<< <i>The bigger the bubble, the bigger the pop!!! >>
How real is the supposed industrial demand? If it stays high than industry has to compete with John Q. Public for available physical supply. At what point will industry stop or slow down their buying? It would seem that the best way for folks to put pressure on industry to pay more is to keep buying the physical metal and taking it out of the market.
In a way, it is a good thing that the public can't buy and take delivery of barrels of crude oil.
<< <i>I wonder how come the "wrong forum" brothers ain't jumpin' in right about now. >>
In his own jungle, a 500 lb gorilla goes anywhere he wants to.
I'm in the process of rounding up all my silver wannabe's that never made it and I'm going to convert them into cash. I hear those $5 bill coupons will buy you a gallon of gas.
Sell!
I sold in '89 and I'm selling again in '011 You can accumulate a lot of junk in 20 years.
<< <i>Cladking - regarding "I believe there will be a paradigm shift "
Please elaborate - is your point that after approx. 1964 silver was demonitized (by government actions) and now it is being remonitized (by the private market)? If silver is really being remonitized, the historic gold/silver ratios begin to make sense again. >>
I doubt silver will ever be used as money again due to its scarcity. It still has a slight role as money because many people remember when it was money and because of its historic ties to gold.
Through early history silver wasn't extremely more common than gold. Indeed in some places there are good reasons to believe it was as scarce or nearly as scarce. Through history the gold silver ratio was much lower than today.
In the 1860's both gold and silver production began soaring to unheard of levels and have been maintained since. It was the invention of steel that initially in- creased silver production and the industrial revolution and the steam engine that resulted in much higher production. The amount of silver above ground was so great that it essentially swamped demand and only government intervention in silver producing countries kept the price up.
But people still liked silver for its various properties and huge amounts were used for jewelry, photography, and plate. The government accumulated huge stock- piles in order to keep the price high and inflation eroded the real value of silver and made it relatively cheaper all during the middle of the last century. It was largely the pessimism engendered by the silver debackle of '79 as well as the sale of the 3.3 billion ounce strategic stockpile that allowed prices to stay at such in- sanely low levels throughout the '80 and '90's. These price levels obscured the fact that silver was being consumed to make myriad products as the bankers were growing wealthy holding the price of silver right at floor level.
There was no reason for this to ever end except that reality always catches up with the affairs of men; we ran out of easily available silver. Yes, it's true we were lucky that this didn't go on another ten years as it well could have if the Chinese, Indians, and various other speculators hadn't gotten in the game and put a stop to it by accumulating the available silver.
Now we have to see what the price setting mechanism says silver is really worth. With such an enormous change in the dynamics of the market and in the perspec- tive of people it is very difficult to judge in advance what level that might be. Even if everyone today believed silver was really worth $1000 an ounce it couldn't go straight to that level because people can't switch gears that fast. As soon as there is even a $10 spike there will be millions ready to sell and squelching the move. Some owners have strong hands and plan to not sell or sell at only far higher prices that might never be reached while some owners are sweating bullets and just bought this morning. Like everything only time can sort this out but the more voracious the buying the less time is needed to get there.
Everyone might think of silver much differently in a few years. This even applies to the strongest bulls.
Gold/Silver doesn't go up, fiat currencies go down. Gold tracks purchasing power, the gold standard was used to measure currencies. The ultimate short of fiat is PM's so if you feel the fiat currencies are going to do well stay out of PM's it would be call a bubble.
If you realize this isn't US driven anymore and Asia's on the rise with their middle class that's competing from needed commodities throughout the world. Then you act accordingly. There's a real push to dethrown the dollar as the world currency so expect that to be coming soon. We aren't the world as we were in the past. Europe was the reserve currency in the 19th, the US in the 20th, and Asia looks to be in line for the 21st or at the very least a basket of currencies but either way that's not good for us.
I don't look at the price as much as what's going on throughout the world. If all you do is read and listen to the US media your in trouble in a global world. We a part of the sum. We'll do fine in the long run we can crank out the food and that's in short supply globally but I expect a reset of the system soon.
Cladking -- thanks; in essense, the shift is away from reliance on stockpiles to reliance on current production?
Further question >>> if I casually look at the supply/demand tables on the silver institute web site, it feels like the equilibrium is fairly stable; it feels that the driving force behind prices is the investment demand that picked up in 2009 - 2010, and that increases in silver mine production ares keeping up with industrial demand. Is my interpretation wrong? It's hard to look at this table as see pressure on price, except as a result of investment/inflation concerns.
I have been buying since silver was $9.00 and I have sold none. To sell would mean trading real wealth for paper dollars which are losing value almost hourly. As long as the govt keeps printing this monopoly money I will keep on buying silver and gold. The gurus of the financial markets have been consistantly wrong when it comes to precious metals investing. They are fighting the last war. There was a time not long ago when these people could predict when metals were over bought and ready for a major correction based on supply and demand, chaos erupting around the world, the wedding season in India etc etc. Anyone paying attention to the trends for the last couple of years has seen corrections attracting more dollars that were just waiting for a dip, thus not only making the correction short lived but creating new highs. The old factors just don't apply so much any more. The major factor in the rapidly rising prices of precious metals is the non stop printing of paper money. When I actually see the politicians (of both parties) seriously addressing our terrible debt monster and the cessation of the printing pressses then I will consider selling. Until then I will keep on trading my soon to be worthless dollars for something that will support me when I get old. Dave W
<< <i>... in essense, the shift is away from reliance on stockpiles to reliance on current production? >>
Yes, exactly.
