Why isn't silver going up.

If you look at the bar charts on Kitco and elsewhere, the use of silver in jewelry and silverware is much higher than it was 30 years ago. If those charts are accurate, then there are billions of ounces of silver that could potentially be recycled.

 

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You and I and a few others on the forum think that, but many still believe in the idea that it will continue ( albeit gradually to some unbefore reached level in the stratosphere ) and are not worried about a basement drop because so many others say that the USD will be worth 5 centavos or so in the near future, thus ignoring relative strengths. The idea of holding forever, no matter what the price becomes, sounds good until a person really needs the money for daily needs, then the value may be far from what it once was. Holding forever is OK as a small percentage of a speculative portfolio, but when it is the majority of your total portfolio, it is a gamble. IMO.
Jim
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Good thoughts. I love silver, really I do. My main concern for long term pricing would be price. All metals have gone up considerably. Silver is mainly a byproduct metal, meaning most of it comes to us as a ancillary product of the mine. I have read many articles the last two years about new mines being explored and opened up. Any mine for gold, copper, nickel, will produce silver as well. Also, some old silver deposits are, at $40 an ounce, very worthwhile to exploit.

I am just saying do not be surprised to see new sources coming online. Once online, incremental operating costs will allow them to produce even at $20 silver in the future. Ask any farmer what traditionally happens to prices of a crop from year to year. If onions are 5 times average price this year, take a guess what will happen to onion prices next year. Yes, mines are much longer to open, but $40 silver and $1700 gold will make a lot of known, lower grade sites viable. The longer prices stay this high, the more viable those known sites become, not even talking about new sites that a lot of money is being spent researching right now.

I know Cloud and others are more pessimistic on this point, maybe I am just too much an optimist. Doesn't mean I am right though!

Chris

 

The key words are "at some point." I don't think the bullion products in the hands of collectors and investors will go into the melting pot at anything close to current prices. If people start selling their ASEs at $100 or $200 and that becomes the new equilibrium price, there is no reason to complain. But I seriously doubt that ASEs will be melted in any great numbers at $30 or $40 or even $50.

 

At this point very little would surprise me, Chris =) All I can do is gauge how things appear up to this point, and there's no way to accurately anticipate future unknown variables. Though that's not to say you can't prepare for the possibilities. Even if a lot of silver does hit the market, as long as real interest rates are negative and the money supply is expanding at its current rate any correction would be temporary IMO. In my mind those two factors would outweigh increased supply over the long run since physical demand is still a relatively small niche market right now and has the potential to expand quite a bit if people at large lose faith in paper currency especially with the recent ability for people around the world to participate. Even though demand has notably increased this year, and I am having a harder time finding some of the higher demand silver coins, most people I talk to still don't seem to be interested in metals.

 

anyone seeing an upward move this week?

 

I get the feeling silver wants to break out of its trading range...to the upside. I don't have anything to back that up other than a hunch (...said Quasimodo).

 

Silver has other uses.. the digital camera industry has put a lot of silver back into the market, once a dentist kept his plates for his retirement fund.. now those electrical impulses are not worth much on the open market. But the biggest thing is India and Pakistan where the custom is to have the family wealth kept on the female person under the kurta. Them kurtas come off at $40

A billion pounds of available silver are walking around on the streets of India at any given hour.

 

It could be my imagination, but I think the premiums on APMEX are going up even though spot has been relatively static. $5/$6 premiums for ASE's and Maple Leaves depending on wire transfer vs. CC price.

 

I've been saying consistently on this forum not to expect silver to follow gold. There are two basic arguments being made here for silver's rise.

1. Silver will rise because it is a hedge against bad economic policy of government, especially the US government.
2. Silver has many industrial uses and supplies are short.

