Gold And Silver Prices In The Midst Of A Currency War

Since almost everything is perfectly aligned to produce rising gold and silver prices, many investors are baffled and frustrated over not only the lack of upward movement in the two precious metals, but the plunge in price for both of them.

Most mainstream media outlets point to the alleged recovery in the United States as a major reason, but that's in reality not even part of the equation. The reason a recovery is cited as important for gold and silver prices is the assumption the Federal Reserve will stop its easing program sooner than expected.

While there are all sorts of assertions of recovery thrown around in the financial media, most institutional and private investors know the difference, even if the general population doesn't. A so-called recovery isn't even part of the picture, and shouldn't be seriously considered in relationship to the prices of gold or silver.

The exception to that would be the industrial demand for silver which would result in higher silver prices. But there has to be an actual strong recovery for that to be considered in the price equation. Some may ask about the recently released job figures, which appear to confirm robust economic growth in the United States.

But the data aren't even close to being significant, as evidenced by the fact the participation rate of the labor force has plummeted to 63.5 percent; the lowest level since 1981. That is a big contributor to the 7.7 percent unemployment rate released. That and the quality of jobs and suspicions many of those getting jobs were actually obtaining second jobs because of the requirements surrounding Obamacare, which make the job numbers very dubious.

Another factor is the number of people no longer being counted in the labor force have jumped by almost 300,000 in January, which is larger than the alleged number of jobs created. Consequently, we must look past the headlines to see the actual data.

For example, a significant 48,000 of the jobs created were in the construction industry, which were the result of the $40 billion in monthly acquisitions of mortgage backed securities by the Federal Reserve.

Some may think that it means stimulus is working, but on the contrary, it means the jobs are being artificially created and propped up, and when the Fed stops pumping money into the economy and/or begins to unwind it's positions, the economic house of cards will collapse around them. Rising interest rates will result in similar consequences. On the other hand, only 14,000 of the jobs added in January were in manufacturing, which would have pointed to a sustainable growth pattern if the numbers were higher. So the economic picture remains grim, and the U.S. economy continues to falter and struggle.

Fed Strategy

For those that don't understand the monetary policy of the Federal Reserve, it is probably thought the latest job-creation numbers point to wild success for the central bank. It's actually the opposite because the overall stated purpose of quantitative easing is failing at this time, which is to debase the U.S. dollar. What that means is the Fed will continue to print money indefinitely, and could even ramp up the printing presses more ... and probably will. The Federal Reserve wants a weaker, not a stronger dollar. We'll get into the why of that a little further into the article.

Fed minutes

Before we go on, there is a need to point out the latest minutes from the Federal Reserve which supposedly pointed to internal disagreement about the loose-money policies it is now engaged in. A large number of investors actually ate this up, thinking the Fed was indecisive over whether or not it was going to continue on with its stimulus program over the long haul. It was undoubtedly a ruse.

The Fed has absolutely no intention of ending quantitative easing any time soon. The comments in the Fed minutes were obviously orchestrated to create a sense of uncertainty around its practices and outlook. The question is why did they want that to be layered on the public investment psyche? This is important because it seems to contradict the goal of debasing the U.S. dollar even further.

I don't think it's anything more than creating some doubt in the minds of those who believed they had the moves of the Fed figured out. Almost no one has been uncertain as to what the Fed would do lately, and so that allows for a number of investors to position themselves for huge gains. That includes other countries as well. So to generate some confusion in the minds of people was the goal there, and it has of course worked, as the idea of an ongoing recovery has been successfully planted in the minds of investors. Now many think sometime soon the Fed could end its stimulus, even though by its own unemployment parameters it's far from its stated goal.

Why the Federal Reserve Failed to Weaken U.S. Dollar

Okay. The Fed failed to lower the value of the U.S. dollar. The reason is that we are in the midst of a currency war, even though it is asserted that isn't the case. And don't be confused by the origin of the war: it's the Federal Reserve and its lengthy loose money policy that kicked it all off. The reason the dollar isn't falling in value is because the central banks of other nations have responded with their own stimulation efforts; the most recent and important being Japan.