There's still enough silver in existence that supply constraints aren't "real" but there's so little silver left and so much reason to believe that this element will become increasingly important to industry that there is far too little at current prices to be wasting it and to supply the vastly increased investment demand. This simply had to occur eventually since the amount of silver available just keeps dropping. In the long run industrial buyers would have found no silver available to run their production lines. Investment demand and the silver owned by investors will forestall this. But prices have to increase to levels where supply and demand come back into balance. Too few investors are willing to sell under the old paradigm.
Current production is interesting because of the peculiarities of the nature of the way silver is produced and consumed. The metal comes out of the ground in much larger quantities than gold but it is mostly a byproduct of the mining of other metals and far too cheap even at $45 to operate these mines for their silver. This makes the supply and production rat- her high but fixed and relatively unresponsive to higher prices. Don't look for vastly larger production numbers in response to these higher prices. A similar effect is seen in the de- mand for silver in that it is needed in tiny quantities in most of its applications. This means that even if it goes up far more it will have little effect on demand. What does it matter if a refrigerator contains a penny's worth of silver or a dime's worth?
But this flow of metal is quite large relative gold or platinum so minor savings and small in- crease can result in substantially more metal available.
The wild card here is the very nature of the metal. This metal is simply very high tech due to its very unique physical properties. As time goes on it's a virtual certainty that more and more processes and products will require it.
Gold is insurance against economic disturbances but silver is a bet on the ingenuity and re- sourcefullness of man. The Egyptians valued silver very highly and said that gold is the bones of the Gods and silver the skin. Silver is an investment in the future but, obviously, it is a riskier investment at $45 than it was at $4.50
Further question >>> if I casually look at the supply/demand tables on the silver institute web site, it feels like the equilibrium is fairly stable; it feels that the driving force behind prices is the investment demand that picked up in 2009 - 2010, and that increases in silver mine production ares keeping up with industrial demand. Is my interpretation wrong? It's hard to look at this table as see pressure on price, except as a result of investment/inflation concerns. >>
The change is simply that supply can't keep up with investment demand. A new equilibrium is likely to emerge and we may already be started on a path from which no retreat is possible. There are always macroeconomic forces that can halt trends dead in their tracks. If you don't follow the trends you tend to be immune from them though.
And if it does that another 10-20 days in a row you will certainly know that the world is coming to an end. If it were to hit $60 or so what do you think the strength of the dollar would be at that point?
"If it's not fun, it's not worth it." - KeyMan64 Looking for Top Pop Mercury Dime Varieties & High Grade Mercury Dime Toners.
that silver would hit $50 (I think it was around $29 at the time).
I also said the dollar was going into the toilet in January or February (the thread was How is the upcoming collapse of the dollar going to effect the prices of US coins?) but that thread might have been deleted....TDN was arguing with me about how inflation had not reared it`s ugly head....)
Any currency that is compared to the historic rise in silver and gold this past year would look "bad", so why even insinuate that it is the Dollar alone?
I would like to know who is buying. Then I can see if there is strength in their buying or if it is speculative. Do the ETF margins play a big role? I bet they do. With the click of a button, millions of ounces of "paper" gold and silver can be sold. (and bought)
All the shops are buying and laying off the silver and gold off right away. How many shops are reselling silver to the public now at $45?
My own opinion, is that we are in a speculative bubble caused by the political games being played in DC, the Federal Reserve's "Quanatative easing" and the media hype from every news outlet.
This thing still has legs, so I am certainly not being a nay-sayer. But beware of this - "you cannot see a bubble when you are in one."
<< <i>I don't think tying the recent rise in gold and silver to weakness in the dollar is a valid argument. Measuring the strength of the Dollar. Any currency that is compared to the historic rise in silver and gold this past year would look "bad", so why even insinuate that it is the Dollar alone? I would like to know who is buying. Then I can see if there is strength in their buying or if it is speculative. Do the ETF margins play a big role? I bet they do. With the click of a button, millions of ounces of "paper" gold and silver can be sold. (and bought) All the shops are buying and laying off the silver and gold off right away. How many shops are reselling silver to the public now at $45? My own opinion, is that we are in a speculative bubble caused by the political games being played in DC, the Federal Reserve's "Quanatative easing" and the media hype from every news outlet. This thing still has legs, so I am certainly not being a nay-sayer. But beware of this - "you cannot see a bubble when you are in one." >>
I am like you - I do not think the rise in precious metal prices is tied to weakness in the dollar. I think it is a symptom of the weakness in the dollar.
The Chinese and Indians are the primary buyer of pms at this time, i believe. Americans are broke and unemployed.
We may be in a speculative bubble but everything goes up AND down.....even a correction of gold to $1,000 would not have indicated a bubble occurred...............if it then goes up past it`s high within a reasonable time.
What coin dealers do with gold and silver after they buy it is probably only a good indicator of common business practices. when they stockpile it, they change from dealers to speculators/investors.
-Gold to silver ratio of 50-1 to 100-1 was insane considering that the silver to gold ratio that is mined each year is <10-1...while only silver is being consumed/lost. -Trading ratios/money flows on the major exchanges are much <10-1. -Ratio of silver to gold naturally occuring in the earth's crust is <12-1. -Ratio of sovereign silver to gold coins (in dollar value) being sold by mints is much less than 10-1. In some cases 2-1 or less. -Gold to silver price ratio now down to 33-1. But it would seem a visit to the 10-20 range is in the cards. This is not your great grandfather's silver market any more -Silver is the "everyman's" gold being more divisible and far less costly per unit. -Numerous industrial and medicinal uses for silver.
