in 2002 to 486 today and predicted to reach 655oz by 2015 (optimistic I think)
    • Its availability is decreasing. Perth mint cannot meet demand currently.
    • There is less silver above ground than gold. 
    • speculative demand is growing as the global situation continues to deteriorate. 

    PM's seem to illicit a fairly emotive response from many people. I personally don't get that carried away with it. I follow PM's simply because they're interesting and offer some opportunities via small cap miners. They're trendy at the moment and sentiment is increasingly swinging their way so I'll go for the ride and see if I can't make a buck or two along the way.

    Profile photo of FreckleFreckle
    Blocked
    @freckle
    Join Date: 2012
    Post Count: 1,681
    Intrigue wrote:

    Xdrew I understand what you say with respect to the AUD being a safe haven. You mention 'it remains at an abnormal high'. Are you saying you dont expect the AUD to drop anytime soon or rather it is abnormal and thus should return to normal?

    AUD is/was basically considered a resource currency. While resources did ok the currency rose. It would normally fall when resources declined but not this time. The AU economy has stood up better than most after the GFC so is considered now to offer some protection to those looking for safer places to invest and park their wealth. AU's currency now has an element of safety that was usually the domain of the US dollar. That's created a few headaches here and a belief that our dollar is too high. Personally I think it's about right. A high dollar hurts exports, a low dollar hurts everyone.

    Quote:
    Freckle thank you for trying to help me with the $ question. Think I've almost got it. Today Silver is AUD 34.14  or 35.07US. lets say the price of silver was the same as it is today but the AUD was 50c to the US dollar. The silver is US would be worth the same $35.07 but in AUD it would be $70.14…. Am I right.

    Bang on!

    Quote:
    the person that took money out of their offset to purchase silver, would find it hard to win as the price would need to rise at least 7% per annum to be in front?

    Yep!

    Quote:
    It seems from what you are saying such a speculator would be better to play the rise and fall, or not at all?

    Not necessarily. All investment is speculation to some degree. Day trading is hard work and few actually make any more than lower frequency trading. People take positions based on their belief about what might occur over certain time frames and tailor their position to match that expectation.

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