What drives silver prices?
Cladiator
Posts: 18,039 ✭✭✭✭✭
As we all know silver, gold and platinum have all been on the rise for a while now. My question is what is actually driving these price increases? What factors are making silver go up?
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Supply and demand set the price of anything, including silver. Proponents say that there are several reasons that demand is increasing:
- China is buying up commodities of every sort, including oil, steel, gold, silver, wheat, beef, etc., thus driving the prices of all commodities up.
- The U.S. dollar is weak due to the huge budget deficit, debt, and trade deficit. This encourages investment in commodities that have perceived intrinsic value.
- Fears of inflation in the future encourage some folks to invest in commodities, which, in their minds, will not lose value as quickly as currencies.
- Worldwide political and economic instability encourage some folks to panic and dump wise investments for commodities.
Check out a Vanguard Roth IRA.
<< <i>- Worldwide political and economic instability encourage some folks to panic and dump wise investments for commodities. >>
Oy. A short list some of recent panic stricken commodity and currency investors:
- Warren Buffet
- Peter Drucker
- Jim Rogers
- George Soros
- Bill Gross (runs world's largest bond fund)
Quite a pack of fickle fruitcakes.
Atomic
Vladimir: That's what you think.
- Samuel Beckett, Waiting For Godot
<< <i>I will tell you a couple of things that is no longer driving silver prices, that is the photographic industry and x-rays. Silver is no longer needed in either. >>
You think that silver is not needed in these industries? Think again!
decoupling of interest rates and gold prices due to increased pressure on gold reserves.
Silver consumption has greatly exceeded mining plus recycling for nearly twenty years by
a wide margin. Above ground stocks have been steadily shrinking and the price just need-
ed a trigger to increase. There is an evolving perception that the dollar is over-valued and
this is exascerbating the moves as foreign currencies rise. There is also a change in the per-
ception of the metal itself as more people come to believe that it is a very high tech metal
and others like Warren Buffet and Bill Gates take small positions in it. There are only some
twenty billion troy ounces in existence and this represents a tiny fraction of the total wealth
in the world.
<< <i>
<< <i>- Worldwide political and economic instability encourage some folks to panic and dump wise investments for commodities. >>
Oy. A short list some of recent panic stricken commodity and currency investors:
- Warren Buffet
- Peter Drucker
- Jim Rogers
- George Soros
- Bill Gross (runs world's largest bond fund)
Quite a pack of fickle fruitcakes.
Atomic >>
I'm just glad that I bought last year at a much better price
I also wish I could have bought more in those days. Most of mine were around $500+. I'm still buying it when I can find a few deals here and there.
I have noticed a major reduction of posts from the precious metal bashers as well.
It's going to keep going up as well, I'd say get used to it. The surprise to me is that gold isn't rising along with it.
John Marnard Keynes, The Economic Consequences of the Peace, 1920, page 235ff
To us in the America, it's because of the weakening dollar.
roadrunner
<< <i>Understand that silver is also driven heavily by the paper comex contracts. Many sources have indicated that if all paper contracts had to be filled, there would be no silver left to fill them. It has been the manipulation of the market by these paper contracts (non-delivered silver) that have kept the price down. It hasn't been hard to play contracts on the short side as long as you don't have to supply the silver. As more players realize this and require delivery of the contract, the price will rapidly escalate.
roadrunner >>
Investors have been puting pressure on the PTB at the Comex and indications are that is starting to work. It might be that those who have sold silver short and manipulated the market for so long (and I am talking about 8 or fewer large players here) are having to change their ways as more and more people are calling for physical delivery......Silver can only go higher. I would suggest you read the archives of Theodore Butler. You may also want to look at the "gold is money forum". You'll find good daily information on the PM markets there.
Theodore Butler Silver Archives
--------
Howdy from Houston...
Can't keep my eyes
from the circling skies
Tongue tied and twisted
Just an earthbound misfit,
I
">my registry set
China has been very unhappy that I have been somewhat successful in my endeavor except for the 1932-1939 obw rolls.