Some have suggested that we could mine old landfills for silver since that's where all the old electronics and silver "waste" went. Considering that it currently costs $35-$70 to bring a ton of municipal waste to market I don't see the price collapsing from landfill sources. And in each ton of waste I'd be surprised if you had even 1 oz of silver. A ton of refuse is roughly equivalent to about an uncompacted 8ft cube which would be mostly paper, plastics, bulk base metals, and organics. In checking 2 of the large mines that silver miner Hecla runs, they process silver ore at 10 oz/ton. I don't see the landfills ever getting to that scale since you don't have the option of finding veins of silver in the landfill. Since each of us tosses out waste, how many ounces of silver per year have each of us tossed out with our waste? If all the silver were in coin or bar format it could be much more easily recovered. For every 1000 tons of waste you want to reprocess, you'll have to build a $100-$150 MILL processing plant to first deal with the garbage. And everyone wants one of those in their backyard. None have been built in the US in over 15 yrs. Still, all in all, an interesting idea. The technology and economics are not yet there.
<< <i>I think mining silver from waste dumps is wildly impractical for reasons previously stated. Recycling would have to be performed prior to disposal. >>
Today, recycling is being done at quite a few processing facilities. But the bulk of the old silver is in the old landfills. And 85% of the waste in the USA still goes right to existing operating landfills for burial (ie no processing).
Many or most communities now have recycling programs for electronics. But I don't know if that material is mined for precious metals. And if so, what quantity is recovered. $Cash4Gold and $Cash4Silver is still a lot larger.
Silver up $1/day isn't normal or rationale. It's no sin to take some money off the table occasionally, wait for a pullback, and get back in.
I speak as someone who (unfortunately) believed the tech stock hype back in the 90s and was very fortunate/lucky not to get very badly hurt when that bubble blew.
I'm just saying...the dollar isn't going away anytime soon (don't believe all the political posturing/hype)...and all you would need would be a dollar reversal vs other currencies (through higher taxes) to inflict some heavy pain on the precious metals move.
I'm just saying...the dollar isn't going away anytime soon (don't believe all the political posturing/hype)...and all you would need would be a dollar reversal vs other currencies (through higher taxes) to inflict some heavy pain on the precious metals move. >>
Ok, so higher taxes would raise the dollar and lower PM's. Don't know if I agree with that connection. Explain the connection. How about spending. Seems like a bigger connection there to me.
Gold and silver are valuable but wisdom is priceless.
<< <i>I have been buying since silver was $9.00 and I have sold none. To sell would mean trading real wealth for paper dollars which are losing value almost hourly. As long as the govt keeps printing this monopoly money I will keep on buying silver and gold. The gurus of the financial markets have been consistantly wrong when it comes to precious metals investing. They are fighting the last war. There was a time not long ago when these people could predict when metals were over bought and ready for a major correction based on supply and demand, chaos erupting around the world, the wedding season in India etc etc. Anyone paying attention to the trends for the last couple of years has seen corrections attracting more dollars that were just waiting for a dip, thus not only making the correction short lived but creating new highs. The old factors just don't apply so much any more. The major factor in the rapidly rising prices of precious metals is the non stop printing of paper money. When I actually see the politicians (of both parties) seriously addressing our terrible debt monster and the cessation of the printing pressses then I will consider selling. Until then I will keep on trading my soon to be worthless dollars for something that will support me when I get old. Dave W
I never thought I'd see the day when a coin shop would need guide ropes to keep the customers orderly but that is what I saw yesterday here in Salt Lake City. And...people are not just selling silver they are buying it. I couldn't even look in the display cases to see what to spend my money on. In another shop it wasn't crowded but the first guy in after me said he wanted to buy $300 dollars of silver. It's a different world right now.
I inherited my Dads collection in 1982, it contained two suitcases of silver, albums, rolls, etc and when it gets to $52 again I'm going to do some serious thinking not that I haven't already. My Dad never had a lot, his most valuable coin was a 1942/41 dime that he found in change. For a few days there he had more money than he ever dreamed of....and I never heard him say a word when it crashed.
A lot of what he had I've since changed to those keys he never could find and a high quality 7070 that I always dreamed of but there's still a good chunk left. I wonder what my Dad would have done if the prices had held a little longer? I wonder what I'll do?
<<Ok, so higher taxes would raise the dollar and lower PM's. Don't know if I agree with that connection. Explain the connection. How about spending. Seems like a bigger connection there to me. >>
Once again, lots of this stuff (including currency moves and precious meals) is a matter of perception.
Therefore, once the U.S. starts raising interest rates and boosting taxes, that will be viewed by the market as a "dollar positive" development...as in defending the strength of the currency. And yes, although inflation is an never-ending phenomena, it doesn't mean that PM prices can't be seriously hurt.
After all, inflation is ALWAYS happening...so if there was a true linear connection between inflation and money printing, gold and silver would NEVER go down. But the experience over the past 30 years proved that not to be the case.
Because I was not "of age" in the 1980's boom/bust cycle and was curious just how quickly it "popped" I thought I'd google the chart for that period and came up with the following:
That doesn't even show the interday high of $50. Think it closed the next day at $35.
Numismatist. 50 year member ANA. Winner of four ANA Heath Literary Awards; three Wayte and Olga Raymond Literary Awards; Numismatist of the Year Award 2009, and Lifetime Achievement Award 2020. Winner numerous NLG Literary Awards.
The 1980 price is also not a totally reliable guide as the Hunt Bros. were also artificially manipulating the market...so using that number as a past high watermark is not totally without risk.
For example, without the Hunts, the price may have only risen to $25-$30...hard to tell.
<< <i>For example, without the Hunts, the price may have only risen to $25-$30...hard to tell. >>
I agree. Might not have even broken $20. Let's look at it this way, from the 4th quarter of 1979 to the first quarter of 1980 we were at $15 minimum. That's over $40/oz in today's dollars.
I see silver with a lot of support and likely never to drop below $30 again.