Nothing but a currency war, or aggressive response to the policies of the Federal Reserve could have kept the price of the U.S. dollar from falling. The fact that the dollar is perceived to be so strong confirms the fact there is a currency war going on. Nothing else can account for the strength of the dollar at this time. Since it may not be obvious to a lot of readers, I include the practice of people and institutions throwing their money into U.S. dollars when they panic, which seems to be very regular these days.

Weaker competing currencies are creating the illusion of a strong and safe dollar, which is then artificially reinforced by investors pouring their money into it. This is why I tie the currency war and illusion of safety in the U.S. dollar together. They're inseparable, and so must be tied together when talking of currency movements. The perceived flight to safety is a major reason the dollar retains some of the strength it has.

Central Banks and Currency Wars

A currency war is when central banks representing different nations participating in the printing of money out of thin air. This is of course sounds like stimulus in general. The difference between that and a currency war is the degree and response of central banks to the Fed. In this case Japan has boosted its stimulus enormously, and so the yen has moved lower against the dollar.

While we have no idea when it will change, the outcome of all of this for the U.S. dollar is it will probably continue to remain strong for a season, and so the Federal Reserve will continue to print or respond to competing stimulus efforts in order to bring the value of the dollar down. Eventually it will cause investors to lose faith in the dollar, which at that time will experience an enormous plunge in value in a relatively short time (not instantaneously).

All of this is predicated on the fact the Fed wants a weaker U.S. dollar. The only way to get it is to continue printing money. The outcome of that is obvious, and only a matter of when, not if it happens.

Currency Wars are Predictable

What's interesting about currency wars is there are recent historical data which can be used to learn how the currencies respond. While a currency war is cyclical in regard to different currencies, they are linear in nature, which means they are predictable and easily identifiable. Already noted is the predictability of the response of the Federal Reserve to competing central banks in regard to its policy of debasing the dollar.

The next stage is to see which currencies will be affected and how by that battle. Over the last couple of years we can easily see how the battle of currencies played out with the dollar, the euro, and now the yen. This is where gold now comes into the picture. To see the movement of the value of currencies, it must be measured against gold in relationship to a specific currency. In the case of the U.S. dollar, it reached a top in September 2011.

About a year later the same happened in regard to euro gold. Now we have yen gold approaching history highs. The pattern is easy to see, and as mentioned - predictable. The metric is simply the price of gold reflected in the currency in question. So currencies move in a predictable manner as they devalue in relationship to gold.

After the yen the British pound will probably be next in line to move in the same manner. When the cycle comes back to the U.S. dollar, it is at that time the projections of much higher gold and silver prices will kick in.

Understanding Gold Prices and Currencies

Many investors don't have an understanding of what is happening with gold when talking of its price, so let's look quickly at what it really means. When talking about the price of gold and whether the movement is up or down, in reality what is being talked about is the strength or weakness of a currency that is being determined.

Gold itself is inert and actually stays neutral as a store of value. The price of gold moves in direct correlation to the strength or weakness of currencies. Again, this is why major currencies in a currency war can be identified fairly accurately as to their strength in relationship to gold. Just keep in mind it's the currency that is actually being measured against gold, not the value of gold in and of itself that is going up or down on its own.

Gold and Fed Minutes

Let's revisit the Fed minutes again. Why did the Fed have the comments about its policy in them? It wants to keep investors off balance. That is important because it is in order to be able to successfully debase the dollar while attempting to hold down the price of gold and silver, as well as other commodities. If investors believe the dollar remains safe, they'll continue to pour money into it even though it is under attack by the Fed itself. In other words, it's trying to keep inflation in check by making investors believe it may stop stimulating at any time.

That's not even close to the truth, but the idea has now been planted in the minds of investors, so they are paralyzed some in regard to putting money in gold as a place of safety. Some actually believe the Fed minutes point to a possible end to quantitative easing, when in fact there is no such idea in the near-term suggesting the Fed is even contemplating it. Most investors don't understand the consequences of the Fed unwinding its positions, and so take as fact the orchestrated implanting of alleged opposition to ongoing stimulus into the Fed minutes, when the stimulus will continue on for some time to come.

