Silver metal shaping up to be a good bet

Silver metal has been on a tear for the past several months and now it has just had a big pullback.  This is not something to fear but rather normal ebb and flow in a new bull market.  It is a buying opportunity IMO because people here in the US and abroad are reawakening to the need for their money to have some backing other than the words of mealy mouthed government bureaucrats.  Silver is both a commodity metal and a money metal.  Silver's big consumer from a commodity perspective used to be in photographic applications but digital cameras have changed that industry completely and photography is no longer the big consumer of silver that it once was.  The big consumers of commodity silver going forward will be electronic and electrical applications, hand held computers, electric cars and in all manner of green energy technology such as windmills.  Silver has physical properties that will be leveraged by many industries going forward.  The more techology driven our society becomes -and that covers far more than electronics- the more demand there will be for silver's qualities of malleability, ductility, and reflectivity.  Silver is the best thermal conductor of all the metals and it also has highest electrical conductance.

From a monetary perspective, Bernanke has proven beyond any doubt that he has no respect for the dollar.  By the time he finishes printing up the $600 billion associated with QE2 in mid 2011, Bernanke will have tripled the monetary base since the start of the financial crisis.  It has to be seen in chart form to be really understood.  Bernanke doesn't have any more levers to pull.  Helicopter Ben has promised everyone that he will just print and print and print as long as the world lets him get away with it.

For its part, Congress has proven beyond any doubt that it has no regard for the national debt (which will eventually have an impact on the value of the dollar).  We were at $7 trillion at the start of GW Bush's reign of terror and now the national debt is up to $14 trillion just 10 years later.  The progression is not linear, it's exponential.  Until foreigners stop lending us money the debt will continue to grow exponentially because nobody in congress has the stones to risk their political career on doing the right thing.

And so silver (AKA poor man's gold) is acknowledging all of this lack of restraint by breaking out.  Metals watchers all over the web are reporting that fact including noted commodities analyst Adrian Douglas.  What was also very interesting to watch was that while silver spot price was falling back to $26, the price of silver on Ebay did not come down at all!!  There's no good way for me to capture this fact in the blog but just go to Ebay if you are reading this within a short time of its publish date and search for 1 oz silver coin.  Search completed auctions only using the advanced search function.  The price of winning bids without free shipping seems to average around $32-$33/ oz and with "free" shipping its more like $34-$36/oz.  That's a far cry from today's spot price of $27.12.  In other words, physical, delivered silver is demanding higher prices than the official "spot" price which is what traders of paper claims on silver look at.

One more thing, and I know this is entirely subjective, but when I hold a 1 Troy oz silver coin in my hand it has a size and a weight and a look and that just gives a gut feeling that it is undervalued.  If someone put $30 US dollars on the table next to a 1 Troy oz silver coin and told me to choose one over the other there would be no doubt that I would take the coin over the paper money.  That might make a worthy experiment for me to try on average folks some afternoon in front of some local big box store.