<< <i>The 1980 price is also not a totally reliable guide as the Hunt Bros. were also artificially manipulating the market...so using that number as a past high watermark is not totally without risk. >>
Were they manipulating the market or were they simply asking for delivery of the silver they purchased? I think they were just taking delivery but I could be wrong.
<<Were they manipulating the market or were they simply asking for delivery of the silver they purchased? I think they were just taking delivery but I could be wrong.>>
I think they attempted to execute a classic "cornering" of the market...which itself isn't necessarily illegal, but they also pulled some shady stuff in the process. I believe there were major fines and possibly actual jail time served. Here are the details...one of the brothers is still alive: http://en.wikipedia.org/wiki/Nelson_Bunker_Hunt
Nelson Bunker Hunt and William Herbert Hunt, the sons of Texas oil billionaire Haroldson Lafayette Hunt, Jr., had for some time been attempting to corner the market in silver. In 1979, the price of silver jumped from $6/oz to an all-time record high of $48.70/oz. The brothers were estimated to hold one third of the entire world supply of silver (other than that held by governments).
On January 7, 1980, in response to the Hunt's accumulation, the exchange rules regarding leverage were changed, when COMEX adopted "Silver Rule 7" placing heavy restrictions on the purchase of commodities on margin. The Hunt brothers had borrowed heavily to finance their purchases, and as the price began to fall again, dropping over 50% in just four days, they were unable to meet their obligations, causing panic in the markets.
The Hunt brothers had invested heavily in futures contracts through several brokers, including the brokerage firm Bache Halsey Stuart Shields, later Prudential-Bache Securities and Prudential Securities. When the price of silver dropped below their minimum margin requirement, they were issued a margin call for $100 million. The Hunts were unable to meet the margin call, and, with the brothers facing a potential $1.7 billion loss, the ensuing panic was felt in the financial markets in general, as well as commodities and futures. Many government officials feared that if the Hunts were unable to meet their debts, some large Wall Street brokerage firms and banks might collapse.
To save the situation, a consortium of US banks provided a $1.1 billion line of credit to the brothers which allowed them to pay Bache which, in turn, survived the ordeal. The U.S. Securities and Exchange Commission (SEC) later launched an investigation into the Hunt brothers, who had failed to disclose that they in fact held a 6.5% stake in Bache.
My accountant my banker and my investment advisor have advised me to sell??? But the same people advised me to sell at $12 $18 $25?LOL My accountant was the only one who made sense when he reminded me that you have no profit unless you are a seller.
Give the laziest man the toughest job and he will find the easiest way to get it done.
There's a lot of great commentary on silver, gold and other metals on the Precious Metals Forum and highly recommend it. It is probably the most well balanced and thought out forum on the net on the subject.
<< <i><<Were they manipulating the market or were they simply asking for delivery of the silver they purchased? I think they were just taking delivery but I could be wrong.>>
I think they attempted to execute a classic "cornering" of the market...which itself isn't necessarily illegal, but they also pulled some shady stuff in the process. I believe there were major fines and possibly actual jail time served. Here are the details...one of the brothers is still alive: http://en.wikipedia.org/wiki/Nelson_Bunker_Hunt >>
Here's my take. But this is the 21st century and it's not a 79/80 type event. The Hunt brothers were used as a scape goat they broke no existing laws, it allowed the government to put the cat back in the bag. Let's talk about now though, been there done that.
This time around they have allowed Warren Buffet to acquire more physical silver than the Hunt brothers ever owned below 5 buck without a whimper in the markets. I ask why? My thought would be because of lessons learned from 79/80. They use the paper market to control the physical market. That didn't happen much in 79/80. It was mostly physical and mining.
Now at the start of the ETF's Buffet all of a sudden said silver was now over valued and sold at 6 bucks to created the physical for the ETF's, was he smart, dumb, or cut a deal of some sort? Here now we stand most people play the EFT's and mining,which is lagging due to the ETF's. Then you have the physical game. The paper PM's are getting shaky IMO so get ready for the next big rush once PM's can't be purchased. Mining stocks, not that I don't own some now and they're not dogs.
There also appears to be big bank plays in platinum right now. JPM is buying all the physical platinum they can get and storing it. While GS is telling their clients to sell Platinum. What's up with that? Banks usually play paper so JPM is storing for the long haul and staying out of the paper markets. Should we be worried?
The other topic of interest is the University of Texas trust fund buying 1 billion dollars in physical and storing it in NYC. Now they're worth almost 20 billion but if these cities, states, and trust come in and follow then you haven't seen nothing yet as it will be hard to come up with that kind of physical since CB's, Governments, and citizens are fighting over it with industry. This maybe your one shot at the moon, or your biggest lessons learned but quite frankly more than likely both. Good luck all.
<< <i>I believe there will be a paradigm shift in the way people value silver and a buying panic will ensue. It hasn't started yet most probably. When silver gaps higher by a few dollars that will mark the onset.
Of course I've been wrong before. >>
You're not wrong here. There will be a panic, this year in my book.
This thing is nuts! Forget the possibility of $50 during the summer or late this year...at this crazy rate, it could hit $50 NEXT WEEK! Almost scary it has moved so fast. I sold some at 26x face and some before that...so I have been selling a little at a time. I feel as though this is the safest approach. Considering my cost basis is $9/oz or wayyyy less I am not worried but would like to sell the rest of what I have when it hits the magical $50+/oz mark. I am just afraid that a lot of people have this same plan...the question now...will it hit $60? At what point does the bubble pop?
"If it's not fun, it's not worth it." - KeyMan64 Looking for Top Pop Mercury Dime Varieties & High Grade Mercury Dime Toners.
At the 2006 Berkshire Hathaway annual meeting, Mr. Buffett was asked about the fund’s silver holdings and Buffett responded:
“We had a lot of silver once, but we don’t have it now—and we didn’t make much on our prior holdings.” He went on to say: “I bought [silver] early and sold early. Silver was my fault. [Speculation] is wildest at the end.”
