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A couple weeks ago, Money Morning Guest Writer Jack Barnes examined the last major commodity to enjoy a true price breakout: silver.
Barnes detailed why silver is poised for a breakout, based on its current price surge underway in India, the price run up of gold - a leading indicator of silver prices - and the fact that the white metal has yet to set a new nominal record price in U.S. dollars.
Barnes outlined the actions investors should take to involve silver in their investment plans, offering three strategies: physical acquisition and accumulation, exchange-traded funds (ETFs) and stocks, and options on futures.
The analysis sparked reader comments to the Money Morning Mailbag from interested investors wanting more information on the hot topic profit play.
Question: Good article. I have a couple of points, if I may.
You do a disservice by not mentioning bags of "junk" silver...circulated pre-1965 dimes and quarters. It's the best way to own physical, by far.
And iShares Silver Trust (NYSE: SLV)? Guess who runs it? JPMorgan Chase & Co. (NYSE: JPM). That's right. But I'm sure there's no reason for the chickens to be concerned just because the fox is in charge of the coop. Morgan is scum, but Morgan is not some sort of omnipotent entity. They are in up to their eyeballs on this suppression scheme. I figure they'll wriggle out of any serious losses. Their sponsors in the U.S. government and their protectors at the U.S. Commodity Futures Trading Commission will make sure they don't get hurt, but the idea that they can take silver down to $9 again, much less $2 gives them way too much credit.
I also like Endeavour Silver Corp. (AMEX CAN: EXK)...for what that's worth. Smaller, but comin' on. Plus, if you buy any of these stocks or physical now, you're betting that a breakout is coming and is imminent. It may very well be, but all the indicators are flashing overbought. That won't mean much if a breakout occurs, but if it doesn't ...
- Tom W.
Money Morning Guest Writer Jack Barnes: I should have broken the silver equity holdings into two more categories: equity and ETFs. Equities would have been 3% and ETFs 2%. The idea is that you have a diversified basket approach to silver's move.
All investors needs to do their own due diligence, as to what mix of exposure is best for them. Due to obvious turn over time, you would want your core holdings in physical and possibly certificates of ownership of the equity shares, and your speculative holdings in ETFs and long options on futures in an account you can quickly place a trade from. Each type of exposure has a different time window to hold during these sudden moves. I am not suggesting you hold all of them equally.
Question:What happened to the pending lawsuit related to the purported JPMorgan price manipulation of silver? I thought this was going to be litigated.
I personally doubt if you will ever see silver below $8.00 an ounce again. The cost of permits and mining rights will increase as more attempts are made to dominate world resources (this includes water). Silver is the future.
More traders will eventually view this as a long bull commodity run and start buying silver long, and JPMorgan will have to sell their short holdings. They can't control the world.
- Karen K.
MM: The alleged market manipulation by JPMorgan Chase & Co. (NYSE: JPM) story sounds like a Hollywood script. In March, London trader Andrew Maguire was named "whistleblower" by the press when his name was released as being the e-mail author who wrote to the CFTC regarding JPMorgan's large short positions on silver.
Maguire, a metals trader at the London Bullion Market Association, was involved in a hit-and-run car accident a few days later when he and his wife were driving in London and struck by a car coming out of a side street. Of course many suggested Maguire's CFTC communication was related to the following "accident."
Then a New York Post article in May reported that the Department of Justice had launched an investigation into the supposed metals-market manipulation by JPMorgan.
The article alleged that the firm, which holds a number of derivatives in precious metals, attempted to lower the price of silver for its own profit. JPMorgan was quick to issue a response, stating there was no criminal or civil investigation into the company's silver trading practices.
Metals industry representatives spoke out at a meeting with the CFTC in March, expressing fear that recent high prices were actually manipulations by institutions like JPMorgan and Goldman Sachs Group Inc. (NYSE: GS).
While it's no secret that big banks are making big profits off the precious metals market, proof of a DOJ investigation has not been substantiated.
(**) Money Morning editors reserve the right to edit responses for grammar, length and clarity when posting on our Web site. Please include your name and hometown with your email.
News and Related Story Links:
- Money Morning:
Special Report: How to Buy Silver
- New York Post:
Feds probing JPMorgan trades in silver pit
- Money Morning News Archive:
Money Morning Mailbag Feature