Gold Traded in U.S. Dollars

All of this is to say that the continuing currency wars has helped protect the U.S. dollar from being seen as enormously weak. That has brought the price of gold down against the dollar. That means the dollar against a number of currencies has strengthened, creating the illusion it has strengthened against gold. But it's not gold that moves up and down remember, but the currencies against the gold. This is what currency wars create, and we simply need to watch it unfold and play out, looking for the time when the dollar begins its inevitable decline.

A Word on Silver

Much of what has been said about currencies and gold can be applied to silver, with the obvious exception silver has far more industrial uses and so has dual demand in that regard; both in supply and demand, as well as its being regarded as an investment metal like gold is. Without getting into the specifics of the enormous number of products now needing silver, let it suffice to say the macro-economic situation in the world - including the growing population and emerging markets - guarantees an enormous industrial demand for silver for many years into the future.

Silver demand and consumption has nowhere to go but up

The price of silver will jump up when it is understood and realized it will be difficult - if not impossible - to meet the demand for the white metal. As far as the price goes, I'm not going to enter that game as far as predicting one. The reason I say that is we are without a historical road map when contemplating and researching silver shortages; there has never been a shortage. We do know when the Hunt brothers tried to corner the market years ago, the price of silver shot up exponentially.

The reason silver is having difficulty pushing up in price is because the silver shorts at this time that are depressing the price. That can't and won't last, although it's impossible to know when that will stop. One thing to consider is there are no supports in place for silver as there are with gold, so when silver shortages are recognized as the reality and the price of silver shoots up, there will be some silver shorts who won't be able to get out that will be crushed.

It will happen. For silver prices, it's more important to look at an inevitable shortage than it is to look at inflation and the fear factor as those looking at gold must do. They come into play with silver, but the real impetus for soaring silver prices will be its inability to meet growing industrial demand rather than its relationship to its investment side.

That's not to say the price of silver couldn't or won't go up based upon its being an alternative to the U.S. dollar, because it will. It simply means the big move in the price of silver will be as a result of shortages, not because of the money supply and inflation. Since silver will move up on both, a growing number of investors believe it could be the most significant asset class of the next decade. I tend to believe they're right.

Silver Investing Strategy

To me, silver shouldn't be invested in using borrowed funds, but rather should be invested in as capital becomes available. That's because there will be a time when the shorts get hammered, and we don't want to be in that position when it happens. Silver shortages ensure that it will happen. We should be positioned accordingly.

Conclusion

The reason for the downward pressure on the price of gold is the ongoing currency wars. The U.S. dollar is still very flawed, but because of the stimulus associated with major currencies it gives the impression of strength because other currencies are also being debased by the respective central banks in each country. The goal of the Federal Reserve is to debase the U.S. dollar. It won't stop until it has accomplished that goal, and there is no way there is any chance whatsoever the Fed is really considering ending stimulus any time in the near future.

Even so, the resiliency of gold is seen by the fact it is still holding its own fairly well in a very difficult environment. Gold will catch up with the money policies of nations as people increasingly grow wary concerning the viability of paper, fiat currencies. That and the pattern of cyclical, but linear currency debasement against gold as a consequence of the current wars means the price of gold will rebound once the effects of debasement comes around again to land on the U.S. dollar.

As for silver, it will be affected by the same forces, although its major move up will be in response to the shortages that are coming and the resultant spike in prices in conjunction with soaring demand. What if you believe there is a recovery? Sorry to hear that. But if you do, be aware that it is at best tenuous and very slow. It won't affect Federal Reserve policy or the currency wars, so everything mentioned in the article will still hold for some time.

The Fed will continue to stimulate, the dollar will continue to fall in value, and the price of gold and silver will rise in response to that.

Silver Prices Headed to the Moon?

While there's no doubt we're in the midst of a bull silver market, some comments by silver analyst and bull Israel Freidman on the web site of Ted Butler goes beyond reality (I think), and enters into the realm of fantasy, as he makes the assertion the combination of industrial use and investment value in relationship to silver could push the price of silver beyond gold some day.