Comments
<< <i>
<< <i>Silver up almost a buck...again
>>
Another day, another dollar sure doesn't mean what it used to mean. >>
"
True, it is "another" dollar, if you take "another" to mean a "different" dollar
<< <i>
<< <i>The bigger the bubble, the bigger the pop!!! >>
Said the man with a bottle of soda pop for his avatar!!!!
at least he didnt say this will all fiz out.
<< <i>The bigger the bubble, the bigger the pop!!! >>
How real is the supposed industrial demand? If it stays high than industry has to compete with John Q. Public for available physical supply. At what point will industry stop or slow down their buying? It would seem that the best way for folks to put pressure on industry to pay more is to keep buying the physical metal and taking it out of the market.
In a way, it is a good thing that the public can't buy and take delivery of barrels of crude oil.
<< <i>I wonder how come the "wrong forum" brothers ain't jumpin' in right about now. >>
In his own jungle, a 500 lb gorilla goes anywhere he wants to.
I'm in the process of rounding up all my silver wannabe's that never made it and I'm going to convert them into cash. I hear those $5 bill coupons will buy you a gallon of gas.
Sell!
I sold in '89 and I'm selling again in '011 You can accumulate a lot of junk in 20 years.
"Keep your malarkey filter in good operating order" -Walter Breen
<< <i>Cladking - regarding "I believe there will be a paradigm shift "
Please elaborate - is your point that after approx. 1964 silver was demonitized (by government actions) and now it is being remonitized (by the private market)? If silver is really being remonitized, the historic gold/silver ratios begin to make sense again. >>
I doubt silver will ever be used as money again due to its scarcity. It still has
a slight role as money because many people remember when it was money and
because of its historic ties to gold.
Through early history silver wasn't extremely more common than gold. Indeed
in some places there are good reasons to believe it was as scarce or nearly as
scarce. Through history the gold silver ratio was much lower than today.
In the 1860's both gold and silver production began soaring to unheard of levels
and have been maintained since. It was the invention of steel that initially in-
creased silver production and the industrial revolution and the steam engine that
resulted in much higher production. The amount of silver above ground was so
great that it essentially swamped demand and only government intervention in
silver producing countries kept the price up.
But people still liked silver for its various properties and huge amounts were used
for jewelry, photography, and plate. The government accumulated huge stock-
piles in order to keep the price high and inflation eroded the real value of silver
and made it relatively cheaper all during the middle of the last century. It was
largely the pessimism engendered by the silver debackle of '79 as well as the sale
of the 3.3 billion ounce strategic stockpile that allowed prices to stay at such in-
sanely low levels throughout the '80 and '90's. These price levels obscured the
fact that silver was being consumed to make myriad products as the bankers were
growing wealthy holding the price of silver right at floor level.
There was no reason for this to ever end except that reality always catches up
with the affairs of men; we ran out of easily available silver. Yes, it's true we were
lucky that this didn't go on another ten years as it well could have if the Chinese,
Indians, and various other speculators hadn't gotten in the game and put a stop
to it by accumulating the available silver.
Now we have to see what the price setting mechanism says silver is really worth.
With such an enormous change in the dynamics of the market and in the perspec-
tive of people it is very difficult to judge in advance what level that might be. Even
if everyone today believed silver was really worth $1000 an ounce it couldn't go
straight to that level because people can't switch gears that fast. As soon as there
is even a $10 spike there will be millions ready to sell and squelching the move. Some
owners have strong hands and plan to not sell or sell at only far higher prices that
might never be reached while some owners are sweating bullets and just bought
this morning. Like everything only time can sort this out but the more voracious the
buying the less time is needed to get there.
Everyone might think of silver much differently in a few years. This even applies to
the strongest bulls.
Is the dollar going up or down?
Gold/Silver doesn't go up, fiat currencies go down. Gold tracks purchasing power, the gold standard was used to measure currencies. The ultimate short of fiat is PM's so if you feel the fiat currencies are going to do well stay out of PM's it would be call a bubble.
If you realize this isn't US driven anymore and Asia's on the rise with their middle class that's competing from needed commodities throughout the world. Then you act accordingly. There's a real push to dethrown the dollar as the world currency so expect that to be coming soon. We aren't the world as we were in the past. Europe was the reserve currency in the 19th, the US in the 20th, and Asia looks to be in line for the 21st or at the very least a basket of currencies but either way that's not good for us.
I don't look at the price as much as what's going on throughout the world. If all you do is read and listen to the US media your in trouble in a global world. We a part of the sum. We'll do fine in the long run we can crank out the food and that's in short supply globally but I expect a reset of the system soon.
<< <i>WHY was I finishing my clad sets in the early ''00s when silver was uinder $10 an ounce!? Arrrgh... >>
This is probably the only "investment" in the world better than silver.
Further question >>> if I casually look at the supply/demand tables on the silver institute web site, it feels like the equilibrium is fairly stable; it feels that the driving force behind prices is the investment demand that picked up in 2009 - 2010, and that increases in silver mine production ares keeping up with industrial demand. Is my interpretation wrong? It's hard to look at this table as see pressure on price, except as a result of investment/inflation concerns.
http://www.silverinstitute.org/supply_demand.php
We haven't heard anoything specific on that front yet, have we?
<< <i>It will be very interesting to see how the Mint prices it's special pucks...in only what, 8 more days.
We haven't heard anoything specific on that front yet, have we? >>
Yes we have...tentative price of $279 per puck, but that was before the latest silver run-up
There was a time not long ago when these people could predict when metals were over bought and ready for a major correction based on supply and demand, chaos erupting around the world, the wedding season in India etc etc. Anyone paying attention to the trends for the last couple of years has seen corrections attracting more dollars that were just waiting for a dip, thus not only making the correction short lived but creating new highs.
