Expert warning: The do’s and don’ts of gold and silver investing

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Kurt Wallace: This is Kurt Wallace and our guest today on Rare is Anthem Blanchard President and CEO of Anthem Vaults. Anthem it’s good to have you with us today on Rare.

Anthem Blanchard:Great to be here Kurt. Thank you for having me on the show.

Kurt Wallace: Let’s talk about silver and silver and gold. In 2010, silver dipped to $17.94 then in 2011 silver had a breakout record high of $48.70. Now it’s back under $20 and it’s stayed pretty much the same over the last year. What are your thoughts on this stagnent pricing of silver?

Anthem Blanchard: Well, it looks to me Kurt that silver is creating a base for itself. Its off, about two-thirds off of it’s peak so it got up to almost $50 an ounce back in April of 2011 so you typically want to buy things when they’re on discount and silver is trading at a discount.

Kurt Wallace: Well, silver’s option activity sits near a decade low what does that say about the future pricing?

Anthem Blanchard: Well, I think one of the interesting kind of aspects that we’ve been looking at in the futures market is really been gold, and what I always tell my clients and people we talk to is that wherever gold goes, silver goes and more, so gold is my indicator for silver. And really what we’ve seen in the gold markets is some interesting happening. That’s in silver markets too. So, we had in 2014 record lows in the amount of registered gold that’s available for delivery.

So, basically the way the futures work in a nutshell is that you have the option to basically take delivery of metal at some future point. Traditionally you have miners and mining companies i particular that are producers of metal that mine metal. They basically know that they have metal in the future and therefore they able to sell into the future and thats way for them to obtain capital. Of course also used as a mechanism to speculate on the price. Typically you tradionally see premiums on the spot metal you have something physical in your hand you have a premium there over the futures market and if the premium gets large enough then you can see offtick in the futures market. And I think that’s what we’ve seen to a large degree.

I think that a lot of the activity that we’ve seen a lot of the massive amounts record amounts of importing of gold into China which is the number one consumer of individuals they are the number one buyers of metal and really not consuming but saving. But I think a lot of the off tick that we’ve seen in the US futures market is actually been from demand in Asia. So, I think that’s really significant and in silver just in particular we’ve had really large accumulated positions of silver by Chase JP Morgan Chase Bank. It’s interesting to me there’s some interesting positioning going on there. So, I think that those signs to me are very bullish for gold and silver

Kurt Wallace: Well, the gold/silver ratio at present is about 66:1 does that tell us anything, it’s kind of off kilter right now.

Anthem Blanchard: We look at the last 10 years or so and it’s definitely fallen far off it’s low. Right now it takes about 70 ounces of silver to buy one ounce of gold. But we’ve seen the ratio get all the way down to close to 30-32 back in 2011. And we’ve seen it go up to almost 85 which was back when we had the crash of 2008. So, we’ve seen the ratio actually hit a lot higher we’ve seen the ratio get a lot lower. It says both to me that silver is pretty cheap. I’m of the opinion that it’s an incredibly good value. Gold is off about a third off of it’s peak of about $1900 an ounce back in August – September 2011 and silver is two-thirds off of it’s peak. So, you want to buy when prices are low you don’t want to buy when prices are high. That’s when whatever you’re buying essentially when prices are zooming and zooming but gold and silver have been largely out of the news but all those things I take are very bullish signs.

Kurt Wallace: COMEX inventories the affect on the market and confidence in futures contracts. What’s going on here with COMEX?

Anthem Blanchard: Well, I think you might get to a point where you end up having a situation where there is too much demand to take physical delivery of, I mean the COMEX exchange has the ability to increase it’s minimums. Basically the way it works is you oly have to have a fraction of the amount of money that you’re actually buying in terms of your actually position. So, my estimation is that first we’re probably going to see the COMEX increase it’s requirements if it does feel a real squeeze. Really we’re going to have to see what the effect is going to be after that in the market and how much confidence the market has. It’s impossible for me or anyone else to guess how the market is going to react. I think that’s what we’re going to see happen. But there’s only so much you can increase the minimums. And all of a sudden it’s really stops becoming a futures market if there really isnt very much leverage there. It’s not really that much advantage. It’s one of those case where I think we really need to keep an eye on it.

It’s really important to know the difference between physical metal and the paper’s market. So, you actually own physical metal as property and property is a right there versus having the privilege of using an options, futures or ETF market. Those are really all securities or paper instruments. So, they’re great in being able to provide you with easy liquidity – they are normally pretty cheap – they can offer you leverage so it’s great for price speculation but if you’re really looking for a preservation of wealth they are really dangerous vehicles.

We’ve seen countless examples over the years of futures markets and traders going bust. We’ve seen issues with ETF’s in the past so, it’s very different there many less protections as a holder of a security than there are as a holder of your property and that’s what you get when you own physical gold and silver.

Kurt Wallace: Anthem Blanchard President and CEO of Anthem Vaults, thank you for being with us today on Rare.

Anthem Blanchard: My pleasure Kurt, anytime!


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