Why isn't silver going up.

Actually Gold has all the properties needed for currency. These would be:

• It's supply is relatively fixed.
• It's very relatively rare.
• It can be divided without loss of value. It can be forged into larger pieces without loss of value.
• It does not corrode or tarnish. Hugely important.
• It's easily shaped and formed.
• It can be infinitely recycled without loss.

 

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I agree with everything you've stated here, but the one area where gold falls short is liquidity. It's one thing if it's a gold backed currency, but to use gold itself as currency at today's prices is not very feasible. You aren't going to want to drop hundreds of dollars worth every time you have to make a transaction just because you don't want to cut your coin in half. Silver may tarnish, but it doesn't corrode, so the intrinsic base value of the metal remains intact. They both have their strengths and weaknesses, and I don't think that gold being the best monetary metal prevents silver from picking up the slack, especially considering that 4.5 of your 6 points apply just as well to silver.

 

How many other metals meet your list, but not considered "monetary metal"? Platinum, palladium, amongst many others are just as suited to your list Fatima, yet simply were not available to the ancients with their technology. That is the point, there are MANY metals that would serve that function, (actually nickel is an excellent coinage material as well), but by happenstance simply could not be since they are harder to refine. Gold is not singularly special to be the only metal worthy of coinage.

I am also curious about your list. Is this a list from a numismatic publication, or one created with the idea of making gold the only possible metal for coinage. The softness of gold is actually a huge drawback. Yes, it might make coining gold easy, but also means in circulation it wears quickly. This aspect of gold actually makes it a very poor choice for a circulating medium.

 

Sure. This is why, throughout history, that governments since ancient times, defined other items, usually silver, bronze, copper, etc in terms of gold. Gold on its own has always been too valuable to use for day to day commerce unless you were a big spender. In modern times, this was handled by the issuance of gold certificates. I would assume that at some point in the future, when governments are forced back onto the gold standard, there will be some sort of modern equivalent. As long as a party can take this medium and exchange it for gold it works.

 

It's not my list. Every article on the properties of currency lists this as qualities for a good currency. I probably left a few out as I did it from memory. Jewels, which were available in ancient times, do not make good currency because they fail the divisibility test. If you cut a diamond in half it becomes worthless and it can't be recombined. On you last point, this is why gold is always alloyed with another metal to make it harder. This is why all circulating gold coins were combined with other metals. Gold's atomic properties make it easy to refine this extra metal out should the owner wish to do so.

 

Actually, gold was used in coinage fairly pure in the Greek's time. First it was electrum, but fairly quickly pure gold was used because the first electrum coins were debased by the Lydians. Yeah, even back then the government was cheating its people. Basically even if coined gold coins were constantly tested on a truestone to make sure the government wasn't cheating.

Even in alloyed form, gold is really too soft for coinage. If it were a lower value, thereby circulating more, it would not be used. Even light circulation quickly degrades a gold coin in comparison to silver, copper, or nickel. Only its relatively high value, and therefor its light actual circulation, allows it to be used for coinage.

 

Yet, gold has been minted into coins for 1000s of years. You said so yourself. Here in the USA, some of the early mints like the one in Charlotte, only minted gold coins. I would say your opinion on this might need to be revisited.

 

Why isn't silver going up?


First that's a good question. It's a rare metal, (as is gold – although gold is rarer.) Silver, however, much like platinum, also has industrial uses. Silver was used mainly in the production of photographic film but this has declined rapidly with the advent of digital. But there is growth for silver in other areas. Medical being one.


But, that background does not explain the silver price movement, or rather the lack of it compared to gold's sustained price rise, so why?


Coin collectors like to own physical coins – that's why they're collectors! They know their hobby well. But some may say it seems the more they discover about their hobby the less they seem to know, because as they dig into the detail of their interest, layer upon layer of further coin information unravels and is exposed before their eyes? What can then happen is, things you thought you knew about your coin, which you may have owned for several years, were no longer what they seemed, based on the discovery of fresh information. You may have been attracted to your coin several years ago based on some initial research and convinced yourself back then that the investment would be positive, maybe even shrewd? Only to discover now, perhaps rather harshly, that the coin was not as rare or as sought after as you believed.