The old factors just don't apply so much any more. The major factor in the rapidly rising prices of precious metals is the non stop printing of paper money.
When I actually see the politicians (of both parties) seriously addressing our terrible debt monster and the cessation of the printing pressses then I will consider selling.
Until then I will keep on trading my soon to be worthless dollars for something that will support me when I get old. Dave W
David J Weygant Rare Coins www.djwcoin.com
<< <i>... in essense, the shift is away from reliance on stockpiles to reliance on current production? >>
Yes, exactly.
There's still enough silver in existence that supply constraints aren't "real" but there's
so little silver left and so much reason to believe that this element will become increasingly
important to industry that there is far too little at current prices to be wasting it and to
supply the vastly increased investment demand. This simply had to occur eventually since
the amount of silver available just keeps dropping. In the long run industrial buyers would
have found no silver available to run their production lines. Investment demand and the
silver owned by investors will forestall this. But prices have to increase to levels where
supply and demand come back into balance. Too few investors are willing to sell under
the old paradigm.
Current production is interesting because of the peculiarities of the nature of the way silver
is produced and consumed. The metal comes out of the ground in much larger quantities
than gold but it is mostly a byproduct of the mining of other metals and far too cheap even
at $45 to operate these mines for their silver. This makes the supply and production rat-
her high but fixed and relatively unresponsive to higher prices. Don't look for vastly larger
production numbers in response to these higher prices. A similar effect is seen in the de-
mand for silver in that it is needed in tiny quantities in most of its applications. This means
that even if it goes up far more it will have little effect on demand. What does it matter if
a refrigerator contains a penny's worth of silver or a dime's worth?
But this flow of metal is quite large relative gold or platinum so minor savings and small in-
crease can result in substantially more metal available.
The wild card here is the very nature of the metal. This metal is simply very high tech due
to its very unique physical properties. As time goes on it's a virtual certainty that more and
more processes and products will require it.
Gold is insurance against economic disturbances but silver is a bet on the ingenuity and re-
sourcefullness of man. The Egyptians valued silver very highly and said that gold is the
bones of the Gods and silver the skin. Silver is an investment in the future but, obviously,
it is a riskier investment at $45 than it was at $4.50
Further question >>> if I casually look at the supply/demand tables on the silver institute web site, it feels like the equilibrium is fairly stable; it feels that the driving force behind prices is the investment demand that picked up in 2009 - 2010, and that increases in silver mine production ares keeping up with industrial demand. Is my interpretation wrong? It's hard to look at this table as see pressure on price, except as a result of investment/inflation concerns.
>>
The change is simply that supply can't keep up with investment demand. A new equilibrium
is likely to emerge and we may already be started on a path from which no retreat is possible.
There are always macroeconomic forces that can halt trends dead in their tracks. If you don't
follow the trends you tend to be immune from them though.
``https://ebay.us/m/KxolR5
<< <i>Up a buck & a quarter+, in one day.
And if it does that another 10-20 days in a row you will certainly know that the world is coming to an end. If it were to hit $60 or so what do you think the strength of the dollar would be at that point?
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that silver would hit $50 (I think it was around $29 at the time).
I also said the dollar was going into the toilet in January or February (the thread was How is the upcoming collapse of the dollar going to effect the prices of US coins?) but that thread might have been deleted....TDN was arguing with me about how inflation had not reared it`s ugly head....)
Measuring the strength of the Dollar.
Any currency that is compared to the historic rise in silver and gold this past year would look "bad", so why even insinuate that it is the Dollar alone?
I would like to know who is buying. Then I can see if there is strength in their buying or if it is speculative. Do the ETF margins play a big role? I bet they do. With the click of a button, millions of ounces of "paper" gold and silver can be sold. (and bought)
All the shops are buying and laying off the silver and gold off right away. How many shops are reselling silver to the public now at $45?
My own opinion, is that we are in a speculative bubble caused by the political games being played in DC, the Federal Reserve's "Quanatative easing" and the media hype from every news outlet.
This thing still has legs, so I am certainly not being a nay-sayer. But beware of this - "you cannot see a bubble when you are in one."
Anaconda the Psychic
- Jim
<< <i>I don't think tying the recent rise in gold and silver to weakness in the dollar is a valid argument.
Measuring the strength of the Dollar.
Any currency that is compared to the historic rise in silver and gold this past year would look "bad", so why even insinuate that it is the Dollar alone?
I would like to know who is buying. Then I can see if there is strength in their buying or if it is speculative. Do the ETF margins play a big role? I bet they do. With the click of a button, millions of ounces of "paper" gold and silver can be sold. (and bought)
All the shops are buying and laying off the silver and gold off right away. How many shops are reselling silver to the public now at $45?
My own opinion, is that we are in a speculative bubble caused by the political games being played in DC, the Federal Reserve's "Quanatative easing" and the media hype from every news outlet.
This thing still has legs, so I am certainly not being a nay-sayer. But beware of this - "you cannot see a bubble when you are in one." >>
I am like you - I do not think the rise in precious metal prices is tied to weakness in the dollar. I think it is a symptom of the weakness in the dollar.
The Chinese and Indians are the primary buyer of pms at this time, i believe. Americans are broke and unemployed.
We may be in a speculative bubble but everything goes up AND down.....even a correction of gold to $1,000 would not have indicated a bubble occurred...............if it then goes up past it`s high within a reasonable time.
What coin dealers do with gold and silver after they buy it is probably only a good indicator of common business practices. when they stockpile it, they change from dealers to speculators/investors.
