Some reasons I think Silver is on Fire

Just from observations I have made over the last couple of years where the price
of silver is concerned is.

The price of silver is not influenced solely by the situations taking place in the U.S
alone. Silver price is established by global events and markets.
And over the last couple of years we have had some major changes in the way the
world is looking at and relating to silver and gold.
The Chinese have gone from a major exporter of gold to one of the largest importers
of gold and silver on the planet. Actively getting their population to buy gold and silver.
China's largest bank setting up funds for their people to put in small amounts of money at a time, to build up to purchases of ounces of precious metal to be credited to their accounts or taken home for those that want to take physical possession.
For those that can not afford to buy an ounce at a time.
Why this even catches my attention at all is the fact that China is a communist country
and the fundamental core of a communist country is the State itself. With the population
working for the building of the wealth of the State. Not for the building of wealth
of the general population. Which they have begun to do by wanting their people to
purchase precious metals. I am not sure what caused this fundamental shift in
policy. Maybe getting ready to start a new currency based on silver and gold.

With the U.S. Dollar being the reserve currency of the planet that affords
us a unique position in the world to our great benefit ever since the end
of World War II. There has been a quite concerted effort to change that
position that we enjoy. China and Russia set up an exchange at the
end of 2010 so that they could by pass the U.S. Dollar altogether.
In February of this year the IMF (International Monetary Fund)
is pushing to replace the Dollar as the world reserve currency.
And today the U.N. (United Nations) has joined in on calling
for a replacement of The U.S. Dollar with a global currency


March of 2010 JP Morgan Chase gets caught red handed suppressing the silver market
there have always been rumblings of this going on for as long as I can remember. And
those that did not believe it just chalked it up to conspiracy theory noise.
But with them being caught in the act. The light begins to come on slowly in peoples
heads (It was like a lightning bolt in mine I remember the day the story broke in March 2010 very well and I began hard core stacking) with the historical ratio of silver to gold
being 16 to 1 (16 ounces of silver equal in value to 1 ounce of gold) people began to
understand that silver was way under valued artificially by JP Morgan's price
suppression scheme and began buying accordingly.

With a small vendor in Tunisia feeling no respect from those in political power.
He sets himself on fire in front a local government building, which sparks a protest
which ends with the removal of the long time repressive Tunisian government.
Which in turn ignites protests across the Middle East. Egypt is the next Government
to fall with the entire event played out in the major press outlets of the world
one was able to watch it every day all day if they so chose to on the internet.
Live feeds coming out of Tahir Square. Now Libya is going differently and the
Government is fighting back. Unlike Egypt where the Military were behind the people
Libya has turned to killing the protesters drawing in the rest of the world into
the fray. The entire Middle East is on fire right now.

There are also protests in the Uk and Germany because they no longer want to
be part of the disastrous Euro experiment because they feel they are being made to foot
the bill for bailing out other country's where the economy has crashed or is crashing
Portugal, Greece and others.

Protests all over Europe for various other reasons where governments are taking from
the people to give to the banks and other various austerity measures.

Protests here in the United States over heavy handed
actions being enacted by state governments. Whether real or perceived
The rise in prices of everything from Gas to Bread
when a lot of people foolishly fell into the whole throw it on a credit card
thing, and live right to or beyond their financial limits so any rise in prices
would put them behind on everything.
people are on fire and revolution is in the air around the planet.

And in times of unrest and uncertainty people turn to what has been money
for thousands of years. Silver and Gold

My thoughts are that with gold at it's current price level
and the historic silver to gold ratio of 16 to 1
the price of silver should be right around the $90.00 per ounce area.
I just think the current rapid rise in the price of silver is
due to silvers artificial suppression of price for decades
and it is just racing to catch up with it's self.

If anyone can think of other reasons I would love to hear them because
the price of silver and gold directly affect one of the great joys in my
life, Coin Collecting:hail:

Terry

 

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You missed the biggest reason -- pure price speculation by hedge funds and other investors.

Also, the famous "historical 16:1 ratio" is largely a myth. Gold and silver have different physical characteristics and are not close substitutes in most industrial uses. So there is no reason why there should be any fixed relationship in the price. It's like saying there should be a ratio between lumber and wheat because they are both plants.

