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.

Fortuna Silver Mines (TSE:FVI) Production Surges 33.8 Percent

Fortuna Silver Mines Production

Fortuna Silver Mines (TSE:FVI) had a great quarter by any measurement, led mostly by increased production across several of their key metals, including silver.

The only decrease in production was zinc, which dropped a slight 1 percent to 6,868,811 pounds.

Silver production increased by 30 percent to 479,821 ounces, a record for Fortuna, while copper production exploded upwardly, increasing by 213 percent, ending the quarter with 295,854 pounds produced.

Lead had a 1.5 percent gain, with 295,854 pounds extracted from Fortuna's properties.

Fortuna looks strong going forward, as their sales in 2009 of $51.4 million, double the year before, shouldn't decrease in any way in 2010, and will continue to rise based on the increased production levels of their precious metals.

Silver Wheaton (NYSE:SLW) Continuing Spectacular Growth

Silver Wheaton Growth to Continue

Silver Wheaton (NYSE:SLW), even after a fantastic increase in silver production in 2009, doesn't show any signs of slowing down too much, as the company could enjoy growth in the 35 percent range for 2010.

Assuming they reach their goal, which they are likely to, Silver Wheaton will grow to 23.5 million silver equivalent ounces. By 2013 the company wants to reach 40 million silver equivalent ounces.

Silver Wheaton can just about do what it wants in reference to growth through acquisitions, as its cash flow, cash reserves and credit line of $400 million give them a strong liquidity foundation to work from.

Silver Wheaton Growth to Continue

Silver as Idaho Currency?

Silver as Idaho Currency

While the impetus behind introducing a bill to allow silver to be used in Idaho as a currency is job creation, the implications would be extraordinary if it happens, especially in relationship to the silver currency strength to the strength of the U.S. dollar.

The silver medallions, which have a good possibility of becoming a currency from a political standpoint, could be used for many things, including paying state taxes if one wished.

If this were to become successful, it wouldn't be long before other states implemented similar measures, which would create a dominoe effect, this time for something very positive.

Who knows where silver as a currency could go if this works, and if gold would be seriously entertained as a competing currency again.

Silver as Currency

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

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