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What’s Next for the Price of Silver per Ounce?

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• April 28, 2016

The price of silver per ounce has been on a tear in recent weeks, and no doubt, that has many investors wondering just how high silver can go.

Silver prices hit an 11-month high in April, considerably outperforming the gold price. According to Commerzbank, the silver price per ounce has benefited from a weaker US dollar, strong ETF inflows and purchases from speculative investors. While silver bugs are no doubt happy to see the price of silver per ounce on the rise, the firm suggested in its most recent note that “correction potential has built up in the near-term.”

What is the price of silver per ounce right now? At close of day on Wednesday, the white metal was sitting at $17.21 per ounce, up 0.47 percent for the day. Since the start of the year, the silver price has risen 22.23 percent.

Silver wasn’t doing too well at the start of the year, however. As Commerzbank noted in its report, the gold-silver ratio was at its highest since February 2008 in the first two months of this year. That was largely due to silver being priced too low relative to gold. Thus, the firm sees the relative strength of the price of silver per ounce as of late as a “catch-up effect.”

A weaker US dollar has buoyed gold prices so far this year. The US Federal Reserve once again opted to leave interest rates unchanged this week, providing support for both precious metals.

Where is the price of silver per ounce headed?

There’s plenty to consider when looking ahead at the future for the price of silver per ounce:

  • ETF inflows; As mentioned above, the metal has seen strong ETF inflows—240 tons in the first two months of 2016 and 185 tons in February alone, according to Commerzbank. However, inflows slowed to just 60 tons in March.
  • Correction potential; Commerzbank also pointed out that net long positions are currently worth 10,600 tons of silver. That might sound like good news for the price of silver for ounce, but as the firm states, “this has also generated considerable potential for correction if money managers were to take profits and close their long positions.”
  • A boon for miners; To be sure, a higher silver price would be welcome for many long-suffering silver miners. As Commerzbank notes, a low silver price per ounce has made primary silver production “hardly profitable at all.” However, that scenario changes at the current silver price, meaning more supply could come back online.
  • Higher demand; Of course, beyond its investment appeal, silver has a number of industrial applications as well. On this front, demand from the photovoltaic sector is expected to surge by 10 percent, driving industrial silver demand to its highest level in five years.

Overall, while Commerzbank sees a potential correction for the silver price in the near term, the firm does see additional upside for silver in the medium to long term. Commerzbank has upped its forecast for the price of silver per ounce to $18 from $17 previously.

Educational and Fun — How Thinking North Connects Investors

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Kal Kotecha PhD

On Wednesday March 30th, I was honoured to accept an invitation to be the guest speaker at “Thinking North” — a new leader in connecting businesses to the investment community. Every two months the best and brightest of Toronto’s business leaders are invited to present their business or company to an audience of investors and financial professionals.

Canada’s Silicon Valley North namely Kitchener-Waterloo, along with the Great Toronto Area hold some of the brightest and finest tech companies in North America. Thinking North assists in connecting these and other sector companies to Toronto’s venture capital.

Thinkingnorth.com is the brainchild of Toronto Venture Capitalist, Steve Singh. After reviewing investor social networks in San Francisco, Toronto and Bogota Colombia, it was readily apparent event originators were more about filling the rink rather than aiming the puck at the top right corner of the net. “For me, it was more about filling the room with the right people and achieving the duality of good/interesting companies at various stages of evolvement pitching to a targeted audience of savvy investors,” says Singh. Together, with Natalie Yavorska, an astute business professional, and Raj Ravindran, entrepreneur, mentor and analyst, Thinkingnorth was born. ThinkingNorth is an arena for sharks, dragons and emerging species.

The night started with introductions followed by my talk. I focused on the importance of tax breaks for corporations and small businesses. Also, where I think the economy is headed and how to capitalize on the technological brain power located between the 401 corridor of Toronto and Kitchener-Waterloo.

Following my talk, presentations were made by Venture Capitalists plus six start-up stage companies. They were given five minutes each to represent their business vis-a-vis product/service, competitive influences and monetization strategy.

Jeff Maser from the Tinley Beverage Company opened the round of presentations. The firm manufactures a drinkable vitality supplement containing hemp stalk extract called Hemplify. The drink satisfies more than thirst, it is also an aesthetically pleasing package. Featuring a beautifully-designed sleek bottle, the product contains non-psychoactive terpenes, essential oils, vitamins, electrolytes, and omegas making it a revitalizing source for athletic, contemplative, and creative activities.

Fertilify took the stage next. This company manufactures a health supplement designed to help women support and maintain reproductive health. They have set themselves the ambitious goal of helping modern and career women who delay giving birth, to maintain the proper level of vitamins in order to ensure they do give birth to healthy children. The company’s intelligent and radiant President Lalli Chapman stated, “I started Fertilify to confront the issues facing women’s fertility today, and help do something about it.”

Another company with the theme of hemp-based products was presented by David Vinokurov from Budhubz.com. Vinokurov showcased a new app akin to Air BnB with a focus on 420-friendly guest facilities and dispensary relationships.

Next to be featured was a luxury all natural water company called Flow Water. This product boasts high natural levels of certain minerals such as calcium taken from a family owned water source in Ontario, and also displaying exotic packaging.

Following this was an exciting new career oriented app called Paddle which helps workers navigate the complexities of today’s career cycle. Paddle has already signed agreements with major universities in the U.S., including Harvard and Stanford. Given the current climate wherein people are expected to have many careers in the course of their working life, they hope to revolutionize the way people approach careers and make it easier to hop between different roles and industries.