 

I will resond to just one of your points. JPM is the market maker in silver futures. As such, they HAVE to sell silver short to create the market. It is literally the definition. So many PM people misunderstand this, and think they are being caught "red handed". The guy in the internet that has been ranting about this has done so for 20 years. He simply will not, (not does not, because he has been presented this fact, he just refuses to believe it), believe it.

Have they sometimes made too many contracts, possibly, no market maker can get it right all of the time. This is just a huge fallacy enormous amounts of PM investors believe in.

Chris

 

The concept that China and Russia presented last November of accepting each other's currency in commodity exchange such as oil has not happened as China may have thought it would help them with the price, which it didn't. My belief is that China doesn't trust Russia on principles, and Russia doesn't trust China because of lack of transparency. You can't make a currency the world's reserve just by claiming it is such. The world has to trust it, and in most countries, their currency is in much worse conditions, and they do not trust the Yuan or the Ruble like the dollar. IMO. I believe that at least half of the price of silver is due to fear and speculation.

Jim

 

JPM is not THE market maker in silver. They are A market maker in silver. The point I think is missed about them is that by the CFTC's own rules, the function of the futures market is price discovery and not to set the price, which is the definition of market manipulation, and is illegal. As a market maker, JPM has the responsibility to own or have access to the physical silver to back the short positions they take. And it is incorrect to say that they HAVE to sell short. This is entirely voluntary. They could choose to let the price rise as long as there are sellers at some price, and are only required to step in when there is a shortage of liquidity in the marketplace that makes it freeze up. This is not the case, and it is NOT JPM's responsibility to fill all market orders at or near the current price level. The do this as part of their own proprietary trading and not as a market maker.

In JPM's defense, I'll say that nobody knows whether or not they are a naked short seller. I've read that the government of China is a client of JPM, they own a lot of silver, and they may be basis trading through JPM to earn income from their silver holdings. It is impossible for any analyst to know whether or not this is the case.

There is a lot of speculation out there about JPM, both positive and negative. Maybe someday we will know the true story, or maybe not.

 

But I thought the basis of the security was a sold short. This becomes the derivative that is traded. This is what I meant that shorts had to be created to even HAVE a market. Sorry if I misspoke that they are the only market maker, but I just get peeved when people try to show how many shorts JPM sold to "prove" manipulation. Without knowing a lot more about the market, these people cannot judge if those shorts were the correct amount to liquidate the market and actually have a market.

 

Jim I think you may have misunderstood what I was meaning to get across
Not that China and Russia were trying to set up a world currency
but that they have as of last year set up an exchange to trade directly
bypassing the reserve currency of the world the U.S. Dollar
Sorry for not being clearer.

Terry

http://www.businessweek.com/news/2010-12-15/yuan-ruble-trade-starts-as-russia-china-shun-dollar.html

http://www.chinadaily.com.cn/bizchina/2010-12/18/content_11722196.htm

Medoraman,
I Don't even know where to begin with that one.
Yes they were caught Red Handed manipulating the silver market.
Yes there was an e-mail exchange between a gentleman named Andrew Maquire
and Eliud Ramirez and Bart Chilton of the CFTC in January of 2010
where Mr. Maquire was warning the CFTC of an upcoming silver market manipulation
being signaled by JP Morgan Chase. And in real time he walked the CFTC through the
things that were going to take place during this particular manipulation.
“Maguire understands the process so well that he was able to describe it to the CFTC’s Bart Chilton on the phone in real time. As in: ‘in a few minutes, they are going to do this, and then they will do that.’” And it happened.
I don't want to load up a thread with a ton of links to video of CFTC meetings
and stories that broke around the planet in March of last year.
Here is just one. People interested can find tons more information
out there
http://www.itszone.co.uk/2010/04/03/andrew-maguire-exposes-systemic-fraud-by-cftc-and-jpmorgan/

And as far as just over selling some contracts that is putting a very politically correct spin to it.
At a CFTC meeting last year a banking official was caught on tape stating
that it was COMMON PRACTICE in the industry to sell up to
100 ounces of gold on paper for every ounce of physical gold in their possession.
Talk about freaking people out that thought that they actually had real gold
in an account. The little guys knew very quickly that they would never see
the gold in there accounts if there was a run to get physical in hand.
because the well connect big boys would get their physical metal
first and Joe Six Pack investor would be left with paper.
Which is coincidentally about the same time that people began wanting physical
metals versus paper.

