Here is an interesting story about the University of Texas Investment Management Co. taking physical delivery of gold. This endowment fund is the second largest following Harvard University. Obviously from reading the article, I get the sense that some very smart people are concerned that there may be difficulty in getting physical gold delivered due to the fact that futures contracts that are traded represent so much more gold than actually exists.
This is consistent with information that Eric Sprott shared back in January about having difficulty getting physical delivery of silver for his hedge fund. It would seem that there just might be a pattern developing here, and it is one that investors in the precious metals would be wise to heed.
No Substitute for Physical
If you really want to own real assets, then there just is no substitute for physical possession. Any paper derivative is simply not worth the paper that it is printed on. That is the big problem with the fiat currencies today and what is driving the price of precious metals to all time highs. Confidence in the paper system has declined. Investors are demanding to hold something tangible in their hands.
That is not to say that money can't be made using paper. Trading in the gold and silver ETFs or mining shares is a great way to move into and out of positions quickly and make some additional cash by trading. However, at the end of the day, you have to realize that you really don't own anything of substance. Just ask the shareholders of any of the recently bankrupt companies what they got out of any bailouts. Then decide for yourself--paper or physical.
Until next time--KEEP IT REAL!
Showing posts with label silver. Show all posts
Showing posts with label silver. Show all posts
Monday, April 18, 2011
Friday, April 8, 2011
Outstanding Week for Gold and Silver
What an amazing week this has been for gold and silver. Gold has hit record highs heading into the weekend and the strength of silver has lifted it solidly above $40 per share to close within pennies of $41. The higher gold gets, the more that talk about bubbles begins to surface. But I found this interesting commentary on the Kitco website which is where I go for all my precious metal related information.
http://www.kitco.com/ind/Holmes/holmes_apr042010.html
I like the information presented that would argue against a bubble especially the comments about the lack of a price spike in terms of standard deviations. These are the types of moves that mean a market is really stretched pretty thin and will likely snap back. We are nowhere near that now. Granted gold could easily settle into the summer since there is a seasonal aspect to gold. But I think that may be less important with investment demand versus social demand.
I also think the comments about the gold as a percentage of total financial assets is a telling graphic as well. There is clearly not the widespread interest that there was in 1980. So until we see that number crossing 2%, we won't, in my opinion, be coming close to bubble territory. Two percent is probably what might even be considered reasonable in terms of asset allocation. There are many investors who have zero allocated to gold.
If you haven't invested in gold or silver, you may want to get some exposure. You could do this quickly and easily with the precious metal ETFs such as GLD or SLV. This is probably what I would do. I would also look at using protective puts to lock in profits as they hit record highs along with the underlying bullion. Also, feel free to learn more about gold by reading books from Amazon such as the one below.
http://www.kitco.com/ind/Holmes/holmes_apr042010.html
I like the information presented that would argue against a bubble especially the comments about the lack of a price spike in terms of standard deviations. These are the types of moves that mean a market is really stretched pretty thin and will likely snap back. We are nowhere near that now. Granted gold could easily settle into the summer since there is a seasonal aspect to gold. But I think that may be less important with investment demand versus social demand.
I also think the comments about the gold as a percentage of total financial assets is a telling graphic as well. There is clearly not the widespread interest that there was in 1980. So until we see that number crossing 2%, we won't, in my opinion, be coming close to bubble territory. Two percent is probably what might even be considered reasonable in terms of asset allocation. There are many investors who have zero allocated to gold.
If you haven't invested in gold or silver, you may want to get some exposure. You could do this quickly and easily with the precious metal ETFs such as GLD or SLV. This is probably what I would do. I would also look at using protective puts to lock in profits as they hit record highs along with the underlying bullion. Also, feel free to learn more about gold by reading books from Amazon such as the one below.
Monday, November 1, 2010
Silver at Decade Highs--Nearing $25 per Ounce
Have you noticed the price of silver lately? It seems to be stealthily increasing and over the past month has markedly outperformed the price of gold. I have especially noticed this because the price of Silver Wheaton stock (symbol SLW) which I own in my retirement account has gone nuts and has outperformed Goldcorp stock (symbol GG) by a wide margin.
To be perfectly honest, I haven't been paying much attention to the silver price and didn't even realize that it was approach the psychologically important $25 per ounce level. I had simply noticed that SLW was increasing dramatically. In fact, I have become worried that the stock has gotten ahead of itself so in the past week I bought some puts to protect my paper profits.
Silver is typically more volatile than gold so when the price of these precious metals begins to decline, I would expect silver to decline much more rapidly. I don't know when that will occur but wanted to be able to protect myself with puts. I also plan on allowing many of the calls that I have sold on SLW to be called out. This will decrease my exposure to the silver price since I think it might be getting a little high in the short term. Longer term I would expect that the fundamentals would argue for a higher silver and gold price. But I want to take some profits now and buy back in again later.
