What happen to the Silver Market?

Sorry if my post seemed harsh, but many like to throw around words here, and we need to remember that we shouldn't be accusing parties of felonies without proof. Its dangerous and unfair.

I thougth in May the margins were tightened, and that is what triggerer the selloff.

 

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As been pointed out earlier from a value standpoint margin requirements for silver is twice that of gold. If holding both in a major downturn which do you dump first?

 

Gold is, and always has been the safer of safe havens. I think this will change at some point in the future when silver supply becomes scarce, but until then silver will probably be relatively manic. I put about 5% of my retirement into a gold mutual fund last week (effective market open today), and after seeing some support finally I just put another 15% in. Even if it drops I will just leave it there for the forseeable future since I believe in the fundamentals. The rest is still in bonds which I think will only be safe until such time as QE ceases so I plan on continuing to ease out of those incrementally. I would never dump any physical though. I'd refinance my home first. In the old days you could buy a home with 500 oz of silver so I'm betting that will do better for me than equity.

 

What are your thoughts on silver's supply and demand? I see opinions on both sides every time I ask. As an example, one person I talked to was very sure that silver would go north of $200/oz in the next two years. Another I spoke with seemed to think there was plenty of silver coming out of the ground, "more than you may realize." I'm not sure what to listen to, but it's interesting nonetheless

 

I don't have the numbers handy, though I have posted the links to them more than a couple times in the past somewhere around here, but basically mine production did not meet industrial demand for 50 plus years and the entire world supply of available silver got decimated down to about 1 billion ounces, the lowest level since the 1300's. Available is the key word here, which does not include investment silver which may or may not come back on the market depending on who's holding it. At some point in the last few years mine production began to exceed industrial demand, however it still does not exceed total demand which includes investment demand. It should be apparent with the recent price moves that the price is driven by paper markets, since the fundamentals haven't changed in the last week. Right now the US dollar is the beneficiary of Euro weakness. Even if this does not remain the case, the paper price could still do the opposite of what would be expected under normal circumstances. All things being equal, I think $200 silver in 2 years is plausible, but all things are not equal.

 

The question to ask these people is "why" they think silver would be going to $200/ounce. I don't think there is a shortage of silver as an industrial commodity. I'm not aware of any products that contain silver as being in short supply. The other reason that people give for silver supposed rise in prices would be a presumed role as a monetary asset. Yet there is no clear picture as to why this might be the case except that it is often mistaken to have the same role as gold, which it doesn't.

Most of the huge gyration in prices has to do with mischief on the futures markets which are dominated by the bullion banks which BTW also happen to be the same TBTF banks that are being sued for and investigated for all kinds of financial fraud. The same TBTF banks that have no problem shifting their risks and losses to the taxpayers. Why should they leave silver out of the party?

 

When was that? Even in the early 60's when my parents bought their first home this was not true, and it has not been true since then I am sure of.

 

I agree with you Fatima that they why is the important aspect.

To me the gyrations are nothing more than the fact that silver has historically had higher volatility than other PMs typically, but I could be wrong of course.

 

I can't help but think that after the recent price drop, folks should be asking themselves whether or not this bull market in silver is over, and not whether it will hit $200. My personal opinion is that it is not, but it's difficult to come up with reasons for silver to make an all time high anytime soon. It seems pretty clear that the CFTC has no intention of permitting a replay of 1979 as long as it is in their power to stop it.

 

Heh it was never. I meant 5000 oz, not 500. Although just out of curiosity I looked up the ratios and it was as low as 816 oz to buy an average priced home in 1980.

 

There is a clear picture why this is the case. In the last 10 years gold has risen from $250 to $1600 approximately. An increase of 540% for a total of 640% of the original price. In that same span silver has risen from $4 to $30, an increase of 650% for a total of 750% of the original price. If silver is not a monetary metal then one must assume that the price action in silver is only due to industrial demand. So which is more likely, that silver is a monetary metal or that it's industrial demand is the same as the amount of inflation pushing gold higher? Nevermind that silver has been used as money throughout history. I have yet to see a reasonable argument why silver is not a monteary metal. I have only seen assertions that that is the case.

 

Maybe this will explain it to you.
http://dailybail.com/home/hilarious-jpmorgan-silver-manipulation-explained.html

 

This is a faulty conclusion. Why not simple predatory speculation? We saw oil go to $150/barrel in 2008, yet currently it's $82. 10 years ago it was $23, so we have a delta of 552%, comparable to what you listed for silver. While oil was doing this we heard all kinds of claims of peak oil, the Saudis had run out, yada yada, also very similar to silver. Buying an oil future was just as risky as buying a silver future has been lately. As it turns out, there is no shortage of oil and all the gains/losses were paper related.

(The oil futures market got knocked out when the politicians started to take political heat for the price of gasoline. They picked up the phone and started to threaten the right people and prices quickly dropped.)

Sure speculators hit this metal, but this doesn't make it a monetary metal nor more than oil is. I will also say that it is withing the realm of possibility that speculators could drive the price of silver to $200, but this isn't the sort of thing that long buyers of the metal should be making decisions on.

 

I agree 100%. Both of the items you list are commodities and similar in that fashion. The one thing I would say Fatima that you would not agree with is that your exact argument also applies to gold, and all other PM. I simply do not see how its not.

I am sure you will say history, (which silver has), central banks holding it, and other things, which you are completely free to do, I simply believe those things are remnants of a different age and gold has now just become a high value, easy to physically own, easily storable, commodity.

 

Boy a huge $7 upswing in silver from the low on Monday (9/26).
I wonder if that $25.99 low yesterday will be the bottom in this downturn?
If it is, if you blinked, you missed the bottom.

 

I've given definite reasons previously on this forum why gold is different, but you won't discuss it logically. I assume that you don't "see it" since you simply refuse to believe, despite any logical argument to the contrary, that gold is not a simple commodity. I don't mind that you have this opinion, I don't seek to change it and there isn't anything else I can say to you on the matter to you. I'm surprised you keep bringing it up.

 

I wasn't trying to bring it up really sir, I was simply pointing out I agreed with your logic on silver, and I simply use the same logic for gold. I was being gracious and acknowledging you feel differently.

There is a difference between not understanding your arguments and not agreeing. With such a subject there is no absolute proof, you have your thoughts and opinions, and I have mine. There is no "logical infallibility" that can prove any such a thing, one way or the other.

Chris

 

We'll just have to agree to disagree. I will grant that your argument does well to dispute what I said about silver rising in tandem with gold as a reason for it being a monetary metal. I'm sure many other things have followed the same trend, however this does not negate silver being a monetary metal. It merely undermines that particular reason I gave, but there is still the primary reason to deal with. Oil has never been money like silver. If silver is not a monetary metal, then why has it been used as money for thousands of years? This is indisputable, and again I will point to the fact that there is no logical reason for silver not to be monetary metal.

 

By this reasoning, bronze is also a monetary metal, as are quite a few other base metals. All metals ever used for coinage also have non-monetary uses. It seems to me that the differences are of degree, not of kind.