<< <i>I wonder how come the "wrong forum" brothers ain't jumpin' in right about now. >>
Love it!!!!!!!!
Herb
-Gold to silver ratio of 50-1 to 100-1 was insane considering that the silver to gold ratio that is mined each year is <10-1...while only silver is being consumed/lost.
-Trading ratios/money flows on the major exchanges are much <10-1.
-Ratio of silver to gold naturally occuring in the earth's crust is <12-1.
-Ratio of sovereign silver to gold coins (in dollar value) being sold by mints is much less than 10-1. In some cases 2-1 or less.
-Gold to silver price ratio now down to 33-1. But it would seem a visit to the 10-20 range is in the cards. This is not your great grandfather's silver market any more
-Silver is the "everyman's" gold being more divisible and far less costly per unit.
-Numerous industrial and medicinal uses for silver.
Some have suggested that we could mine old landfills for silver since that's where all the old electronics and silver "waste" went. Considering that it currently costs $35-$70
to bring a ton of municipal waste to market I don't see the price collapsing from landfill sources. And in each ton of waste I'd be surprised if you had even 1 oz of silver. A ton
of refuse is roughly equivalent to about an uncompacted 8ft cube which would be mostly paper, plastics, bulk base metals, and organics. In checking 2 of the large mines that
silver miner Hecla runs, they process silver ore at 10 oz/ton. I don't see the landfills ever getting to that scale since you don't have the option of finding veins of silver in
the landfill. Since each of us tosses out waste, how many ounces of silver per year have each of us tossed out with our waste? If all the silver were in coin or bar format it
could be much more easily recovered. For every 1000 tons of waste you want to reprocess, you'll have to build a $100-$150 MILL processing plant to first deal with the garbage. And
everyone wants one of those in their backyard. None have been built in the US in over 15 yrs. Still, all in all, an interesting idea. The technology and economics are not yet there.
roadrunner
Recycling would have to be performed prior to disposal.
<< <i>I think mining silver from waste dumps is wildly impractical for reasons previously stated.
Recycling would have to be performed prior to disposal. >>
Today, recycling is being done at quite a few processing facilities. But the bulk of the old silver is in the old landfills.
And 85% of the waste in the USA still goes right to existing operating landfills for burial (ie no processing).
Many or most communities now have recycling programs for electronics. But I don't know if that material is mined for
precious metals. And if so, what quantity is recovered. $Cash4Gold and $Cash4Silver is still a lot larger.
roadrunner
<< <i>But the bulk of the old silver is in the old landfills. >>
I believe that silver is lost forever. As you have stated in the past roadrunner, silver was cheap for too long and treated capriciously.
Silver up $1/day isn't normal or rationale. It's no sin to take some money off the table occasionally, wait for a pullback, and get back in.
I speak as someone who (unfortunately) believed the tech stock hype back in the 90s and was very fortunate/lucky not to get very badly hurt when that bubble blew.
I'm just saying...the dollar isn't going away anytime soon (don't believe all the political posturing/hype)...and all you would need would be a dollar reversal vs other currencies (through higher taxes) to inflict some heavy pain on the precious metals move.
Ok, so higher taxes would raise the dollar and lower PM's. Don't know if I agree with that connection. Explain the connection. How about spending. Seems like a bigger connection there to me.
<< <i>I wonder how come the "wrong forum" brothers ain't jumpin' in right about now. >>
HRH - "His Royal Highness"
I'm selling my silver to buy paper stocks in western Ma. - drats, they are privately held.
<< <i>I have been buying since silver was $9.00 and I have sold none. To sell would mean trading real wealth for paper dollars which are losing value almost hourly. As long as the govt keeps printing this monopoly money I will keep on buying silver and gold. The gurus of the financial markets have been consistantly wrong when it comes to precious metals investing. They are fighting the last war.
There was a time not long ago when these people could predict when metals were over bought and ready for a major correction based on supply and demand, chaos erupting around the world, the wedding season in India etc etc. Anyone paying attention to the trends for the last couple of years has seen corrections attracting more dollars that were just waiting for a dip, thus not only making the correction short lived but creating new highs.
The old factors just don't apply so much any more. The major factor in the rapidly rising prices of precious metals is the non stop printing of paper money.
When I actually see the politicians (of both parties) seriously addressing our terrible debt monster and the cessation of the printing pressses then I will consider selling.
Until then I will keep on trading my soon to be worthless dollars for something that will support me when I get old. Dave W
David J Weygant Rare Coins www.djwcoin.com >>
Perfect analysis in my opinion.
I inherited my Dads collection in 1982, it contained two suitcases of silver, albums, rolls, etc and when it gets to $52 again I'm going to do some serious thinking not that I haven't already. My Dad never had a lot, his most valuable coin was a 1942/41 dime that he found in change. For a few days there he had more money than he ever dreamed of....and I never heard him say a word when it crashed.
A lot of what he had I've since changed to those keys he never could find and a high quality 7070 that I always dreamed of but there's still a good chunk left. I wonder what my Dad would have done if the prices had held a little longer? I wonder what I'll do?
Once again, lots of this stuff (including currency moves and precious meals) is a matter of perception.
Therefore, once the U.S. starts raising interest rates and boosting taxes, that will be viewed by the market as a "dollar positive" development...as in defending the strength of the currency. And yes, although inflation is an never-ending phenomena, it doesn't mean that PM prices can't be seriously hurt.
After all, inflation is ALWAYS happening...so if there was a true linear connection between inflation and money printing, gold and silver would NEVER go down. But the experience over the past 30 years proved that not to be the case.
That's a pretty quick pop.
<< <i>That doesn't even show the interday high of $50. Think it closed the next day at $35. >>
You answered my question before I asked it!!