I did this very effectively with Akamai stock (AKAM) using the collars that I trade. I had purchased AKAM at various prices over the summer and had a net basis of $40 per share. As it ran up, I decided to take the opportunity to purchase some $50 puts for October and lock in those profits. As it turns out, AKAM was well below $50 per share so my puts were exercised allowing me $10 profit per share. Then, I bought back the stock at two different price points below $50, namely $46 and $48.82. The end result is that I now have the same number of shares that I owned before along with some extra cash. I own puts on the stock and have sold some covered calls creating a collar.
My current basis in AKAM is $47.94 with the opportunity to be called out in 3 weeks at an average price of $50.25. That would make for a one month profit of 4.8% should AKAM rise just a little farther to $52.50. If not, I will sell some December calls to lower my basis some more.
The point is that I am doing the same thing with my SLW stock. By owning the stock, I gain exposure to the silver price but have the flexibility of easily managing options to take advantage of the price swings and lock in profit using puts and collars. My current basis in SLW is $24.15 per share overall with an average call strike price of $27.31 provided SLW is above $29 per share 3 weeks from now. If not, I will sell calls on the shares I have left although I would expect some to get called out.
Anyway, this is just one example of using stocks to gain exposure to real assets. I suspect real assets and the companies that deal in them will be a profitable investment for the next several years. Until next time--KEEP IT REAL!
To be perfectly honest, I haven't been paying much attention to the silver price and didn't even realize that it was approach the psychologically important $25 per ounce level. I had simply noticed that SLW was increasing dramatically. In fact, I have become worried that the stock has gotten ahead of itself so in the past week I bought some puts to protect my paper profits.
Silver is typically more volatile than gold so when the price of these precious metals begins to decline, I would expect silver to decline much more rapidly. I don't know when that will occur but wanted to be able to protect myself with puts. I also plan on allowing many of the calls that I have sold on SLW to be called out. This will decrease my exposure to the silver price since I think it might be getting a little high in the short term. Longer term I would expect that the fundamentals would argue for a higher silver and gold price. But I want to take some profits now and buy back in again later.
I did this very effectively with Akamai stock (AKAM) using the collars that I trade. I had purchased AKAM at various prices over the summer and had a net basis of $40 per share. As it ran up, I decided to take the opportunity to purchase some $50 puts for October and lock in those profits. As it turns out, AKAM was well below $50 per share so my puts were exercised allowing me $10 profit per share. Then, I bought back the stock at two different price points below $50, namely $46 and $48.82. The end result is that I now have the same number of shares that I owned before along with some extra cash. I own puts on the stock and have sold some covered calls creating a collar.
My current basis in AKAM is $47.94 with the opportunity to be called out in 3 weeks at an average price of $50.25. That would make for a one month profit of 4.8% should AKAM rise just a little farther to $52.50. If not, I will sell some December calls to lower my basis some more.
The point is that I am doing the same thing with my SLW stock. By owning the stock, I gain exposure to the silver price but have the flexibility of easily managing options to take advantage of the price swings and lock in profit using puts and collars. My current basis in SLW is $24.15 per share overall with an average call strike price of $27.31 provided SLW is above $29 per share 3 weeks from now. If not, I will sell calls on the shares I have left although I would expect some to get called out.
Anyway, this is just one example of using stocks to gain exposure to real assets. I suspect real assets and the companies that deal in them will be a profitable investment for the next several years. Until next time--KEEP IT REAL!
Friday, April 9, 2010
Gold Breaking Out of Trading Range
Have you been paying attention to the price of gold lately? It appears to be breaking out of a trading range and has pushed past resistance at $1135 per ounce. As I write this, spot gold is trading over $1157. The latest push has been ascribed to uncertainty surrounding the financial situation of Greece.
I find this interesting since the last time investors were concerned about the financial crisis, the dollar was allegedly the beneficiary of the uncertainty. I find it hard to believe that this could be the sole reason. While it may be part of the equation, I think that many investors are setting up for the inflation trade.
I, for one, have felt that the Fed will be late in raising interest rates just as they were late in lowering them and raising them the time before. It would be almost guaranteed that they will do little before November elections. You can bet the political pressure is enormous. For this reason, I see inflation as a potentially huge concern in the next several years. Just look at what the price of oil has done lately also, and you will see that the concern is unlikely limited to the Greek situation.
Have you benefitted from the gold trade? I have seen my holdings in Goldcorp go up in the last several weeks although not as much as I would have expected. My Silver Wheaton stock has done very well over the past week since the price of silver is also doing well. You should definitely consider investing in a little gold and silver since I see several more years (maybe up to 10) left in this commodity super cycle.
Until next time--Keep it real!
I find this interesting since the last time investors were concerned about the financial crisis, the dollar was allegedly the beneficiary of the uncertainty. I find it hard to believe that this could be the sole reason. While it may be part of the equation, I think that many investors are setting up for the inflation trade.
I, for one, have felt that the Fed will be late in raising interest rates just as they were late in lowering them and raising them the time before. It would be almost guaranteed that they will do little before November elections. You can bet the political pressure is enormous. For this reason, I see inflation as a potentially huge concern in the next several years. Just look at what the price of oil has done lately also, and you will see that the concern is unlikely limited to the Greek situation.
