is silver a bargain at $40 ?

What you say is true, but the liquidity of any bullion dealer, or even all of the bullion dealers together is no where close to the liquidity of any of the three major stock markets. I think the total today was over 5 billion shares. The top 10 brokers of the NYSE, each traded from over 300,000,000 shares to #10 at 93,000,000 shares. Know of any bullion dealer, who traded that much silver bullion today?

Jim

 

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Yes, it's funny the the PM bears make such a huge deal about a $100 down day in gold ... yet that is a tiny move. The S&P 500 index is down over 10% already this month!

 

Well, to clarify in case I am seen as a "gold bear", I am currently a "physical gold bullion" bear. I think the fear portion of the current price of gold is too large at this time. I still feel ( no proof obviously) that the European and the coming Chinese fall will keep the gold bull market going for several years, but I expect large downs and ups as crises wane and flare. If one is content watching their gold value go up and down over the years, without financial stress, I sure can't criticize.

However, reading posts on the forum, many are overboard on PM as their only form of investment. Some seem to save for a month or more to buy a 1/10 oz of gold or 3 or so ounces of silver, and these are the ones ill suited to "bullion investment" as they will have little recourse when they need money than take whatever the price then may be. Others who have debt independence and a consistent income do not have the same problem. There are other factors of course,such as age, health, family needs, community needs , etc., that play a part.

Jim

 

I think our point Winged is that a truly down market would be exacerbated by the limitations of the physical market. Many people wanted to sell silver at $35 in 1980, yet their final price may have been $22. This is a limitation of this market that is not present in stocks or bonds. Believe it or not, but some of us have lived it, and know that the silver market at the CME might read $35, but the man on the street cannot sell it to anyone for more than $22. Everyone likes to say how the CME is too low when people want to buy silver, well the CME will be too high if there is a significant downturn and everyone wants to sell. I am not saying this will happen any time soon, just EVENTUALLY somehting will happen and many newbies to PM will want to sell. It always happens eventually, at some point in the future. Maybe the price will drop down to $150 and people will panic, heck I don't know when or why.

Not trying to be a bear, just explaining this to others who may not have experienced it. Physical PM simply is not as liquid as other markets, and there is no guarantee you will get anywhere near CME pricing whenever you wish to sell. It will depend on the markets disposition.

 

i think the same thing happened with the stock market crashed in 1929 ... and again in 1987

well certainly if you buy the GLD and SLV ... it's liquid and you can get out

I personally am not worried about selling PM's as long as the US is printing and printing and printing and printing paper (unbacked) currency

If the US ever decided to adopt hard money policies, that's the time to sell PMs

 

I have a hard time thinking of any countries that have an "backed" currency. Some Euro countries can't print any euro currency at all, but other countries have no backing that I know of. I assume you mean like silver, gold, oil, copper,land, etc. Even the swiss franc has no backing. Any country adopting a hard backing had better have a huge, huge inventory, as all non backed currencies in the world will suck them dry. Having a "backing" un-redeemable, isn't a hard currency. If the Martian franc is back by gold, but you can't redeem it for gold, is no backing at all. IMO.

Jim
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If by "hard money"

 

Once a country is allowed to print as much paper currency as it wants ... with no limits ... there is always trouble down the road.

We've seen this same story play out over and over.

This legal tender currency note from Zimbabwe could buy a loaf of bread ...

 

I don't expect $40 to have a big effect on either. In the applications that use silver, it seems to usually be a small component relative to the total. So whether silver is $20 or $40 or $60 doesn't have much effect on total cost, particularly considering silver's unique properties. Regarding mining, silver is usually produced as a byproduct. There aren't many primary silver mines and if $40 spurs new exploration, it may be 7 to 10 years until someone can take it through the stages of obtaining funding for exploration, finding it, getting permits and approvals, prelimininary feasibility, feasibility, raising funding for mine development and infrastructure buildout, and finally, around 2020, mining.

 

QE1 was announced on March 18, 2009. On that day, silver closed at $12.685.
QE2 was announced on November 3, 2010. On that day, silver closed at $34.37.

There has been nothing wrong with silver's performance, only the expectations of investors.

 

I agree. "Backing" is just another deception.

 

The signal I am looking for is a rise in interest rates.

 

Except that in the 1970s, gold and silver made their biggest move up during a period of rising interest rates. It just isn't that easy to time the top.

 

so true ... when gold and silver peaked in 1980 ... interest rates were around 15%

 

I don't disagree with you that physical PMs are less liquid than paper. It's also an advantage depending on the circumstances. I can't take an electronic share of stock down to the pawn shop to get some quick and for that matter untraceable cash. But this is a completely different discussion than what the price of silver might do.

(I'm of the personal opinion that an owner of physical gold will never have a problem selling it.)

 

I think where my thoughts diverge is that I don't measure intrinsic value in currency. I measure it in precious metals, because they are a true store of value. The fluctuations in buying power make using currency a poor measuring stick of value. I would agree with the projections used for cost of production, but since they are measured in dollars I expect those projections to rise. This is how it can be a bargain even though it may seem overvalued, and maybe it is overvalued right now, but the question in my mind is what's more likely: Will currency reflect true value before the price of metals reflects their true cost of production? I would guess that one cannot happen without the other, and until then both markets will be manipulated. If neither will ever come to pass then I suppose it isn't a bargain, but if they do the next question becomes which is more out of wack which is obvious.

 

pm markets are volatile and subject to wide swings because of the underfunded limited nature of the commodities. The 1980 market, silver was pushed to $50 from $3, dropping back to about $6. Now, someone doubled their money on the $3 silver, but many declared losses of $44. I believe that market was manipulated. The current rise is due to a completely different set of circumstances. Gold has no set ratio to Silver. At one time it was declared at 16:1, but the market never bore that well.

I do believe you see a 64:1 or so ratio during more stable times. But silver has moved much more slowly recently likely because of the purchases made by the South Korean govt. ?

Me, I am in a holding pattern for a few days yet. Rather miss the wave than to catch it on the wrong side. There is always an opportunity to trade PMs, and greed will mess a guy up. IMHO

 

It's sort of an existential question since intrinsic value must always be measured against something. Bonds are measured against interest rates. Stocks are measured against present value of future cash flows. Real estate is measured against future rents. And so on. Since gold and silver are mined by people who must be paid in dollars or another currency convertible to dollars, and energy costs are measured in barrels of oil which are denominated in dollars, it is appropriate to measure the intrinsic value of gold and silver against the dollar. It is also true that since we live in a world where dollars are the medium of exchange, everything is measured relative to that. If I read you correctly, you are measuring value against your expected future value of the dollar, and that's fine. The intrinsic value of gold and silver will probably continue to rise just as it always has. But if you expect PM prices to eventually revert to the cost of production, from here the prices of PMs will have to underperform the decline in the dollar for the two numbers to meet.

I hope that makes sense.

 

anybody notice that silver was up nearly $1.50 overnight? it's flirting with $42 today.

i hope some people took my advice to load up at $40 ... my net worth is up HUGE this week

 

I can think of quite a few -- for starters, anything electronic. And they're all terrible "investments".

 

you must work for the FED! That's exactly how the fed keeps telling us there is no inflation.

meanwhile gas is up, oil is up, food is up, medical care is up, educational expenses are up, materials like cotton and copper are up, etc