Beating a Dead Horse (the one about silver)

:dead-horse:

I know I am beating a dead horse, but what in the world is happening with silver? I am enjoying the price drop (I can now fill in my pre-64 Washington quarter books) but: Why is silver still sitting at close to $30.00? I really would have thought it would have started creeping back up in price, especially with the fact that I hear a lot about silver going up at this time of year?

Juan

 

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$30 is still up. It could just as easily be $7 right now. Demand and prices don't just move in one direction, though some would like to make you believe so. Maybe people are spending their money on Christmas presents right now, who knows.
Guy

 

I don't agree. At $7 the supplies of physical silver needed by industry would dry up since it is far below the cost of production and existing inventories aren't really large enough anymore to compensate.

Silver had a huge run. I haven't bought any since it went above $20. Right now it looks like it is building a base to make the next run up in price. I think we will see new highs, perhaps by a lot, due to speculation and increased investor buying. But ultimately, the price will probably revert to current levels or a bit lower.

All just my opinion, of course. Nobody can know the future.

 

Where you stand depends on where you sit
If you bought silver when it was higher than it is now, well you might be sweating a bit. In my opinion, I think silver might see-saw for a while longer, offering opportunity to buy and to sell. With all the 'crises' going on in the world right now, I doubt the bull is done.

But one day it will be..maybe a couple or three years?

I'm sitting tight.

Lucy

 

I looked it up. Hecla mining has been reporting a cash cost of mining silver to be about an average of less than $3/oz over the last decade.

 

Cloudsweeper,

Could you explain what you mean by "building a base to make the next run up in price" I am not an expert in any of this stuff and I don't understand what you mean about "building a base" . I appreciate you taking the time to explain it to me.

John Thompson

 

A while back, I read where the average rate of silver extraction was about 14 ounces of silver per metric ton of ore. I would think it costs more than $42 (14 x $3) to process a metric ton of ore.

I went looking for some reference to back up my previous notions and found the Silver Bear Resources, Inc Preliminary Economic Analysis (PEA) for the Canadian company's Vertikalny deposit which is part of Silver Bear's Mangazeisky exploration lease in Yakutia, Russia.

The PEA estimates...

...at a cost of...

...based on...

The reference you provide, the Hecla Mining Company, reports average extraction rates of...

Lucky Friday Mine: 10.27 Oz/tonne
Greens Creek Mine: 15.45 Oz/tonne

Obviously there are costs involved with the extraction and refinement of the ore, but Hecla Mining Co. has an odd way of reporting it. From 2008 to 2010, they report falling Silver costs of production from POSITIVE $4.20/Oz to NEGATIVE $1.46/oz.

HOWEVER (comma) these numbers add in "By-Product Credits". In other words, they subtract the profit they make from the 68,000+ ounces of gold (produced as a by-product) from their overall silver production costs. That makes these numbers and "Apples-to-Oranges" comparison to other mining production figures.

The Hecla Mining Co. legal disclaimer "reconciliation of cash costs per ounce" can be found here.



Nice try, though! :cheers:







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Cash cost is irrelevant and it should be illegal for a company to report it. I consider it to be intentionally deceptive. It excludes the costs for legal, accounting, tax, non-mine employee expenses, light-heat-power-rent for headquarters properties, executive salaries and bonuses, SEC reporting and listing, and a host of other expenses. That's why many companies with cash costs below the spot price report losses.

Edit: Here is a better way to look at it. HL profits are about 27% of total revenue. Or, total costs are about 73% of what the metal is sold for. So if they are selling the silver [with gold credits included] for about $31, their total cost of production is about $22-23.

 

It's just a technical analysis term. It just means that after a big run up, the price might stall out at a certain level, like the low $30s for several weeks or months until new buyers come into the market.

 

So you are saying to ignore what is being reported on a company's finance reporting, and believe you instead?

 

Ironic.....I just had this conversation with some people about the PMs as well as the market itself.......I`ll tell it to You like this.....perception is key in life, and the markets are no exception. Ask Yourself, is the cost of silver over or undervalued? In my travels I talk and deal with several investors, collectors and dealers of various PMs, and the dealers told me that at even when silver was $40 an ounce....there was just a little drop in demand. People were still bringing in a good amount of sterling flatware to the dealers shops, but the collectors were still on board at $40 an ounce. (Myself included)

So what does it mean that silver has been hovering around $30 for the last couple of weeks? The run is over? That the average Ma & Pa is following the speculators and not buying any more because of the drop? I percieve that to be false. Some will percieve otherwise. The bottom line is that it is all about what YOU percieve. Don`t be shaken by sudden drops and rises. Everything is available for Us to do Our own research. The rest is just guesswork and perception.

