Silver: the golden investment?

A reprint I think you might like. Very interesting. From the TruthinGold site: CYA: SE

Silver has not been on the top of fund managers lists when investing in precious metals. But this unloved metal could be the one to watch out for. The volatile nature of silver could make investing in the companies that extract it remarkably profitable.

One fund manager who has bucked the trend to slant his portfolio towards silver is Ian Williams, CEO at Charteris Treasury Portfolio Managers. The WAY Charteris Gold & Precious Metals fund is the only portfolio in the UK which has the majority of its investments in silver. Around 70 per cent of the portfolio is weighted towards silver, while 30 per cent is in gold.

Williams says: “Out of all the potential asset classes available for investors to buy, silver is the one that has the most profit potential of any asset class in the world. Silver is very bombed out at the moment. The silver asset class is out of favour.

“If you want to buy things in favour then you will buy them at the top of the market – if you want to buy things that are cheap, it involves buying things at the bottom.”

Williams believes silver is at a low point in a bull market. “Every 10 years or so you get a major low in the price of silver,” he says – and these have occurred in 1972, 1982, 1993, 2002 and 2013. Williams explains that there is usually a bounce from this low point, pointing out that the average bounce is 700 per cent for silver. “This does not come very often, and when it does you should take advantage.”

Although Williams also thinks gold will go up in value, he believes it is better to be positioned in silver as it is more volatile and will go up much more than gold.

Williams says: “If you are going to have a two-to-three year period where precious metals are starting to go up, then you might as well be in the one that goes up the most. Silver is $20 an ounce and gold is $1,300 an ounce. It is a lot easier for silver to go from $20 to $40 than it is for gold to go from $1250 to $2500.

“Although silver will be more volatile as well on the way down, if you think you are in an up part of the cycle you would want to be in silver.” Williams’s prediction is that the price of silver will go up sevenfold, to about $140 an ounce, while gold prices will go up only triple, to perhaps $3,500 an ounce.

Another sign that precious metals are in a bull market is because the Gold Forward Offered Rate (GOFO) has turned negative, meaning there is a shortage of supply and prices will rise. “Every so often the gold market goes negative,” Williams explains. “The only way it can is if some big buyers come in and are prepared to pay a premium. Every time this has happened, it has been a signal for a huge uplift in gold price. It is a signal that there is massive pent-up demand for the immediate delivery of gold.

“Why people want it, no one knows exactly. Maybe Indian jewellers are prepared to pay a premium because the gold in three months’ time is no use to them. They have customers who want jewellery and they have not got any gold to make the rings. They do not want to turn the customers away as they do not want them to go to another shop and buy the rings. They are desperate to get their hands on gold.”

Out of the different asset classes you can invest in regarding precious metals, he believes shares offer better value than investing directly in the metal. Companies in his top 10 positions include Fortuna Silver, Tahoe Resources, Fresnillo and Silver Wheaton.

“I would recommend gold shares over gold metal and silver shares over gold shares,” Williams says. “Gold shares will go up tenfold, and maybe some of the silver shares will go up twentyfold. That is a magnitude of how bombed out it is. It is the only sector of the equity market which you can buy at 2008 post-crash levels. Every other sector has gone back up and is hitting new highs. We think it is absolutely unique.”

Williams also believes silver producers have the edge over gold because there is more of the metal in the Earth’s crust. They have also been hitting their production targets, whereas some targets at gold companies have been falling short of expectations.

Now could be the time to buy silver. If there is a bull market in precious metals, the share price of silver firms could soar, and the metal that’s out of favour could soon be loved again.