Making assertions like that are basically useless, as even if that were to happen, it would take so many years that the idea of someone having made it would have long been forgotten, as will the person making it.

Having said that, the underlying premises for why silver prices will rise are worth looking at, as they are surely part of the silver price picture, and need to be taken into account by silver investors.

It's worth pursuing the matter because a number of commodity experts believe that silver may be the best performing asset class over the next decade.

The major argument for silver prices rising in the view of Freidman, which in general is true, is the growing demand by investors, along with the increased number of industrial uses for silver will end up producing a supply shortage in the not too distant future, which is the impetus behind his belief the price of silver could skyrocket to enormous heights, and potentially surpass gold.

Overall, the problem with that Utopian scenario is once the price of silver were to reach those dizzying price heights, and even before, businesses would seek alternative raw materials or methods to produce products requiring silver as a major component.

That would also be the case for investors, who are now loading up on silver because of it being an effective alternative to gold. Once the prices were to rise too high, the falling demand would bring them closer to reality.

Even so, we should see the ratio between gold and silver improve over what it's been, which means silver prices should rise higher in relationship to gold over the next ten years or so.

As for demand outpacing supply, in the short term that's highly doubtful, and there may even be an abundance of silver in that regard. Over the years though, it could definitely be a possibility that silver supply could come under pressure, and that could move the price of silver up to previously unheard of levels, but not to anywhere near where gold would be, unless the price of gold were to plummet to levels it stood at a little over a decade ago.

The other important factor on the investment side is how long central banks around the world continue to attempt to stimulate their respective economies. If that continues over time, that would result in significant inflation, and in investors moving their money into gold and silver to protect their assets.

This will be especially true as currencies lose their buying power.

At this time investors are still looking to the U.S. dollar as a safe haven, which has helped keep the dollar at levels far above its actual value. That's because other currencies are performing at similar levels, because central bank practices of competing currencies are kept them from being at any significant advantage against the U.S. dollar.

That will change, but that's why some investors continue to be long the U.S. dollar, as they know in this tumultuous economic climate that people and institutions will continue to pour money into the dollar as a perceived safety net. They're wrong, but in the short term that will underpin the dollar.

This will gradually change in regard to silver, and the white metal will continue to rise over time, in spite of those that seem to live to only make money by trying to short the commodity. Over time they'll lose, but those moving in and out of the market, and who know what they're doing, do make a lot of money on the wide prices movements associated with silver, and that will continue even as silver continues to rise in price.

What is good about the boost in industrial usage and demand for silver is it will, over time, place a base under the price of silver as it becomes more predictable as a result.

So the wide movement in prices over the short term may slow in the degree they move, although the relatively small amount of silver in comparison to gold will keep those prices moving much more than its counterpart.

In other words, silver will continue to rise, but the fluctuation in price will continue on unless some unknown hoard of silver is discovered which may change the supply picture over the long term. If not, things will largely remain the same as market factors continue to favor silver and those investing in it.

Solar Could Drive Silver Prices Even Higher

To begin with, I'm not in any way a fan of government-subsidized solar, and think it's a terrible idea that any market is interfered with from the government. Having said that, it doesn't take away from the fact that solar energy should continue to grow significantly in the years ahead, and that means silver will get a major industrial boost in demand as a result of that.

Probably the most important story emerging in that regard is the fallout from the Fukushima nuclear facility, which has caused Japan to change more of its energy focus on solar. That means photovoltaic technology, which further means growing demand for silver,  drives up demand because they require about two-thirds of an ounce or 20 grams per each panel.

To generate more demand, even if it's artificial, Japan has offered utility companies a rate boost of three times conventional power if they go with solar. There is no doubt many of them will take the bait and boost solar-generated power in the country.

The point is, whether you agree with this or not, it must be taken into account as part of the overall industrial demand for silver. At this time approximately 11 percent of all industrial demand for silver comes from the solar sector; and that will continue to grow, albeit the ongoing debt crisis in Europe and unsurety about the short-term fate of the economy could cause uncertainty and volatility in silver demand from the sector.

