iShares Silver (SLV): Gene Arensberg top ETF for 2010

"2010 will be the year that silver shines," says metals and mining specialist Gene Arensberg.

In his Got Gold Report, a specialty service from The Gold Newsletter, he says, “We believe that the metal-backed exchange traded fund iShares Silver Trust (NYSE: SLV) is a safe and convenient way for most investors to gain exposure to the silver market.”

"When the general public becomes fully involved in gold, silver shines brightly … for a time. At least it did so in the last public rush into gold which peaked about 30 years ago.

"SLV tracks the spot price of silver, less accumulated fees capped at 0.5% per annum. Since the exchange traded fund’s inception in April, 2006, the trust has accumulated over 300 million ounces of silver.

"That is about 9,500 metric tonnes of bar silver held in ultra-secure soccer field sized vaults by a custodian in London. In December, 2009, the SLV silver stash was worth about $5.3 billion.

“Silver fell out of popularity until just recently, but we see that changing now. For more than 20 years, from 1980 to about 2003, investors all over the globe were conditioned by a weak silver price and not much joy of ownership.

"'Who cares?’ sums up the public attitude before this bull market for silver began in 2003. Even now that attitude prevails among the same investing establishment that has grudgingly accepted gold as an investment class.

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“During that long bear market for silver, government dishoarding of excess silver metal, metal left over from when governments actually had silver in their coinage, acted as a cap to the price.

"That excess supply from official sources is all gone now, but the effects of the artificial over-supply are only just now retreating.

“Silver stayed so low-priced for so long it made the second most popular precious metal difficult to mine profitably. Because of that, annual production of silver has not kept pace with increasing industry and investment demand.

"A factoid that some will find difficult to believe is that because prices for actual physical silver metal have been so cheap for so long, and because global industry consumes more silver each year than miners are able to produce, there is actually considerably less silver metal in existence than there is gold.

“Gold recently rose to new all-time nominal highs above $1,200 the ounce, but its sister precious metal has lagged so far. In fact it hasn’t even gotten to half of where it did in the last bull market peak in January, 1980.

"Silver reached about $50 an ounce briefly then, but so far this cycle has yet to beat its May 2008 $21.44 pinnacle. That is with gold having bested its 1980 high of $850 by more than $350 an ounce. As such, we believe that silver has some serious catching up to do.

"“What is so enticing about the silver story is that it currently takes about 64 ounces of silver to buy an ounce of gold. That is called the gold:silver ratio. During the bull market for precious metals thirty years ago the ratio fell to about 16:1 or 16 ounces of silver to one ounce of gold.

"If gold simply stood still at $1,100 an ounce and the ratio were to fall to 1980 levels, silver would climb to about $69 an ounce. That suggests achievable upside for silver and SLV of nearly 4X from today.

“But wait, there’s more. Consider that compared to period of the last bull rush for precious metals the world has about 50% more people in it. Governments have inflated their fiat currencies since then by a factor of 10.

"World inventories of actual physical silver metal for investment have actually fallen to less than half of the amount that was available in 1980.

"Recently the government of China re-legalized the ownership of precious metals for its 1.3 billion people and is actually encouraging its citizens to accumulate them.

"The number of people of affluence and means in the developing countries like Brazil, Russia, China and India has increased exponentially in the last thirty years.

“So, we see the currently unloved silver market as ripe for an investment renaissance of epic proportions. Think about it.

"Today versus 1980 we have globally 50% more people who will be using 1,000% more dollars, yen, euro, pounds sterling, yuan, etc., to chase less than half as much silver metal in a world where anyone can buy a silver ETF with just a mouse click from their study, even in their underwear.

“Isn’t that a potent recipe for silver? We think 2010 could very well be the year that a global popular rush, a veritable tsunami of liquidity into silver gets underway in earnest as more and more people discover just how little of it remains above ground for investment. Our favorite way to participate is SLV.”