silver etf

Why Silver Is Going Down, and When to Expect a Price Reversal

why silver is going down

Silver prices are having a tough session, and traders who saw August as a month to rebound from a bearish July are wondering why silver is going down.

With many investments down close to 5% on the month, and the white metal trading below its level at the start of the year, it's easy to get discouraged.

Here's why prices are falling, and why we're still bullish...

Silver Prices This Week Trade Sideways on Speculator Shorts

silver prices today

Silver prices this week have been slow and steady, continuing an uneventful August during which the white metal has traded in a narrow range.

However, while silver is likely to recoup from its recently slow trading in July, it most likely won't see a prolonged rally anytime soon because the big drivers simply aren't there.

Here's why for silver, things are going to get worse before they get better...

New ETF Makes Investing in Silver Miners Even Easier

silver

With silver looking even more alluring than gold lately, it's smart to consider investing in silver miners - and a new ETF gives investors one more option.

The PureFunds ISE Junior Silver ETF (NYSE: SILJ), launched in November, differs from other silver mining ETFs in that it focuses only on junior silver miners.

The PureFunds Junior Silver ETF joins just two other silver mining ETFs, the Global X Silver Miners ETF (NYSE: SIL) and the iShares MSCI Global Silver Miners ETF (NYSE: SLVP).

While silver mining ETFs, like silver mining stocks and gold mining stocks, have not tracked the rise in price of the precious metals themselves - many are down anywhere from 10%-20% year to date - the tide is ready to turn.

Many signs point to increasing silver demand in the months ahead, and in recent weeks more money has started to shift out of gold and into silver. Investing in silver mining ETFs is one way to get out in front of this trend before the rest of the crowd.

"For 2013, I think silver, like gold, will set a new all-time nominal price record, likely reaching as high as $54 an ounce," Money Morning Global Resources Specialist Peter Krauth said in his 2013 silver price forecast.

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How To Buy Silver: A Guide To Today's Top Silver Investments

As precious metals go, silver may not have quite the same mystique as gold.

But let's be honest: The "white metal" has its backers, too.

In fact, when Money Morning published its "How to Buy Gold" special report just a few weeks ago, one of the biggest questions that we received in response was: "When can you do the same for silver?"

That's just what we've done here. In this special report, we show you how to buy silver.

Silver: The "Other" Precious Metal

Although gold possesses the greatest allure of precious metals, silver has a longstanding tradition in many cultures - a tradition that in some cases reaches back thousands of years. Nearly 2,500 years ago, for instance, China was the first to use silver as money.

Here in the United States, silver alloys were still present in some of our everyday coins as recently as 40 years ago. Today, however, silver is no longer viewed that much as a monetary metal. But that's because about 40% of silver is used for industrial applications.

The physical silver market is small, with annual demand of slightly less than 900 million ounces.

Since the financial crisis of 2008, silver prices have increased by 300%.
And that's only the beginning. Silver is on the verge of a massive "short squeeze". The last time something like this happened, investors pocketed upwards of 195% in just a few months - but more on that later (Or you can get a sneak peek of our new silver special presentation right now. You can find it here.)

An important metric to understand and watch is the silver-to-gold ratio. It tells you how many ounces of silver it takes to buy one of gold. Historically, that ratio is 16 to 1. On this basis alone, silver should be much higher right now.

But perhaps a more realistic level, at least in the short term, is the ratio of silver-to-gold since the start of this bull market back in 2000. That ratio has been about 50-55 ounces of silver for one of gold. Even this more conservative estimate of silver prices vs. gold provides an excellent opportunity for investors to cash in as gold prices continue to rise.

How to Buy Silver

Like gold, silver investments can be made in a variety of forms. Let's take a look at some of the most popular.



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Special Report: How to Buy Silver

Silver prices soared as high as $50 an ounce last year before experiencing a brief correction that took it back below $30.

However, despite this blip, mounting inflationary pressures, a weakening dollar, and emerging market demand will see silver retest its record highs in 2012. In fact, this time around it could even climb as high as $150 an ounce.

The white metal has already gotten off to a strong start this year, with silver for March delivery surging 5.9% on Tuesday to settle at $29.57 an ounce - the biggest one-day gain in months.

And it's just getting started. So if you don't want to miss the next big bull-run, you might consider the following instructions on how to buy silver.

How to Buy Silver

Like gold, silver investments can be made in a variety of forms. Let's take a look at some of the most popular forms.

Physical Silver: Physical silver can be purchased in a variety of sizes and weights, which determines its price. Most typical are 1.0 ounce silver coins, like the Austrian Silver Philharmonic, the American Silver Eagle, and the Canadian Silver Maple.

Their prices vary slightly due to differences in silver purity, with the Silver Maple being the highest at 99.99% pure. You'll pay about a 16% premium over the silver price for coins due to the cost of fabricating them.

Another popular option is the 100-ounce silver bar, which commands a 5% premium over the spot price of silver.

These coins and bars are essentially bought for their silver content and not as collectibles. If you're looking to build a silver stash - either large or small - bullion dealers may be the easiest way for investors to do so. But do your homework first, and check them out before you buy. Also, avoid paying more than the premiums I noted above for either coins or bars.

Some investors wonder if they should buy smaller denominations, like 1/20th, 1/10th, ¼, or ½ ounce (gold) coins. The thinking goes like this: If ever these coins need to be used to transact and make payments, one would want to have smaller "amounts" to carry around. That's a valid rationale. Even so, keep in mind that you'll pay a premium to the actual silver content, since each individual coin has to be fabricated. I believe that, should we ever get to that point, you could just convert a one-ounce coin or bar into a number of smaller coins, and pay the premium, or perhaps receive whatever else is being used for transactions (a new currency?) in return.

A few dealers that have an established reputation are:



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