For example, Germany has cut back on subsidies to the industry, and Italy has made overtures the same way. But when reports say over 100 countries are now using solar panels as part of their energy strategy, some will continue to spend while others may fluctuate in their spending.

But the trend will continue to go higher no matter what happens in the short term, and taking into account this growing market as it relates to silver demand is a must for those looking at the overall picture.

To put some perspective on this, CPM Group reports that industrial demand for silver climbed by about 11.2 million ounces in 2011, and that doesn't include the decision by Japan to raise its solar capacity.

In the solar panel industry, silver demand has soared from one million ounces in 2002 to an extraordinary 60 million ounces in 2011. And that doesn't factor in jewelry demand.

And while German silver demand in the solar sector has declined, many other nations, such as the United States, Japan, France and China, among others, has more than made up for it.

Also needed to be taken into account is the estimate by CPM that silver demand in Europe for solar panels will drop in 2012, but again, that doesn't include the initiative from Japan, which should offset that and easily increase the demand factor for the metal.

According to SolarBuzz, by 2020 Japan may have 28GW of solar capacity installed, and by 2030 that could rise to 50GW. That will take an enormous amount of silver to make that happen. In 2011 only about 1.3GW of power was installed in Japan.

The risk in the assumption of much higher silver use in solar panels is the price of silver itself, which is poised to jump to much higher levels on the investment side of the metal, where it is considered a protection against inflation and a place of safety in light of the loose money policies of governments around the world.

But in the short term that won't matter, as it'll take time to change to silver alternatives as manufacturers look to lower prices. In the case of the price of silver soaring, that probably would cause solar panel demand to fall, and of course that would have some effect on the price, although even there it'll take time for more solar panel market penetration before it's a major factor in the already volatile price of silver.

That's the positive about any segment which needs silver for industrial usage, as the more demand there, the more the price of silver is more predictable and consequently less volatile.

What makes silver hard to follow is the fast and growing number of products that use silver as an essential part of its makeup. So following the major demand sectors, as far as the industrial side of the equation is the way to go, and with that in mind, solar could become the fastest-growing single segment of the industrial market, so should be closely watched in how it impacts demand.

Other general areas that generate big industrial silver demand are food packaging, lighting and medicine.

As with everything associated with silver, there will always be more swings in prices because of the precious metal aspect, lower supply, and uncertainty surrounding demand in the short term, especially in a recessionary global environment.

But over the long term, there is no doubt silver could very well be among the top, if not the top performers over the next decade.

Silver Wheaton (SLW) Still a Buy

Some financial writers are attempting to cast doubt on silver and gold specifically, and also precious metals streaming company Silver Wheaton in particular, on the dubious and weak unemployment numbers, which allegedly dropped below 8 percent, producing the best results for the Obama administration about a month before the presidential election.

Former General Electric (GE) CEO Jack Welch asserts the numbers have been manipulated in order to cast Obama in a much brighter light than he should be. But even if they're close to the actual unemployed, all that means is a bunch of retailers hired temporary, part-time help, which they'll shed soon after the inventory is counted at the end of the year. Consequently, as usual, the unemployment numbers will jump up after the holiday season.

A major impediment from those making it look like the so-called improving economic situation in America being believable is that most are looking at the weak supply and demand circumstances, along with the assumption QE3 will end sooner than later as a result of the "improving" unemployment numbers.

That's a fallacy, and the open-ended monthly acquisition of mortgage-backed securities by the Federal Reserve is far from ending, and hints have been made that it won't stop until unemployment drops below 6 percent, and possibly as low as 5.5 percent. That isn't going to happen any time soon.
With Europe and China slowing down considerably, what could possibly be the catalyst to really end the ongoing recession? There aren't any, and that means QE3 will go on for a long time into the future; probably for many years.

About the only real positive in the American economy is the probability the housing market has reached, or is close to reaching a bottom. But even there it'll take years before a rebound will happen which will bring prices back to pre-2008 levels.
Even so, new construction could begin on homes in America, which would be a positive for silver and other commodities on the demand side, but which won't do much to change the jobs picture in the next couple of years.
As it all relates to Silver Wheaton, the price is driven more by QE3 at this time than any other factor, and the ongoing stimulus has formed support for silver prices, which means it has also put support under Silver Wheaton as well.
That, and the recent deal between Hudbay and Silver Wheaton shows the management is still seeking to boost its silver resources, as well as gold, which locks in revenue streams for years.