Silver has indeed been very strong relative to gold yet the gold/silver ratio once well over 70/1 is now around 55/1. Will it go back to the 35/1 ratio seen for most of the 20th century?
We had many threads on this exact subject matter. Silver prices have surged nearly 50% in price since those threads which were not more than a year ago.
Actually, the "shorts" have sold nine times the amount of silver available in the Comex vaults. This market manipulation has been ongoing for several years and has drawn the attention of Elliot Spitzer. Their games are coming to a rapid end. In addition, more and more "longs" are demanding physical delivery. Something has to give.
As for the continual photographic myth. Please realize that the majority of silver used in photography was recycled/recovered year after year. The diminished use of film product is pretty much a non-event for the world of silver.
China is NOT buying silver, despite the myth. They will export 1500 tons this year.
Please add Bill Gates to the list of Silver buyers/hoarders.
Just another "idiot".
Yep, all the guys mentioned in this thread have got where they are purely on their good looks and charm
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As I recall, Buffet made this silver investment when prices were very low. Has he since sold any? I don't know. Did other big money investors follow Buffet's lead back then? Who knows? But they often do. If so, could that have something to do with the rising prices?
There has been a lot of hype in Wall Street like circles about the relatively recent strong performance of Gold and Silver. Both metals were in the doghouse for many years before. Once the media starts reporting on something, the following masses are usually not too far behind. matteproof
Not mine:
FACT: My friend (his name is really China) is truly unhappy that I have beaten him in acquiring those BU rolls. You think the country of China cares?
FACT: Silver has indeed been very strong relative to gold yet the gold/silver ratio once well over 70/1 is now around 55/1.
FACT: We had many threads on this exact subject matter.
FACT: Silver prices have surged nearly 50% in price since those threads which were not more than a year ago.
FACT: ........35/1 ratio seen for most of the 20th century.........
Now five different facts is more than just a "few" just in one posting.
Now take that back!!!!
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It's most interesting that Bill Gates would have some interest in silver. Per-
haps he knows something we don't such as a projected steep increase in
the needs of silver in computers? Silver is also the best elemental conducter
in the world and is large constituent of the warmest super conductors. If a
room temperature super conductor is ever discovered it will revolutionize the
world and create untold amounts of wealth. If it requires a significant amount
of silver then prices would go to unimaginable levels.
Silver will be used in an increasing number of products and processes as time
goes on and in many applications can not be replaced regardless of cost.
<< <i>atomic member said: "Quite a pack of fickle fruitcakes." Yes, but they are all rich, aren't they?
I was making a sarcastic comment. These guys are hardly fruitcakes. In the future I'll use the closest thing to a sarcasm emoticon. How's this?
The manager of the world's biggest bond fund creating a TIPs and commodities fund is like Donald Trump created a REIT hedge fund that shorts commercial real estate.
Vladimir: That's what you think.
- Samuel Beckett, Waiting For Godot
<< <i>Oy. A short list some of recent panic stricken commodity and currency investors:
- Warren Buffet
- Peter Drucker
- Jim Rogers
- George Soros
- Bill Gross (runs world's largest bond fund)
Quite a pack of fickle fruitcakes. >>
I thought I heard Buffet dumped his silver last year or so?
"In 2004, gold and silver will appreciate against the so-called strong currencies as well as the weak. The metal's best friend in 2004, we predict, will turn out not to be Alan Greenspan, but Jean-Claude Trichet. When -- not if -- the president of the European Central Bank announces a reduction in
the prevailing 2% ECB repo rate, it will be seen that his purpose is to cheapen the euro. So seeing, investors will call the thing by its name, 'competitive devaluation.' Some investors, reflexively, will take that opportunity to buy the dollar, reasoning that it is the dollar's turned to be 'strong.' Others,
correctly, will reflect how small a monetary role the 'store-of-value' function plays in the councils of our central bankers. With this understanding, they will buy more of those monetary assets listed in the Periodic Table of the Elements."