So coins are one thing, but along with coins come human beliefs, which may change. One day they might be right, the next wrong, indifferent, rational and irrational. Take one extreme example. As we know Coins can be debased. Why would someone do that? To scam other people, yes. But what the forger is hoping is that people will not notice the forgery. The forger is relying on people believing something. He is hoping people will believe that the coins are genuine.


So what does all this preamble have to do with the silver price?


The silver market is small, smaller than gold,even. Not only that but virtually all of it is traded through the Comex market, a part of Nymex. Nowhere else, other than coin shops and the US Mint, which are tiny compared to even Comex. So Comex is in effect a bottleneck, through which supply can be “controlled.” This means there is scope to manipulate demand and therefore price.


Silver as many of you have appreciated has a long and historic link with gold. That link is stronger than you think, in people's minds, as part of their beliefs about the value of precious metals. Hopefully you have begun to appreciate where I am going with this? No? Well it is less about silver and more about what someone can make you believe about the price of silver. The people who play a large part in silver market trading like to make a profit at what they do! (No surprise there then.)They get very, very upset if they make losses. Well they would, those losses can run into $billions, which have to be made good.


So who are the people who get very upset, these major traders? One well known active player is J.P. Morgan investment bank and others like it, that make a market in precious metals trading.


Hopefully many of you will have appreciated the very difficult economic conditions in which the banks and in fact all of us are now living. Only many in the general population are not and are only really concerned about whether they have a job and can afford to buy groceries, perhaps understandably, that is all they can handle. Sadly, the economic conditions today are, well there's only one word that truly reflects the actual situation – dangerous! The scale, magnitude and depth of the global economic problems today are truly epic, compared to even 5 years ago. A lot has changed. I know you may be thinking, if it's that bad, how come they haven't said so on CNBC? Well CNBC is reluctant to tell you, as are many other broadcasters, among them, Bloomberg! In fact ALL of the mainstream media, is NOT telling. Sure their “anchors” are asking the question, but notice how the answers coming from stockbrokers, investors, even politicians talk up the market, but talk down the suggestion of any kind of problem or are just evasive and give a bland neutral answer.....and then switch to another story. The order of the day is don't spook people.....wait for it....because it's bad for business! Are you thinking, it may be bad for business, but what about people?? Well people who are spooked don't buy stuff. Stuff that also happens to be advertised, meaning they don't borrow either and the resultant lower spending is bad for jobs, bad for the economy and difficult for politicians. That's why they don't “over do” the negative stuff.


So what does this have to do with the price of silver? It's more about the price, in Dollars, or more specifically paper currencies, all of them. Euros, Yen, Sterling, Swiss Francs etc. Since the Lehman crash bankers have been looking for safe havens. In investing terms literally at the billions of Dollar level. But you cannot put an amount of money this size just anywhere, even if you think you can. Maybe you're thinking why don't they just buy up all the gold and silver with it? They couldn't! Not without affecting the gold price, dramatically!


If, say, you have $300Billion to invest, all at one time, there are very few places that can take that kind of deposit. Them knowing you could cash it in next week and you wanting to know you will get it all back!. One such place you CAN though is investing US Treasuries. It's not racy, but then it's not meant to be. This is safe haven numero uno for Dollars in the Trillions. There isn't much of an alternative. So this is where most Dollars are locked away.


Unless......unless what? Unless the the Dollar itself becomes worthless. That's scary, (crazy even?) isn't it? Well it could become worthless...how? Maybe if the money supply (of paper money) had been rocketing (printed) say, to pay interest on “debt ceiling” debts? Or even if the debt itself, created with red ink in an account book, by the US Treasury, had monetised some of that $14.3 Trillion in debt that Obama & Boehner were on about two weeks ago? In other words cash was being printed for the sake of it. Literally created accounts with overdrawn balances on one side and on the other side newly printed paper bank notes?