Silver Wheaton will only pay $5.90 an ounce for silver from Hudbay, which brings to overall total the company pays for silver production from all its deals to about $4.04. The operating margin enjoyed by Silver Wheaton are now about 75 percent. What's not to like about that?

As for real unemployment, the U-6 rate remains the same, which stands at 14.6 percent of Americans. That includes the underemployed or those that quit looking for work. Those are the numbers that really count, and that means there is no chance the Federal Reserve and Ben Bernanke are even close to thinking about easing up on the easing. Those that think they are don't understand the motivations and reasoning behind QE3.
This doesn't even take into account inflation and the necessity for the Fed to unwind its position.

Taken together, Silver Wheaton remains a great buy, and those who don't own the company will regret they didn't get in before the price of silver and Silver Wheaton take off to even more dizzying heights.

Silver Wheaton closed Tuesday at $38.70, falling $0.99, or 2.49 percent.

Silver Wheaton (NYSE:SLW) a Buy?

For true believers, Silver Wheaton (NYSE:SLW) will be a company they'll buy on any significant fall in share price, and that happened Wednesday, as it plunged 6.54 percent, or $1.33 a share.

Even its 52-week performance has been terrific, as it's low was 7.12, while recently reaching its high of 21.58. But go back to the latter part of 2008, and the stock dropped to as low as $2.51 a share, which is you would have bought it at that time, you would have been up by over 700 percent.

Volume Wednesday was 14,661,109, over double it's three-month average of 6,823,880. That means the traders decided to take some profits, like they did with gold, as even just a couple of months ago the stock was at about $15 a share, and has surged strongly.

The business model of Silver Wheaton is as simple and profitable as it gets, as they provide capital for miners in return for income from the silver production.

With tight capital markets, that's sure to continue for some time, and even though it will end up moving in unison with market corrections, over the long term this company has a lot of upside potential, and is sure to increase its value far beyond where it is now over the next decade.

Also consider that operating margins at this time are only a little above $13 an ounce of silver for the last quarter, which means cash flow should continue to rise in a big way.

Even if demand for silver slows down some, Silver Wheaton is positioned for a long run, which should build the wealth of those willing to stick with them over the long term.

Is the company a buy at this time? I would say every time you see a drop of this size, it's a good time to buy for a company ensured of a very profitable future. What none of us should do is wait for the perfect timing, where you hope it will drop even more so you can buy at the absolute bottom. That usually backfires. Buy it when it's cheap, don't attempt to get the cheapest, as that requires too much luck to be effective.

Silvercorp Metals (NYSE:SVM) Falls on EU Debt, China Fears

Silvercorp Metals (NYSE:SVM) (TSE:SVM) got clobbered today, along with most precious metals companies, as the overall sector plunged, with traders taking profits and growing concerns on how the Europe debt crisis and inflation problems in China will have an effect on demand for raw materials.

China is especially a concern for Silvercorp Metals, which operates solely in the middle kingdom, and uncertainty as to how deeply China will take measures to battle inflation. They've already raised interest rates, and have introduced more regulation into the property markets.

The issue is demand and nothing else, and Europe and China are major markets to have both potentially decline in demand at the same time, which could very easily happen.

Silver producers like Silvercorp Metals can be hit hard because it's used in so many products, which if cut back, could decrease demand in a big way, along with earnings.

Silvercorp was down over 8 percent at the close, but has regained some of that in electronic trading.

Silver Wheaton (NYSE: SLW): No Dividend Now

No Dividend for Silver Wheaton Shareholders

Although there has been speculation Silver Wheaton (NYSE: SLW) will issue a dividend soon, the company CEO Peter Barnes said that it's a possibility, but it won't happen until cash flows at the company increase.

Barnes said in the quarterly conference call he feels it would be a better idea to plow cash back into the company in order to better prepare itself for acquisition possibilities in the future.