James Grant
Grant's Interest Rate Observer
""The U.S. dollar will struggle to continue providing stability, with the global economy growing proportionally larger than the U.S. economy. The U.S. trade deficit has reached $500 billion a year, financed largely by exporting countries such as China and Japan plowing trade proceeds back into U.S. Treasury notes and securities. Up to this point, they had little choice because the U.S. dollar was the only global reserve currency. However, the euro was introduced in 2000, and Chinese and Japanese companies are now shifting some of their assets into euros. And in October 2003, Russia said it might switch its trade in oil from dollars to euros. If this trend gains momentum rapidly enough, the U.S. economy will face a painful adjustment. Europeans have even started to consider exchange controls to deal with the violent upswing in the value of the euro."
Gartner Group, March 2004
Vladimir: That's what you think.
- Samuel Beckett, Waiting For Godot
I would suggest two important factors,
1. A weakening US dollar requires a global commodity like Silver, or Crude Oil, to rise in price. If they didn't, foreigners would buy US commodities and immediately re-sell them overseas for an instant profit.
2. The substantial number of paper investment contracts that represent "short" positions. Shorts represent a future purchase, the investor has bet that prices will fall and has already sold. Folks have realized that the net Short position is excessive, and there is not sufficient silver in hand to cover the investments. The catch now is to buy before the Shorts feel too much pain and eliminate their positions - or start mining more silver.
<< <i>Silver has indeed been very strong relative to gold yet the gold/silver ratio once well over 70/1 is now around 55/1. Will it go back to the 35/1 ratio seen for most of the 20th century? >>
Yes, the silver/gold ratio IS very high. But consider one VERY important factor: until the mid-1970s the government controlled the price of gold and silver; gold was $35 an ounce and silver was $1 an ounce. Those prices were artificial and never supported by the market, as we saw when the prices were deregulated.
Warren Buffet was mentioned as making a move in silver, so it "must" be the right move. I think we could all learn something from Warren Buffet--place 1% of our total investments in silver. When you are worth $20 billion (or so, haven't looked lately), spending a few hundred million on silver is no big deal; simply diversification.
Now some people believe the price of silver will stay up permanently. They say over the last 2000 years the ratio of silver to gold has been around 22:1, meaning the price of silver SHOULD be around $20 an ounce. Historically, when gold moves it does so slowly, but when silver moves it does so rapidly. Case-in-point, in 1982 gold prices tripled, reaching $800-$900 range, while silver prices increased more than 10-fold, up to $48. Of course, that rise was begun by the Hunt brothers, until a bad economy and wild speculation took over.
People also point out, rightly so, that a *truly* wealthy person (no a few hundred million like the Hunt brothers, but $10 billion or so), could accumulate a substantial portion of all silver in the world. Permit me to point out the opposite, that if Warren Buffet sold his ten million ounces (if he hasn't already), the price of silver would plunge. Vast amounts of silver in one person's hands isn't really that good of a thing.
Silver is destroyed in photography, but when prices go high enough it becomes efficient to recover much of that silver from film, pictures, etc. Silver mines cannot keep up with the demand for silver; however countless silver mines aren't profitable at $4 an ounce but ARE profitable at $10 an ounce.
Personally, I think we are in for an interesting ride, but I just don't think silver will remain high forever. In the long-term, more silver mines can be reopened that will strongly pressure to price of silver to go back down. No, mines can't be reopened overnight, but if silver stays up for a year, I'm sure mining companies will be more than willing to pull more out of the ground.
At any rate, read the comments of economists from both sides of the issue, and see what you think. I believe silver is rising simply because it's been down for so long and it's time for it to cycle up (then back down) for a while. We'll see though, should be fun to watch!
3. It costs me very little bank interest for me to take my dollars and buy silver. If the bank was paying 5 or 6%, I'd be less willing to park money in non-interest-bearing places like silver.
4. I can trade Eagles without the tax man knowing it.