On item #1, I disagree. Silver is not a hedge against the economic policy of the government because silver is not used as a world currency or sovereign financial asset. (world currency = it's accepted everywhere without question, central banks use between themselves) The only metal that holds this distinction, currently, is gold. People often mistake silver to have this same role, but it has not held this position since the late 1960s, and then only marginally. If you are buying silver to preserve wealth because the currency is being debased, this would be a mistake. Silver may or may not rise due to this. You need to move to gold if this is your reason for holding PMs. There is also no longer any such thing as a gold/silver ratio.

On item #2, I agree. However you are now only looking at Silver as a commodity and there are two aspects to this. First commodities are subject to speculation on the futures markets. Silver is a favorite for this as recently demonstrated. Second, industrial commodities usually do poorly during times of recession because industry slows down or stops. In this case, Silver, is a fairly risky investment. Unless you understand fully what drives it as a commodity, you stand to get burnt badly.

 

My friends say gold and silver are just commodity investment, and if you are going to do commodities then you might as well be in pork bellies and corn. They may be right but you can't put pork bellies in a jar under your bed. Silver I stay away from because I know how much of it is out there. Gold I have a little more faith in because it seems to be genuinely scarce to demand. I cannot go to the Cramer route and suggest a person invest in Gold backed Mutual funds. Then truly you should be in Pork Bellies.

 

Good post Fatima. I would just slightly disagree with your point 1. As a storable commodity silver will go up as inflation goes up, as part of its overall price movement. You are right it is not a straight play by any means, though. Silver as an investment is much more complex than gold, it has many more dynamics. This may sound good to some, but it also means it can surprise you negatively much easier too.

Chris

 

The simple response to this, is to ask your friends why the Federal Reserve (the issuers of the the US $) list ~7,500 tons of gold as a financial asset. Anyone can check this on their balance sheet posted on the web. They don't hold silver, they don't hold pork bellies, they don't even hold oil. Likewise, they also have another 7,000 - 8,000 tons in storage in their basement at the NY Fed that is being held for other world governments and their central banks.

Gold isn't just a commodity. It is a sovereign financial asset and this means it's value isn't subject to commodity pricing. Gold is traded on the commodity market, but it's governmental actions that directly affect long term values.

 

http://finance.yahoo.com/q/ta?s=GLD&t=1y&l=on&z=l&q=l&p=&a=&c=slv

Silver has outperformed gold except for the past year. It got a little ahead of gold and it is normal to have a pause in a bull market to build a new base.

 

You may want to consider that there are actually fewer ounces of investment grade silver than gold above ground. So while there are more ounces of silver in the ground and in theoretically recoverable forms, it may not have an immediate effect on a commodity shortage. That's all that is important for a silver investor.

 

You took the words right out of my mouth I would also add that silver has been used for coinage in the past, and just because it isn't being held by central banks right now doesn't mean it isn't still a monetary metal. Even ignoring the US silver coinage, China used silver as money for hundreds of years in the past.

 

This is only confirmation of what I said in my post. i.e. Don't expect silver to follow gold. Gold is a hedge against governments, and mostly a hedge against the US dollar. Silver simply isn't. It's driven by other factors. The bullion investor needs to understand this else they will get burnt badly.

Silver may be the smartest investment in the world but I haven't seen anything here that would suggest that it is. I don't invest much in it because I don't understand all the factors that drive it. In comparison it's quite clear that where the world is headed with fiat money and because of it, gold is heading higher.

 

We don't live in this world anymore. Nostalgia and hopium don't make for good investment decisions. When the world's governments decide to define their currencies in terms of silver again then it becomes important. That will be an inflection point, a period of discontinuity, where everyone, including the gold investor, will have to reevaluate their position. Until then, while we live in a fiat world, only gold is a hedge against this destruction of currency.

 

I would have to second this emotion. Nobody knows how much silver is above ground. To identify certain types of silver as "investment" grade flies in the face of my dead chemistry teachers ghost.

 

I think it's because of the marketing of gold as a hedge against the currencies. I don't think most people think very much else when they look to go off the currencies. That's beyond the metal's industrial and luxury demand, when you're investing in it like that.