Weekly Roundup July 31
Data released at the end of last week showed that hedge funds and other money managers increased their net long position by 11% during July. The US Commodity Futures Trading Commission also said that the gain was the longest continuing run of increases since February.
Silver In Vogue Amongst Chinese Investors
Chinese investors have woken up to the investment value of precious metals, as growing uncertainty in the global economy continue to dampen the prospects for equity returns. With the debt crises in Europe and the US not abating, investors have become risk averse and have looked toward the defensive qualities of silver and gold.
Investors have re-weighted portfolios toward precious metals, with gold and silver outperforming domestic markets. Both gold and silver have hit all time highs this year, and further gains look likely. Added to this is the currency factor. Prices of metals are dollar denominated, so if the dollar continues to depreciate then the returns when expressed in other currency terms will be greater.
A Quantum Leap In Silver Approaches
Jim Rogers, the co-founder of Quantum Fund and a legend in commodity trading, recommends holding physical silver and expects the metal to remain in a long term bull phase. He sees shortages of metals developing over the next few years, and forecasts that silver will see a considerable rise in value over the next ten years. Like any market there will be weak periods when the price will fall, but Rogers sees these dips as buying opportunities.
On Saturday, buysilver.org explained the different ways that investors can build exposure to an increasing silver price. Rogers said in an interview with CNBC recently that he prefers to invest directly rather than in mining companies.
“If you choose the right miner you will make a lot more cash than you’ll in the metal,” Rogers explains. ‘Although, by exposing your self to administration risks and also the regional threat of the mines, amongst other elements, you are in a position to possibly not take component in the potent fundamentals of the commodity marketplace and could burn all of your funds. For instance, natural gas tripled and but Enron, a producer of natural gas went to zero.’
Rogers also expects a third round of quantitative easing in the States, and sees this as further devaluing the dollar and adding to the attractiveness of gold and silver investments.
Finally he sees that smaller investors are warming to the potential of silver, and these smaller investors are not limited by federal government regulations on keeping gold and silver in retirement funds.
Because of this, the small investor, taken as a group, has a huge buying potential. Further, central governments tend not to hold silver instead of gold. This means that they are not in a position to sell vast amounts of silver into a continuing bull market, and so Rogers see less of a cap on the price of silver than gold.
The spot silver price has increased by 122% in the last 12 months, gold by 36%.