Shareholders of course were looking at the over $227 million in cash the company has, along with a revolving credit line of $400 million, wondering why they don't get some of that as a result.

Barnes continued to hit on that theme when communicating a $25 million dividend this year would force the company to need an extra $100 million in equity to make any acquisition they were looking at.

No Dividend for Silver Wheaton Shareholders

Silver Standard Resources (NASDAQ:SSRI) Silvertip Property

Silver Standard Resources (NASDAQ:SSRI) Silvercorp Metals (NYSE:SVM)

Silver Standard Resources (NASDAQ:SSRI) has sold its stake in its Silvertip property to Silvercorp Metals (NYSE: SVM) for C$15 million. The property includes silver, lead and zinc. The terms of the deal was half in common shares of the company and the other half in cash.

“The Silvertip project ranks among one of the highest grade silver-lead-zinc carbonate replacement deposits in North America — with great potential to grow,” said Rui Feng, Silvercorp chairman and chief executive.

The lead could be especially rewarding, as it had a concentrate grade of 65 percent and 80.4 percent was deemed as recoverable in a test a couple of years ago.

Another factor is lead for batteries continues to be in strong demand, while there are only about 7 lead mines in the world to provide it.

Silvercorp wil perform its own due diligence before the deal is officially completed in a couple of days.

Silver Standard Resources (NASDAQ:SSRI) Silvercorp Metals (NYSE:SVM)

Pan American Silver (Nasdaq: PAAS) Gets No Respect

Pan American Silver

The management at Pan American Silver (Nasdaq: PAAS) seem to be quietly building a solid company while most investors in silver and other precious metals look elsewhere for their profits. That, I think, is a mistake.

When talking about increasing their silver production by 31 percent in the third quarter, while generating 6.4 million ounces of silver - a record - they are more than poised to perform strongly for years ahead, and that doesn't even include the acquisition of Aquiline Resources Inc., which has an estimated 632 million ounces of silver in its Navidad project in Argentina.

For all of 2009 the company produced 23 million ounces of silver at a reported $5.53 an ounce; a very good number.

But Pan American Silver isn't only into silver, as its gold production skyrocketed in 2009 by 331 percent.

The best part though, is even with their increased production and available resources, they are being managed well with cost being shaved significantly during the year.

With these facts and other numbers showing a company growing and expanding, while maintaining its handle on costs, and you have all the pieces for a great investment.

For some reason many people simply miss this with Pan American, and that's to their detriment over the long haul.

Pan American Silver

Pan American Silver (TSE:PAA) Posts Profits

Pan American Silver Quarterly Report

After a disappointing fourth quarter last year, Pan American Silver (TSE:PAA) came roaring back to post a profit in the fourth quarter ending December 31.

The factors contributing to the profits according to Pan American Silver was increased production and the increase in the price of silver.

Earnings for the quarter came in at $27.8 million, or 31 cents a share. That was in comparison to the same quarter last year where the mining company lost $33.3 million or 41 cents a share.

Overall revenue grew to $154.4 million, a 234 percent gain. Production during that time resulted in another 6 million ounces of silver, a 30 percent surge. A portion of that was attributed to the expansion of the San Vicente mine in Bolivia.

Gold also enjoyed increased production, as it gained by 425 percent.

The company estimated that silver production should reach 23.4 million ounces for 2010.

Pan American Silver Quarterly Report

Silver Wheaton (TSE:SLW) Augusta (TSE:AZC) Gold, Silver

Silver Wheaton (TSE:SLW) Augusta (TSE:AZC)

Silver Wheaton Corp (TSE:SLW) announced it has made an agreement with Augusta (TSE:AZC) to acquire the gold and silver produced from the Rosemont Copper project for close to $230 million cash.

Silver Wheaton is a reseller of silver byproduct which it acquires from mining companies. With this particular deal the company is looking an annual production rate of 2.4 million ounces of silver and 15,000 ounces of gold.

Operating permits for Augusta are expected to be finalized in the fourth quarter of 2010, which at that time Silver Wheaton will begin payments.

Silver Wheaton (TSE:SLW) Augusta (TSE:AZC)

Silver or Gold for 2010?