The closing speaker was probably the most dazzling. Mark Itwaru from Peeks presented a potentially disruptive technology.  With the foresight to patent his ideas surrounding this technology, he has created an application that gives its users a chance to broadcast themselves and be their own wealth creator, simultaneously in real time. A built-in proprietary payment engine makes it possible to drive revenue through a variety of channels, ie. tips, product sales, advertising, and various others. It was exciting to hear about a brilliant and evolving new technology.

After each of the presentations, a panel of venture capitalists and investors had five minutes to ask questions. After all was said and done, the event closed with another round of networking.  Besides being highly informational from an investor perspective, I must say it was loads of fun from a social perspective.

The team at Thinking North are optimistic about the future – no matter what the state of the market, there are always great people doing exceptional work. There is always capital to be accessed for investing in good ideas and projects. Ultimately, organizations such as Thinking North are here to help Toronto play at the top of the league alongside their neighbours in Silicon Valley and to help Canada maintain its braintrust leadership amongst its peers.

Thank-you Steve, Natalie and Raj for creating a much needed venue that connects investors to great projects.

I now have the honour of being on the investment panel for Thinking North. If you are ever in the Toronto area, feel free to attend the event. The next meeting is expected to have close to 500 investor attendees. The information will be posted on ThinkingNorth.com

Happy Investing!

Kal Kotecha PhD

Clinton or Trump, Who is Better for the Markets and Gold?

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Kal Kotecha PhD

Politics in the United States is dramatic and watches like a soap opera. But which candidate if elected will help the stock market and specifically the price of gold? Let’s breakdown the views of the frontrunners.

Republican Presidential front runner Donald Trump holds very controversial beliefs on immigration, tariffs and border security. On the flip side, Democratic front runner Hilary Clinton wants to “break down walls” and has no plans on placing huge tariffs on imports.

Trump wants to place a 45% tariff on imports from China. Why does he want to do this? Simply, he does not like China ‘dumping’ cheap products into the U.S. But perhaps he is thinking long term. Even though he did not specify outright, he may be thinking that multinational corporations operating in China and other Eastern nations may come back to the good Ol’ USA avoiding the import tariffs and building plants there resulting in the hiring of more Americans. Even some Eastern based corporations may relocate in the U.S. Will this work? I am not a big fan of most of Trump’s ideas – I do like this one. Even though it is not deemed to be a “Republican” view which takes more of a stance on company profits and free trade, Trump if elected, may be successful in bringing back jobs to the U.S.

I remember lecturing at the University a few years ago when a student asked me, “How can we bring more jobs back to Canada?” I pondered and stated: one way would be to place import tariffs on products that were not made in Canada. Even though in ‘theory’ this may seem to work, in practice it probably wouldn’t for Canada. The main reason being that in essence, no company really cares about the Canadian market versus the vast US market. Another reason why this may not work for Canada is because Canada does not have many multinational corporations. The likes of Blackberry and Bombardier are not the stellar darlings they were many years ago and may require government bailouts.

Corporations do not want to lose customers in the lucrative U.S. market. American companies like Microsoft, Nike and Apple, even though they might not have a big workforce in China, may bring back their plants/offices to the US. – especially if their competitors do so. Trump may even lean towards providing tax breaks to corporations willing to relocate back to the U.S.

Trump may be on to something for the U.S. market. If he gets elected, it may be projected that he is not “good for American Company profits”. Let’s be honest here, corporations exploit cheap human labour overseas and they will not be making the profits they are now if they had to move their operation back to the U.S. and pay 5-15 times the wages they are paying now to produce the same product.

On the flipside, Clinton is not expected to try to ‘encourage’ U.S. companies to bring jobs back to the homeland, nor place a huge tariff on Eastern imports. I believe the markets will laud a Clinton win.

In terms of gold, there is evidence that Trump holds gold. As reported by Business Insider  http://www.businessinsider.com/donald-trump-owns-gold-2015-7

Trump owned between $100,001 to $250,000 of gold on July 2015. They appear to be holdings in physical gold, not in specific company shares.

Westernjournalism.com reports:  Is gold better than cash? Donald Trump accepted three bars of it as a security deposit when a new tenant moved into his 40 Wall Street property in New York’s financial district. Michael Haynes, chief executive of APMEX, the tenant, convinced the real estate mogul that accepting gold offered the greatest security for him. “I figured, Trump is a smart guy, and he’ll realize that taking gold is a better idea than taking cash.”

Haynes gave Trump three 32 ounce gold bars for APMEX’s deposit, valued at over $100,000. At the time, Trump expressed concern about the nation’s currency. “It’s a sad day when a large property owner starts accepting gold instead of the dollar,” Mr. Trump told the Wall Street Journal. “The economy is bad, and Obama’s not protecting the dollar at all….If I do this, other people are going to start doing it, and maybe we’ll see some changes.”

Peter Reagan, financial market strategist at precious metals dealer Birch Gold Group, said, “Trump recognizes the vulnerability of the value of the dollar over time and the inflationary pressures on our economy due to Obama administration policies,” http://www.westernjournalism.com/for-trump-gold-is-better-than-cash/

Is this the start of Trump’s new gold standard? Seemingly he understands that to stabilize and secure the US dollar, gold must play a role.

I can find no evidence that Hillary Clinton supports gold or owns gold other than for jewelry purposes.

Therefore my prediction is that a Trump victory will not be favourable for the stock market initially but should be for the longer term as jobs are created and positive for gold.

No matter what happens, the drama and the bashing in American politics is a political version of The Young and the Restless. Enjoy the drama while it lasts.
Happy investing!

Kal Kotecha PhD