Does this happen? Well, Treasury bond paper (basically a Gov't I.O.U certificate, that's all a certificate!) is handed to so called Primary Bankers in exchange, from these bankers, for their Dollars. In the amount of dollars written on the bonds or certificates, (e.g with words like Pay the US Treasury $4.5Billion dollars today, on loan for 3-5 years.) Why would a “primary” banker do such a thing, like empty his pockets with quantities of money on this scale every week and give it to the US Gov't? Wouldn't they go broke?! Yes they would. So what happens is.....the next day the Bankers can go to the US Federal Reserve of N.Y, (which prints US $ bank notes....and yes...swap those US Treasury Certificates for nice new bank notes, replenishing the Dollar notes they handed over to The Treasury the day before! They have to do it this way because it's the law. The intention here being to make it look official.) So the Treasury now spends these borrowed Dollars to get Government things “done,” like defence, welfare, etc. Next time the US Treasury needs more cash to spend it repeats the operation and those printed notes given to the bankers last week are then handed, (sorry lent,) to the Treasury. The bankers then pop along to the Fed and get them back. (Don't believe this operation happens like I've said?) Then go to Google and search- “Primary Open Market Operations.” Anyway for now just recall the opening suggestion I made at the beginning of the previous paragraph, about the Dollar becoming worthless, as it's importance is relevant to the question, namely why is the price of silver not going up? (Even if you now want to know about the potential collapse of the Dollar. Relevance is important.)


When bankers start to believe that paper money is seriously under threat, as a store of value and begin to doubt they can rely on the usual safe haven what would they do? They are then forced to look for other alternatives as a store of value. Gold is now in the frame! But there's a problem....there's not enough gold, (because it's rare!) and you can't ask the Chinese to just make a load! So whilst accumulating gold, bankers must not, I repeat MUST NOT, give away that this is what they are trying to do. Otherwise the gold price will rocket before they have got all the gold they want/need!


One way of keeping a lid on things is to manipulate the price of silver....(finally he makes his point about the silver price)....downwards. Yes downwards, the more dramatic the crash, the better. Because it makes you worried, which is what the banker wants. This is more important than the actual price of silver itself! Silver is known as poor man's gold. Most cannot afford gold, but can afford silver. If a credible amount of fear about the price of silver can be maintained, it will put poorer people off wanting to invest in gold. Why? Because of fear. Fear that if they get it wrong in gold, the financial mistake would be very great...compared to silver. Make a mistake investing in silver and it's not so punishing. That is why the silver price is heavily manipulated and controlled. So called fundamentals do exist, of course and may well be what prevails at more normal times for currencies. But that is not now. The point to remember here is, if I were a banker, what do I care about. Answer, that you behave how I want you to, not whether your stash of silver eagles goes up or down in value!


Are you all too late to invest in gold, or silver? The gold price rise after it blew through $1000 is mostly all bankers getting out of Dollars, very, very quietly. But as for investing in these metals now, I would say yes, buy some. But for now all I wanted to do was answer the other question, about the silver price.


I hope it's been “interesting.”

 

The silver market is small, smaller than gold,even. Not only that but virtually all of it is traded through the Comex market, a part of Nymex. Nowhere else, other than coin shops and the US Mint, which are tiny compared to even Comex. So Comex is in effect a bottleneck, through which supply can be “controlled.” This means there is scope to manipulate demand and therefore price.​

ukgoldbug, to me, the above is the most important paragraph from your well written piece. This is why I contend that silver is not equal to gold. The CME seems to be very susceptible to naked shorting which is the biggest influence on silver price. Any silver investor would do well to understand this, but most won't unfortunately. They will continue to cite such things as gold ratios, etc as the rationale for buying.

 

Agreed, great post ukgoldbug. Fatima, I also agree with you, but my take on that scenario is that is the very reason why silver is undervalued and thus a better buy.

