Wednesday, January 26, 2011

Mining Expert Touts Physical Silver

Jan 26 2011

When investing in precious metals, buying physical metals is best, for a myriad of reasons. Even mining stocks expert David Morgan, of, agrees. In this video blog, Morgan and Michael Maloney meet up in Las Vegas, where they have advice for those who don’t want to take a gamble with their investments.

Production of Silver Eagles, the highly popular U.S. investment coins, is rapidly approaching the physical limits of their production, David and Michael agree. That’s because under the U.S. Silver Eagle Act, only domestic silver—mined in U.S. mines on U.S. soil—can be part of the Silver Eagle program.

“And the U.S. is not the biggest silver mine in the world any more by a long shot,” David says.

Many U.S. silver mines have become depleted, and mines have shut down. “And there’s the fact that U.S. mining is costly, more costly than other areas of the world,” David continues. “You’ve got labor law in certain states, you’ve got Workers’ Comp, you’ve got medical benefits, unionized labor in some cases. I’m not saying that’s good or bad; all I’m saying is that the cost out of the ground for those wage earners is higher than say if you mine in China or Mexico or Peru or other locations. So because of that you’ve got to have a rich silver mine to make it economical.”

The performance of gold and silver during the market crash of 2008 may be a precursor of things to come, Michael says, and confirms his belief that physical metals is a more secure investment than futures or stock in Exchange Traded Funds such as GLD and SLV.

“I’ve often said that Silver Eagles should develop a premium and a shortage, and they developed a huge premium back in November of ’08. They were selling a four times the spot price.

“When shortages developed worldwide of precious metals, and the markets started to crash, gold and silver went with them at first. I believe that’s because now you’ve got everybody with trading platforms, and they’ve got the ETFs like SLV and GLD on their platforms, and they’re trading that on margin, just like they’re trading everything else, and they’ve got futures contracts that they can trade. And when they get a margin call, they have to liquidate everything. So the markets plunged, and you saw silver and gold, which normally would have diverged and done the opposite—it would have been the place everybody ran to for safety—they went with the markets for the ride for a little while.

“When gold fell below 850, suddenly all these buyers came in. The physical market just completely dried up, and there was this silver rush like we have never seen. One-hundred-ounce bars were going for 18 bucks an ounce on eBay, and Silver Eagles were 35 bucks an ounce, when silver bottomed below 9 bucks in November ’08. So on the same day, if you were invested in silver ETFs, or futures contracts, your silver was worth less than 9 bucks. And if you had Silver Eagles, they were worth more than $35.”

Join Michael and David in this Vegas video blog to learn more about why silver is golden and physical metals are best.

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