Investing In Silver For the Long Term

Many people are aware that silver is one of the most in demand precious metals in the world. Silver is a very common precious metal that is used to make jewelry, utensils, computers, vehicles, industrial metals and so on. It is one of the commonly traded precious metals in the commodity market, like gold. It has given many of the enthusiastic investors good returns for their investment in the commodity market. Silver is a very safe precious metal to trade with unlike foreign exchange or other areas in trading.

Lower Risk Factor

Silver has lower risk factors when compared to many other commodities as well as stocks, and shares. The risk in trading sliver is very low when compared to bonds or ETFs. If you are looking to invest in the market for long term, then there is no better commodity that you can think of than silver. It is not similar to any stock trading business but, is more or less similar to gold, which always has a value in it.

Accumulating Silver

One of the best ways to gain good profits out of silver trading is to consider it as a long term investment option. Silver is highly volatile like gold and if you are knowledgeable about making the right moves in silver trading at the apt times, you will end up pocketing good amounts of profit. You should always invest in silver with a long term bullish attitude. Accumulating silver at regular intervals will help in increasing your wealth insurance as well as can be a good trading instrument.

Invest In Physical Silver

One of the best ways of making better investments is to buy silver in its physical form. It not only adds on to your wealth over the years, but you will also be experiencing a steady increase in the price of the silver. There is no dearth for availability of physical silver as you can get it in the form of mint coins that are minted by mining companies, or even can get it in the form of fine bullion that is produced by the national governments.

Silver Bullion

One of the best ways and the traditional way of investing in silver to enjoy long term benefits, is to go for silver bullion. You can opt to buy silver bars which are rectangular metal pieces that come in different sizes ranging from 1 troy ounce bars to 1000 troy ounce bars. You can store these silver bars in your home or even better, in your bank lockers. You can sell all of it or trade in limited quantities whenever you feel that the price of silver is at its peak. Silver is easier to buy than the gold bars, and is also a much cheap investment option with huge returns, very similar gold.

Small Investments

One of the main advantages that you will get by investing in silver is that it just attracts small funds. This small investment can lead to huge profits after many years. With just about $10,000 you can buy huge quantities of silver. You will be able to increase your assets and wealth by investing in physical silver. It is a good buffer that you can always rely on whenever there is an economic crisis, you may need greater financial support in times of financial disasters.

Keep Tab Of Gold Rates

Silver and gold always go hand in hand and hence you need to keep a tab on the rates of gold every time when you have invested in silver. They both normally trade in harmony and whenever gold prices sky rocket or is increase, the prices of the silver will also be seeing an upward trend, and vice versa. But, the fact is that silver is available in more quantities than gold. There is almost 16 times more silver than gold in the world, and this is the reason why demand for gold is in excess of its supply.

Invest During Inflation

One of the top most methods that you can think of to invest in silver is when there is inflation. If there is a few issues related to the stability of the financial market, then gold and silver would more often than not be the main hedge against inflation. Many people will try to look at various other options when the gold prices are soaring, and the next best option of investment is surely silver. This precious metal is chosen by many because of its huge affordability. These type of chances do not come often and when you encounter such a chance, it is important for you take advantage of this and enjoy a good return on investment. This is the reason why you need to think of buying silver as a long term goal.

Advantages Of Investing In Silver

The following are the advantages that you can enjoy when you are investing in silver.

The demand for silver is always there until silver is used for industrial purposes. The demand for silver does not depend upon the economic condition that much. As there is constant demand for silver, its prices will keep on increasing and hence is a very good source of investment option if you are looking for long term returns.
Silver is known as ‘poor man’s gold’. It is highly affordability when compared to gold or other precious metals and it also offers better returns.
As silver is traded in different forms all over the world, it has high liquidity. Silver, in fact, was used as a currency in many parts of the world earlier.
You can also invest in silver in various forms like: silver bars, bullion coins, jewelry, junk silver, scrap silver, collector’s coins as well as silver rounds.

The Dollar Could Easily Get Stronger

Ever since the start of 2017, the dollar has been in an almost constant decline.

In fact, the PowerShares DB U.S. Dollar Bullish ETF (NYSE: UUP) has dropped over 12% from its 2017 highs, despite a 2% gain.

UUP is an exchange-traded fund that measures the dollar against six other currencies. When the dollar strengthens relative to the others, the price of UUP goes up.

Generally, the dollar is seen as a safe haven, somewhere for investors to put their money in times of market uncertainty. And since we have seen a market that went straight up over a 15-month period, there was less demand for safety assets like the dollar.

But that can only last so long. Right now, there is a fear of inflation in the markets due to higher employment and wages.

When the economy is strong, inflation usually follows. That’s because when people make more money, they spend more. And when more money is spent, there’s more in circulation, and the excess supply makes each dollar less valuable.

However, inflation fears are likely overblown due to the fact that we haven’t seen an economy this strong since before the financial crash.