Hence my words of exercising some caution...doesn't Jim Cramer say something about "Pigs getting slaughtered?"
The 1980 price is also not a totally reliable guide as the Hunt Bros. were also artificially manipulating the market...so using that number as a past high watermark is not totally without risk.
For example, without the Hunts, the price may have only risen to $25-$30...hard to tell.
<< <i>For example, without the Hunts, the price may have only risen to $25-$30...hard to tell. >>
I agree. Might not have even broken $20. Let's look at it this way, from the 4th quarter of 1979 to the first quarter of 1980 we were at $15 minimum. That's over $40/oz in today's dollars.
I see silver with a lot of support and likely never to drop below $30 again.
<< <i>The 1980 price is also not a totally reliable guide as the Hunt Bros. were also artificially manipulating the market...so using that number as a past high watermark is not totally without risk. >>
Were they manipulating the market or were they simply asking for delivery of the silver they purchased? I think they were just taking delivery but I could be wrong.
I think they attempted to execute a classic "cornering" of the market...which itself isn't necessarily illegal, but they also pulled some shady stuff in the process. I believe there were major fines and possibly actual jail time served. Here are the details...one of the brothers is still alive:
http://en.wikipedia.org/wiki/Nelson_Bunker_Hunt
Nelson Bunker Hunt and William Herbert Hunt, the sons of Texas oil billionaire Haroldson Lafayette Hunt, Jr., had for some time been attempting to corner the market in silver. In 1979, the price of silver jumped from $6/oz to an all-time record high of $48.70/oz. The brothers were estimated to hold one third of the entire world supply of silver (other than that held by governments).
On January 7, 1980, in response to the Hunt's accumulation, the exchange rules regarding leverage were changed, when COMEX adopted "Silver Rule 7" placing heavy restrictions on the purchase of commodities on margin. The Hunt brothers had borrowed heavily to finance their purchases, and as the price began to fall again, dropping over 50% in just four days, they were unable to meet their obligations, causing panic in the markets.
The Hunt brothers had invested heavily in futures contracts through several brokers, including the brokerage firm Bache Halsey Stuart Shields, later Prudential-Bache Securities and Prudential Securities. When the price of silver dropped below their minimum margin requirement, they were issued a margin call for $100 million. The Hunts were unable to meet the margin call, and, with the brothers facing a potential $1.7 billion loss, the ensuing panic was felt in the financial markets in general, as well as commodities and futures. Many government officials feared that if the Hunts were unable to meet their debts, some large Wall Street brokerage firms and banks might collapse.
To save the situation, a consortium of US banks provided a $1.1 billion line of credit to the brothers which allowed them to pay Bache which, in turn, survived the ordeal. The U.S. Securities and Exchange Commission (SEC) later launched an investigation into the Hunt brothers, who had failed to disclose that they in fact held a 6.5% stake in Bache.
$12 $18 $25?LOL My accountant was the only one who made sense
when he reminded me that you have no profit unless you are a seller.
.
Camelot
There's a lot of great commentary on silver, gold and other metals on the
Precious Metals Forum and highly recommend it. It is probably the most well
balanced and thought out forum on the net on the subject.
<< <i><<Were they manipulating the market or were they simply asking for delivery of the silver they purchased? I think they were just taking delivery but I could be wrong.>>
I think they attempted to execute a classic "cornering" of the market...which itself isn't necessarily illegal, but they also pulled some shady stuff in the process. I believe there were major fines and possibly actual jail time served. Here are the details...one of the brothers is still alive:
http://en.wikipedia.org/wiki/Nelson_Bunker_Hunt >>
Here's my take. But this is the 21st century and it's not a 79/80 type event. The Hunt brothers were used as a scape goat they broke no existing laws, it allowed the government to put the cat back in the bag. Let's talk about now though, been there done that.
This time around they have allowed Warren Buffet to acquire more physical silver than the Hunt brothers ever owned below 5 buck without a whimper in the markets. I ask why? My thought would be because of lessons learned from 79/80. They use the paper market to control the physical market. That didn't happen much in 79/80. It was mostly physical and mining.
Now at the start of the ETF's Buffet all of a sudden said silver was now over valued and sold at 6 bucks to created the physical for the ETF's, was he smart, dumb, or cut a deal of some sort? Here now we stand most people play the EFT's and mining,which is lagging due to the ETF's. Then you have the physical game. The paper PM's are getting shaky IMO so get ready for the next big rush once PM's can't be purchased. Mining stocks, not that I don't own some now and they're not dogs.
There also appears to be big bank plays in platinum right now. JPM is buying all the physical platinum they can get and storing it. While GS is telling their clients to sell Platinum. What's up with that? Banks usually play paper so JPM is storing for the long haul and staying out of the paper markets. Should we be worried?
The other topic of interest is the University of Texas trust fund buying 1 billion dollars in physical and storing it in NYC. Now they're worth almost 20 billion but if these cities, states, and trust come in and follow then you haven't seen nothing yet as it will be hard to come up with that kind of physical since CB's, Governments, and citizens are fighting over it with industry. This maybe your one shot at the moon, or your biggest lessons learned but quite frankly more than likely both. Good luck all.
I knew it would happen.
<< <i>I believe there will be a paradigm shift in the way people value silver and a buying
panic will ensue. It hasn't started yet most probably. When silver gaps higher by
a few dollars that will mark the onset.
Of course I've been wrong before. >>
You're not wrong here. There will be a panic, this year in my book.
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“We had a lot of silver once, but we don’t have it now—and we didn’t make much on our prior holdings.” He went on to say: “I bought [silver] early and sold early. Silver was my fault. [Speculation] is wildest at the end.”
From here:
2007 article
I have no idea if Warren Buffett bought back in, but it looks like he sold too early. I don't think he is behind the recent rise.