Gold or silver?

I have blogged about gold and how it might be a good idea to buy some to protect our wealth against a backdrop of higher inflation.  For almost a year now, I have been hearing from various quarters that silver is undervalued and from a value perspective, it is a better buy than gold.  Certainly, Marc Faber and Jim Rogers, two of the greatest financial brains of our time seem to think so.  This is not a new idea but it is to me since I have not seriously looked into this before.

Silver is a real asset, with real value, just like gold, as its supply is finite.  Fiat currencies, on the other hand, do not have any intrinsic value and more could be produced at will.  So, we expect silver to at least keep pace with inflation and in an inflationary environment, an investment in silver should protect our wealth from being eroded.

So, I decided that I should do some research on the subject even though I am quite comfortable with my current choices in investments.  If I decide not to buy any silver in the end, I would have gained some useful knowledge anyway, I rationalised.  I found much information and I am now posting what I feel are some interesting findings.

From MoneyWeek, 24 April 09:

Indeed, well over half of the annual silver supply is now used by industry (in sectors ranging from medicine to aerospace), compared to around 11% for gold. In precious metal upswings, it tends to outperform gold: the "same drivers as gold driving a smaller market ensures that", says Franklin Sanders of The Money Changer.......

.....Once sentiment turns, however, silver can tumble rapidly...

From Mineweb, 5 Nov 09:

The longer term trend channel for silver began on March 21st, 2003 at a low of $4.35 and has upper resistance of $51 and lower support at $12. Such volatility has always been very high because, with the silver market only about 2% that of gold, even a small amount of money flowing into silver has a huge impact.


The medium term trend channel began with a lengthy March through August 2007 consolidation base of $13 - $14 and currently has upper resistance at $32 and lower support at $13.


The Gold:Silver ratio has ranged from 14.9-to-1 in January 15, 1980 at the time of the record high gold and silver prices to 99.8-to-1 on February 22, 1991 when the price of silver was particularly depressed.


The current short term trend channel began in November 2008 at $8.79 and currently has upper resistance at $22 and lower support at $15.50.

Silver is currently trading at the higher end of the Gold:Silver ratio since 1980.  Silver is now US$15.15/oz while gold is US$ 1,052.20/oz.  This gives us a ratio of 69.45 to 1.  This is closer to the historical high of 99.8 to 1.
So, there seems to be some truth in the claim that silver is undervalued now and that it is a laggard in the realm of precious metals or it could also mean that gold is simply too expensive.  Some hedging might not be a bad idea.

There is a very easy way to gain exposure to silver in Singapore through a Silver Savings Account with UOB.  I might just start an account.  Just like gold, I will probably be buying silver with an aim to protect my wealth with the increased likelihood of higher inflation in the coming years.  It will not be for trading.

Related posts:
Gold as an insurance against inflation.
101 investment choices.

Is SPH the bluest of them all?

Some readers are disturbed by my write up on F&N and Keppel Corporation yesterday.  Well, if I had long positions in those counters at this point in time and if the positions were big and if they were bought at recent highs, I would be disturbed too.  Would they become blue black chips?

So, are there no bastions of strength left, seeing how F&N and Keppel Corporation are in precarious positions?  Aren't blue chips supposed to be the strongest of them all?  Well, the color blue ranges from a very light baby blue to a very dark midnight blue.  Things are always relative, remember?

I have mentioned quite a few times in my blog and elsewhere that my favourite blue chip has been SPH for quite some time.  I like their core business.  I like the Paragon building.  I like how they have diversified into property development.  I like their relatively high NAV.  I like their relatively low PE.  I like their current assets.  I like their relatively generous dividend payouts. Relative?  Relative to other blue chips, that is.  I also like the fact that Dr. Tony Tan is at the helm.  So, the fundamentals are good.  What about the technicals?

Technically, SPH is less volatile compared to Keppel Corporation and is more similar to F&N.  SPH is very comfortably positioned in its uptrend. Unlike F&N and Keppel Corporation which are both hanging onto their trendline supports for dear life, we see SPH forming a white spinning top in the last session, closing at $3.70.  Trendline support which I have drawn in orange is at $3.59 thereabouts.

The white spinning top looks like it's setting up for a possible morning star formation.  Sounds familiar?  Price will have to open above $3.72 and close higher in the next session for this to be valid.  I have drawn a trendline resistance in brown color.  This connects recent highs.  Any move up in price should meet with resistance provided by this trendline, currently at $3.76 or so.  Not much upside?  Looks like it.

What about the downside?  I am not delusional.  I do not think that SPH is immune to negative sentiments. The MFI continues to decline and at 35%, it is not oversold yet.  The index has been forming higher lows and if we connect these lows, we see a gently rising support line.  The probability is greater for the buying momentum to continue weakening towards this line.

As buying momentum weakens, a decline in price might see the orange color trendline support tested.  That would be a nice level to buy some.

SPH is my single largest investment in a blue chip company for a few months now.  I am in no hurry to divest and would in fact buy more as it weakens to support.