 

The price of precious metals is set by the Chicago Mercantile Exchange which trades paper representations of gold, silver, and many other commodities. Adrian Douglas has stated in a courtroom that they leverage paper assets (certificates) to real existing metal in their vaults represented by that paper at a ratio of 45:1 or greater, and Bix Weir estimates it is over 100:1.

While this has many potential impliciations, the one I would focus on here is that the volume of trading is significantly greater in paper, and thus the price is not a reflection of real life supply and demand dynamics for the physical metal. This means that the price can do a lot of things that don't make sense based on market fundamentals, and this will likely continue to be the case until position limits are fully enforced. At some point in the future the price must be set free, but until then we could very well see $20 silver. Any such drops would just squeeze the supply which means higher prices sooner than otherwise.

 

I do not worry about the spot silver price drop. It just means that I can find silver art bars locally for a lower price. With the sharp drop from $40 to $30, I think that the major issue people might be facing is finding silver at local dealers. Local dealers are either 1.) holding back inventory that was bought when spot silver was $40 or 2.) they are getting cleaned out by people buying .999 silver especially 1-oz size bars and rounds.

One notable thing for me is that local dealers are raising the premiums on silver.

 

Prices, of course, are a function of Supply and Demand. I would go a bit further and say that Demand is a function of Desire and Resources. Back in May, the CME Group raised margin rates for a number of commodities (silver being one of them). This reduced Demand by increasing the Resources needed to make the investment. As prices began to drop, some speculators likely lost the Desire to own the commodity, also reducing Demand. Here's an interesting article about the change in silver margin requirements.

The new Supply/Demand equilibrium is now in the $30-$32 range. As people get more comfortable at these levels, you may see prices begin to rise again. That's what I think of when Cloud talks about "building a base". New mining operations coming on-line may have a depressing affect on silver prices, but the exchanges may then decide to lower margin rates...you never know. Keep in mind one thing...the futures markets weren't designed as a "get rich quick" scheme for speculators; they were created as "insurance" for the commodity producer. When speculation becomes too great, the exchanges will take steps to "drain the swamp" and restore order...you can bet on it!

 

Lucy, never forget. It's like my grandmother used to say. "No matter where you go, there you are."

On the precious metals, generally, I'm thinking they're bottoming-out right about now, now that the big "shock" relative to the health of the world economy is all but over. The Chinese and Indian markets are going to start pulling them back up, again.

EDIT: I handicap horse races, too.

 

One of the reasons speculators have been drawn to commodities has been the spectre of Quantitative Easing 1/2 (QE1/QE2). The FED says that QE3 is unlikely (likely due only to strong public opposition). One thing to keep an eye on is a "Back Door" QE3!

Tim Geithner is laying out a plan to make up to $2 trillion available to the IMF to backstop the European bailout. The video halfway down the page is interesting, too. Geithner is pretty vague about an actual dollar amount. However, it could be significant and it seems to be flying under everyone's radar. If the US ends up bailing out Europe, that could put upward pressure on commodities (imho).

 

At the previous run up to $30, I was selling in order to get into clad proof sets. I think I might have made a mistake by doing that. I certainly am not selling any more. I kept mine at $40, and I am keeping the rest of it until at least mid year and the elections next year. I may sell some at $60 ? I doubt we will ever see $25 for a long time if ever. Perception is that silver is worth more than that. If we do, I am gonna buy all I can.

I like the Silver Washingtons ! Got my 32S as a gift from my grandfather back in 1958 and it's one of my favorite coins.

gary

 

If this were true, the CME would have also raised margins on stock futures. They are the most volatile thing out there right now. What did they do? The lowered margins. It's all a big farce. They want the stock market pumped up because it gives the illusion the economy is doing well.

 

Illegal? That would be blatently unconstitutional and would violate the First Amendment of free speech. Any such law would be quickly thrown out in court. Furthermore, the price of silver is a hot air balloon filled not with helium, but irrational fear and unnecessary anxiety. It should be no more than $8 tops right now. Mining companies, markets and economies didn't seem to have a problem when it was around $5 for close to fifteen years, why does it need to be so high now? The simple answer is that it doesn't, the high-cost of silver is a ponze scheme of sorts that is going to pop. It is just a matter of time. Only when that day comes will I ever buy a silver coin again, $14 for an old silver half dollar that I used to be able to buy for $3 just a few years ago is disgusting.

 

I am suggesting that you calculate the total cost from the audited financial statements instead of believing the company PR statement.