 

So right you are.

 

How about instead of why isn't silver going up, how far is silver about to go up?

http://www.mineweb.com/mineweb/view/mineweb/en/page32?oid=133794&sn=Detail&pid=102055

 

I posted to soon. epic face palm.

 

I have only recently heard of Sprott, but I understand he has something fairly credible to say about silver. Other than say JP Morgan etc, who do not!

 

My 2 cents

Silver has jumped but not like gold. gold has been classically a safe haven for most big money investors
but silver will move up normally around Oct-Dec as that is the time most metal IRA are cashed out.
:kewl:

 

As for the price of silver in general well I would look at the situation and think the price of silver is one thing. But buying it with the intention of being a strong holder - say for a minimum of two years, is something really quite different. The silver price will matter at the time it is bought and then sold. But realistically, in between, what happens to the silver price is less of a concern and instead the fundamentals should be of more relevance. (Is the currency being debased, is silver jewellery more fashionable, are there increasing industrial uses, are there shrinking industrial uses???) They should be what makes you sell or add, if you are "investing," (as opposed to collecting.)

As for right now I wouldn't be surprised if silver went through $50, possibly as high as $57 at which point the manipulative forces would be back to drive silver back to $42 or $43. And then allow weak holders to limit their losses with further selling causing a further $10 price fall to $33 by late October, only for silver to gradually start ticking back up. But that is all a guess. The silver fundamentals will have changed little in that time, however. But the price movement will have been an interesting little show, if it happens!

If buying, buy the physical (eagles etc.) Don't be tempted to trade with paper. If you don't have it physically, you don't have it full stop!

 

You may want to consider that Sprott runs a PM fund and may not be totally objective. Do you really think he will ever tell people that it's time to sell out of his fund when the top is reached? Be careful when you consider someone's opinion as credible when they are trying to sell you something.

 

Since he has openly stated his intent to sell $32 million of his own fund for the purpose of buying physical silver it would seem he is more concerned about positioning himself with the safety of precious metals in hand than getting people to buy his fund. He must know it doesn't inspire people to buy his fund when he is selling it, so it doesn't make sense that he would make this move if he was trying to entice people into it. Maybe you could argue he is doing it to boost the price of silver, but what makes the most sense to me is that he is making sure he has his bases covered, and if it hurts the PSLV so be it because it's not worth getting burned. Physical metals are the only thing that can function as money and a store of wealth that do not require government backing to retain their value, or carry the potential risk of losing most if not all of their value if the systems in place do not support them. PSLV is a great thing for people who want to invest in the paper market, but paper isn't going to have value until the end of time like PM's will. Sprott is telling us by his actions what he believes is the safest place to be, and he has a better vantage point than most.

In any case there is a certain amount of risk adopting someone else's opinion no matter who they are since by nature an opinion cannot be factually verified, but Sprott has stated plenty of information in his radio and video interviews that can be scrutinized for what it is without the need to examine his character.

 

I am mindful that he may well not be totally objective as he does indeed run a PM fund. I should add I have not bought from Sprott, nor do I intend to! Because my preference is to hold my own physical metal and make my own investing decisions for myself and I recommend others do that. That said, what I was hoping to convey was that some of the things he was saying I agreed with, (obviously not enough to persuade me to give him my money and never would.) In particular his views on paper currencies and not just the risk, but the inevitability they will be debased. (I accept I omitted to expalin this, I should have explained more. My apologies.) So see what Sprott has to say, but whatever he says avoid the temptation to invest with him?

 

I think you are right. What I hope people appreciate about buying silver is, to be a little less self-critical if they buy at $43 and the price drops to $33 in 6-8 weeks time, as it might...or might not. What we saw at the end of April, when it collapsed from $50 was pure manipulation, in my opinion. Comex made a number of margin calls and my understanding is these were made because they were scared out of their wits they would not have enough physical silver to deliver if the buying carried on. In the interim they may have increased their ability to supply more physical, but who knows?