Gold or Silver?

While silver is different from gold in that it isn't only a safety investment but an industrial one as well, under normal conditions it does tend to move in tandem with it, although no always in a straight line.

According to Asian investment firm Hang Seng Financial, they believe silver could very well outperform gold over the next several years by investing in the precious metal physically, through mining companies, ETFs and other means.

I don't think we have to make that distinction so much, as more than likely gold and silver over the next several years will both perform well, with quite possibly gold being the winner in general, although it would depend on how you invest in gold to determine that for each individual investor.

Now long term I think silver could break away form gold when it is largely looked upon for its growing industrial use and demand, but that could take a little while, and the slow (if any) economic recovery over the next several years could easily keep it from doing so.

For 2010, again depending on how you choose to invest in the two precious metals, gold will probably outperform silver, at least in futures trading.

Gold or Silver?

Silver Wheaton (TSX:SLW) Stock in 2010

Silver Wheaton Stock

Silver Wheaton (TSX:SLW) has a great thing going for itself, and that will last as long as the commodity bull market in metals continues.

One major reason Silver Wheaton is such a solid company is its business model, which in essence acts more like a company generating royalties than an actual silver mining company; which it isn't.

In other words, Silver Wheaton has nothing to do with mining or the costs and uncertainties related to it, Silver Wheaton's business model is to buy silver byproduct at below market and sell it at spot prices. This is a fantastic business model that works especially well in the types of conditions we're in.

Silver Wheaton Stock

Jim Rogers | Buy Silver

Silver Prices Going Up

Talking about base metals recently, the best commodity play in that sector, according to Jim Rogers is probably silver.

While most base metals like copper have been driven up in price recently, silver largely remains at low levels, making it a good buy at this time.

Even though Rogers has no interest in base metals at these prices, he does say it would be a good idea to keep your investment in them and not sell, as there's little or no activity in production which would change the base metal production in the years ahead, while demand is sure to increase, driving up prices.

But as of now, silver prices are one of the best base metal buys, and should make investors a lot of money over the long term if they buy low.

Jim Rogers and Silver Prices Going Up

Chinese Investing in Silver

Considering silver a much better investment than gold at this time, Chinese investors have been flocking to the industrial metal in hopes of generating some significant profits in the years ahead.

Reasons for shunning gold by the Chinese are the high cost of the yellow metal at this time, which is prohibitive to a large number of Chinese.

Even though gold prices should continue to rise, silver should have a lot more upside, making it an idea investment and one many Chinese can afford to make.

Along with the upside potential of silver prices going up, it also is a better bet in short-term swings, making it more stable than its gold cousin, which many fear can make huge price swings, making it more volatile in price during the short term versus silver. That may be true, although smaller price decreases can cause equal price and percentage swings in silver, so I'm not sure that's the proper way to think about the reason for investing silver rather than investing in gold.

While I agree that silver is a better investment at this time than gold, the reason is demand rather than price alone. Demand for silver is both industrial and as a safety hedge, making it a great play going forward, as well as being off significantly from its inflation-adjusted highs. Gold is too, but it's the price difference in the two as far as it concerns the Chinese which make it so attractive.

with that in mind, we may want to watch Chinese consumption of silver as one of the market indicators and price drivers over the next several years.

Gold isn't going to go down in price for a long time, so we can count on silver remaining an attractive alternative investment choice to the Chinese, which allows us to know prices in silver will eventually start to skyrocket on that alone, but also including demand and the factor of being a safety hedge as well.

Silver Prices About to Explode?

Taking into account that about 150 million ounces of silver have been officially acquired this year, which represents about 20 percent of all silver production in 2009 so far, as well as 25 percent of all silver mine production. (The difference is recycling.)

Unofficially, it's thought that tens of millions of ounces of silver has been acquired since the beginning of the year, besides direct buying by investors.

Even more extraordinary, this represents approximately 15 percent of all known silver bullion known to exist at this time.

Taking into account the rising number of industrial uses silver is increasingly being used for, and some of the products it can't be recovered from, and we could have the perfect storm for increasing silver prices for a long time to come.