First off, who is buying silver stocks? It boils down to the individual versus the institutional investor.
Individual investors are those who are looking to gain some sort of yield from the volatile price momentum. They believe that they can follow the trend and make or gain or get some sort of return on investment for the initial investment.
The majority of people who are making money buying precious metals stocks are the large institutional investors who also have a head start on understanding the volatility or the directional momentum in the markets.
Who are the people selling? Those selling silver stocks are those who are liquidating portfolios or they’re short selling because they are also following the momentum as many precious metals observers can attest to the volatility and the downward momentum of gold and silver.
It has been a fairly easy play over the last few years even though the actual fundamentals have not changed and the macro conditions underline the reasons for wanting some sort of exposure to the precious metals haven’t been this good in maybe a lifetime or even a century.
One thing to understand before buying or selling silver stocks is that fundamentally the stocks, like the metal itself are suppressed. They are derivatives – an asset class that has been the antithesis to fiat or unbacked money for centuries. Currently the environment where the monetary powers, the federal reserved, most world central banks are forced to print or to create money in order to keep a system solvent or from imploding.
The result has been outsized positions that enable too much control in a very small market. These are profitable positions with circular justification. First off, the high-profile banks that suppress the price of silver and silver stocks make a profit. Secondly the moves in price create an underlying assumption of not only the lack of inflation, but the belief that there is more supply than what actually exists. This happens in an market that threatened the perception that there is no actual inflation. Most people are very sensitive to inflation and it impacts people across the board.
Investors tend to move out of money that is losing its purchasing power or when prices are rising. Buying silver stocks, like the metal itself have been easy picking in this rigged market.
Approaching silver miners, one has to really be careful about understanding the fundamentals because silver stocks, just like any kind of derivative are just that. They are paper derivative of the underlying metal. Unfortunately the mining sector as a whole has not provided the needed understanding to it’s shareholders surrounding true value.
Management of the mining companies has not defended the suppression or the manipulation of its primary product and that’s a big red flag for anyone looking at a value investment in silver stocks.
More information on buying silver stocks here.Back to Silver Coins Home