Have you benefitted from the gold trade? I have seen my holdings in Goldcorp go up in the last several weeks although not as much as I would have expected. My Silver Wheaton stock has done very well over the past week since the price of silver is also doing well. You should definitely consider investing in a little gold and silver since I see several more years (maybe up to 10) left in this commodity super cycle.
Until next time--Keep it real!
Monday, March 8, 2010
Make Money with the Silver ETF
Getting convenient access to real assets can be difficult. It can be tough to buy 1000 ounces of silver, store it, and make money with the large spread from a physical dealer. Furthermore, trading in and out is not practical when dealing with physical silver.
Now, I will always advocate holding physical metal but only as a store of value, not as a way to make money. If you want to make money from silver, then you should be trading the silver exchange traded fund (ETF) which has the symbol SLV.
There are several ways to make money using the silver ETF. You can buy SLV when silver is lower in price and sell when silver is higher. This follows the mantra of buy low and sell high. But I want to focus on a different way to make money using SLV that has the potential to produce a monthly income.
I want to focus on the ability to sell covered calls on the silver exchange traded fund. This allows the investor in silver to not only gain some inflation protection, but also to generate some ongoing cash flow while holding a real asset.
Selling a covered call works like this:
Let's say that you have enough money to buy 200 ounces of silver or roughly $3400. Instead of going through the trouble of buying from a dealer, storing the metal, and just watching it sit there, you could purchase 200 shares of SLV through a brokerage account. As of this writing, the silver spot price is $17.26 per ounce and SLV is at $16.94 per share.
You would purchase the shares and could then sell a call option expiring in April at a strike price of $17 per share for $0.61 per share. If SLV closes above $17 in April, those shares will be sold and you would get $17 per share. If not, you keep the shares and can write another call for a May expiration. Either way you would get to keep the option premium.
When the price of silver is down, you can buy some physical silver but while waiting you could be making some money each month using SLV. It is certainly something to consider. Until next time--KEEP IT REAL!
Now, I will always advocate holding physical metal but only as a store of value, not as a way to make money. If you want to make money from silver, then you should be trading the silver exchange traded fund (ETF) which has the symbol SLV.
There are several ways to make money using the silver ETF. You can buy SLV when silver is lower in price and sell when silver is higher. This follows the mantra of buy low and sell high. But I want to focus on a different way to make money using SLV that has the potential to produce a monthly income.
I want to focus on the ability to sell covered calls on the silver exchange traded fund. This allows the investor in silver to not only gain some inflation protection, but also to generate some ongoing cash flow while holding a real asset.
Selling a covered call works like this:
Let's say that you have enough money to buy 200 ounces of silver or roughly $3400. Instead of going through the trouble of buying from a dealer, storing the metal, and just watching it sit there, you could purchase 200 shares of SLV through a brokerage account. As of this writing, the silver spot price is $17.26 per ounce and SLV is at $16.94 per share.
You would purchase the shares and could then sell a call option expiring in April at a strike price of $17 per share for $0.61 per share. If SLV closes above $17 in April, those shares will be sold and you would get $17 per share. If not, you keep the shares and can write another call for a May expiration. Either way you would get to keep the option premium.
When the price of silver is down, you can buy some physical silver but while waiting you could be making some money each month using SLV. It is certainly something to consider. Until next time--KEEP IT REAL!
Monday, November 16, 2009
Dollar Cost Average Into Silver
Looking back at my last post on gold, I have to admit that I was wrong. Gold has overshot my $1070 target and is trading over $1140 as I write this. Good thing I didn't sell anything. I have been selling some covered calls on the way up and will sell some GG stock at various price points on the way up as well. I am surprised that gold stocks haven't been doing better than they have given the record prices in gold and relative strength of the stock market.
I have a hard time thinking about spending more than $1140 for an ounce of gold. It is not the easiest thing to sell physical gold. I don't have as difficult a time paying for GG or AUY stock, but if you want to own some physical assets, consider silver.
Silver is trading at $18 per ounce. That is a lot easier to swallow especially considering that economic times are tough, and there may not be a lot of extra cash available. It would not be much trouble to spend $50-60 every month or two and pick up a few ounces of silver. With gold being as expensive as it is, silver would be a good alternative and should do well for the same reasons that gold is rising in price.
I think it is worthwhile to purchase some asset that will maintain purchasing power over time. Given the risk of inflation with all of the nearly free money entering the circulation, it is certainly worth considering dollar cost averaging into silver.
Until next time--Keep it REAL!
I have a hard time thinking about spending more than $1140 for an ounce of gold. It is not the easiest thing to sell physical gold. I don't have as difficult a time paying for GG or AUY stock, but if you want to own some physical assets, consider silver.
Silver is trading at $18 per ounce. That is a lot easier to swallow especially considering that economic times are tough, and there may not be a lot of extra cash available. It would not be much trouble to spend $50-60 every month or two and pick up a few ounces of silver. With gold being as expensive as it is, silver would be a good alternative and should do well for the same reasons that gold is rising in price.
I think it is worthwhile to purchase some asset that will maintain purchasing power over time. Given the risk of inflation with all of the nearly free money entering the circulation, it is certainly worth considering dollar cost averaging into silver.
Until next time--Keep it REAL!
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