GDP Down, Fed Spending to Continue
Silver is a metallic chemical element with the chemical symbol Ag and atomic number 47.
A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal.
Melting Point: 1,763°F
Atomic Number: 47
Boiling Point: 3,923°F
Atomic Mass: 107.8682
Yesterday it was announced that the United States Gross Domestic Product (GDP) — the sum of all economic activity in the country — shrunk by 0.1%.
Despite the worst quarter in three and a half years, the market was flat...
This is because it was the best negative GDP number you could hope for.
The GDP went down because business inventory and defense spending fell. Consumer spending on goods and services, as well as fixed income spending on houses and CAPEX, went up.
Let me repeat: Government spending went down, led by the Pentagon — while private spending went up, led by consumers.
This is good.
Every time the government gets a dollar, it wastes half and blows the rest, distorting economics as it does so.
Bad News Is Good
The price of silver gapped up $0.66 on the negative GDP news.
Investors want to own silver because the GDP number means the Fed will continue to QEfinity, buying $85 billion a month in mortgage paper and Treasuries.
Investors want to own silver so much, they bought out the U.S. Mint...
Sales of American Eagle silver coins by the U.S. Mint jumped to a record this month on increased demand for an alternative to currencies as the U.S. central bank presses on with unprecedented stimulus. Sales surged to 7.42 million ounces so far in January, the biggest monthly total since 1986, when the Washington-based Mint began the transactions. The figure compares with the 1.635 million ounces sold in December.
The demand was so great, the Mint stopped selling silver coins mid-month, but reopened sales on January 24. From the website:
The United States Mint will begin accepting orders for the 2013 American Eagle Silver Proof Coin at noon Eastern Time on January 24, 2013. The coin will be priced at $62.95. There is no household order limit for this product. Customer demand will determine the number of coins minted.
Last week the Royal Canadian Mint put limits on the quantity of sales for its Silver Maple Leaf coin.
Consumer demand for silver is setting records. If you couple that with quantitative easing and the high price of gold, silver is a nice thing to own.
The Easy Way
There are three basic ETFs for silver.
The most popular is the iShares Silver Trust, which has $9.71 billion in assets and has returned 9.02% since January 1. It is also liquid and trades more than 10 million times a day.
If you're feeling bullish, you could buy the Ultra Silver Fund (NYSE: AGQ), which trades at twice the volatility of silver. If silver goes up a dollar, AGQ will go up two dollars — and vice versa.
I like the physical silver ETF (NYSE: SIVR). It also tracks silver, but charges 20 basis points less for the same fund.
All the best,
Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.
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