Edited to add after reading Medoraman's newest thread addition
I understand your thinking and you are right the shorts are not proof of manipulation
The manipulation is a separate and distinct event all in its own.
two separate things altogether

 

I recall that concentration was the criteria used against the Hunts to "prove" manipulation. It had nothing to do with determining some theoretical correct amount. If a concentrated long position was a priori evidence of manipulation, the same should go for the short side. JPM's self proclaimed market maker status does not exempt them, or allow them to hold a concentrated short position year after year. Surely there isn't a permanent shortage of silver traders on one side of the market -- unless the price is artificially low.

 

i think that perhaps silver has turned into the common man's gold. some people that want to acquire some hard assets to protect their dollars can't afford an ounce of gold, but they can afford a few ounces of silver. so it's a lot more accessible for some to buy silver rather than gold.

it's sort of amazing to think that silver now costs twice as much as gold did in the 1920's (how did that happen!). in 1925, an ounce of gold was worth about $20 bucks, 0.96 oz of gold went into the twenty dollar gold pieces of the day.

 

But that $20 in 1925 dollars would be worth about the same as an ounce of gold today simply invested in US treasuries. Nothing has changed except the number. Same relationship.

Edit: Put it another way, what would cost $20 in 1925, be it land, oil, basket of goods, etc, probably would run about $1300 today rough numbers. Your gold would have protected your purchasing value, but so would putting cash into a interest bearing bond. This is why they have the same relationship.

 

Up another $1.18 today....over 3 bucks for a silver dime now. Wow!

 

I have seen this logic many places on the net and mentioned on some analyst's interviews, but I wonder if either they are wrong, or if those doing it think they are protecting much. It seems to me that if someone bought an ounce of silver today, let's say $40, then they are only protecting that $40. So how many ounces should he/she buy to protect 3 months of income? or if things really get bad, a year of income. Some can and do, but I would guess few have calculated this in relation to their expected needs. I think the USD will rebound against the basket and PM will eventually be a loss for those who expect the end as we know it, and won't sell at all. Maybe not tomorrow, or not in next few months , but things are getting better faster in the US than in other countries (IMO).

Jim

​

 

The dollar is worth less than most all of the currencies it is commonly measured against currently at 74.7 or so. That means our purchasing power is dropping faster than others. Fortunately Americans have more wealth than people of many other nations and that's a good thing because we can sustain inflation longer than those who are already spending 40% or their income on food. Not sure what measure is telling you that things are getting better faster in the US. Maybe it's just your general feeling?

Bluesboy65

 

Currency value against the basket compares forex basis whereas I was considering a different means of comparison. Look at this table. It is the credit default swap list, basically how much it costs to insure against a country defaults. It is the amount in 1000s of US dollars to insure 10,000,000 in debt ( complete explanation at the bottom of the page. Only Germany ( barely) and Switzerland ranks safer than the US in major countries than the UK, France, Japan, and the PIGS. The US is far from any kind of default, and very few countries would be left if it got to that level. Look at the chart.

http://www.cnbc.com/id/38451750

Jim

​

 

I sols some more today, don't have much left. There's been some good economic news, and some bad, but overall, I think we are recovering from the double dip slowly. I saw $42+ today, listed some silver with BIN, and it was sold and paid for in 10 minutes, over melt. Lots of demand still out there, even at this level.

 

I need to follow your lead. I have been lazy getting stuff out, but $300 for a roll of old washington's is simply getting too much to pass up. Have you sold any foreign silver? I have a bunch of mexican silver that I bought a couple of years ago as well.

 

If I had foreign silver, I'd have sold it first. Being more a collector than investor, it hurts a bit to sell, but it hurts more to be unemployed.

 

While you are selling all your silver, I am buying more.
I bought another 20 ASE's on Tuesday and I am already up 5% on those
I think we are heading to $50 silver by later this year.

 

Or, later this month by the pace we are going:

Coin value calculations use the 2:30 PM EST silver price for April 20, 2011:
Silver $44.97/oz , up 1.01

 

>I think we are heading to $50 silver by later this year<

I wouldn't be surprised if it reaches $50.00 this week.

The other night I was cleaning out the box my printer sits on and discovered a couple of old silver quarter albums then realized they contain $750 in silver value.
This is nuts and I'm loving it.