When inflation gets too high, it sends production costs up and business slows. But right now, inflation remains steady around 2%.

That may seem high, as it was around 0% for all of 2015 and some of 2016, but in the big picture, it’s normal. In fact, it’s seen as healthy.

As a reference, inflation had gotten over 4% in 2005 and 2006, right as the economy showed signs of slowing.

Many are wondering how to profit from this analysis.

Demand for the Dollar

The dollar could easily get stronger from here as well.

Right now, a huge part of the world’s economy has extremely low interest rates. Much of Europe, for example, is under 1%, and they aren’t planning on raising rates aggressively anytime soon.

The United States, however, has a rate of 1.5%. This isn’t high, but we could easily see that go over 2% this year if the economy stays healthy.

That would also increase the rate of government bonds, which is 2.86% right now. As the rate get higher, international investors will begin to buy more U.S. bonds, which increases demand for the dollar and sends its value up.

How to Profit

Even though the only way to directly invest in the strength of the dollar is through UUP, there are other ways with higher return potential.

One is buying call options on the UUP fund, but that’s much riskier, as you could lose your whole investment.

Another way would be buying a leveraged ETF against a different currency.

For example, the VelocityShares Daily 4X Long USD vs. EUR ETF (NYSE: DEUR)returns four times the percentage that the dollar appreciates against the euro.

There are also similar funds that produce the return of the dollar against other currencies, like the pound (NYSE: DGBP), the yen (NYSE: DJPY) and the Australian dollar (NYSE: DAUD).

Overheated Heating Oil Market

I was fortunate enough to be interviewed for a Wall Street Journal heating oil story last week. The primary question was, “How high can prices soar?” Supplies have tightened up considerably during Mother Nature’s onslaught and another bout of cold weather is hitting us, pushing prices higher yet again. Short-term demand related issues like the ones we’re experiencing now due to the weather are never a reason to jump into a market. My less than sensational outlook on current prices pushed me to the closing section of the article. This week, I’ll expand on the topic by looking at the diesel and heating oil markets and formulating a trading plan for the current setup.

I’ll work from big picture to fine detail in order to provide some context for the current situation. First of all, the fracking boom has fundamentally altered the energy landscape of the United States. We are quickly moving from net consumer towards becoming a net producer in the oil and natural gas markets. This paradigm shift is leading to an energy market structure that places us on the side of selling price spikes that are demand based. In this instance, bad weather has created a temporary increase in heating oil use. The price spike will not hold because we have the capacity to rebuild domestic energy stocks cheaply and rapidly.

The same bout of weather is responsible for driving heating oil costs to record levels in the Northeast where more than 80% of all heating oil is consumed. The flip side is that this same weather pattern is keeping people indoors. People staying inside only create heating oil demand. People in normal conditions add to diesel demand through their purchases of goods and services while they’re out and about spending money. Therefore, the net balance of the broader term market shifts towards a bearish supply issue as diesel fueled trucks have less to deliver and fewer miles to cover as citizens remain toasty and warm in their homes instead of out shopping and eating.

The domestic energy market can control supply but has little control over demand except at extremely high prices. Energy production costs are fairly fixed. The primary variable in an energy producer’s arsenal is capping low yielding wells. Prices as a trend however are falling in general as the current processes become more efficient in their cost of execution. Therefore, over time, energy prices should generally decline. Furthermore, energy producers in times of price spikes will sell as much of their expected forward production as possible at these higher prices. This allows energy producers to slow down price spikes through their implementation of profitable short hedges at unsustainable current market prices.

The best way to view these actions is by comparing spread prices to Commitment of Traders data. Spread prices allow you to compare the current market price against a forward price. Current prices or the cash, “spot” markets are the most volatile as they are the most susceptible to short-term supply and demand disruptions. Forward prices are more predictable due the amount of time left to factor in risk variables. Typically, these risk variables include physical storage, insurance costs and interest rates. This leads to forward contracts being priced structurally higher the farther out one looks. This is normal market behavior and the gradually elevated price along the timeline is called, “contango.” Conversely, in times of drama the spot price can overshoot the prices of the deferred contracts. This situation is called, “backwardation.” Backwardation is the market’s incentive to get producers to sell the physical product at the currently elevated price.

Drilling into the details, (pun intended) we can see that there’s definitely a premium in the delivery month futures contract. Knowing that this pricing structure is temporary along with the weather I’m going to let this entire rally pass. There are two reasons I think there’s a better place to buy. First of all, the heating oil market is nearing solid resistance on the daily, weekly and monthly charts. Secondly, I expect the demand numbers along with the general economic numbers for the next month to be dismal. This will lead to a selloff and drop the market under $3 per gallon. I expect the market to be supported around there and provide a solid bottom to buy into the spring driving rally. Don’t let the hype suck you in.

This material has been prepared by a sales or trading employee or agent of Commodity & Derivative Advisors and is, or is in the nature of, a solicitation. This material is not a research report prepared by Commodity & Derivative Advisors’ Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.