Ponderings of supply and extraction. Gold vs. Silver

Very true indeed. I never said my world view of silver predicts anything about pricing.

 

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This more or less happened in the 70s and surprised the analysts who were trained to believe higher prices would bring more gold to market. Instead, higher prices made gold more scarce. I don't know if the same thing would ever happen with silver.

 

But short term this is very normal. Think about it, if you own a stock and its rocketing upward are you jumping to sell, or do you wish to see how high it will go before selling? Same with anything. Severe short term price increases will cause sellers to stop selling for fear of missing future price appreciation. Only when prices STOP increasing will sellers feel comfortable selling. I would guarantee the same has/would happen to silver.

My memory of late 79/early 80 was some sellers, but also a whole lot of buyers wanting to get "in on the action". Price increases beget price increases short term at least.

 

THIS is why I come here; to get exactly this information & perspective/opinion 'Why?' I am convinced premiums have been falling and will fall further, but a trough will form and then ... only then... the PM prices will go parabolic. Watch the premiums, they're the 'canary in the coal mine.'

I don't believe this is so, and this evaluation conflates different things.

Discussing refined product held privately (not ore-in-the-ground, corporate)
1) There are lower retail mkt segments that will sell at x target regardless of timeframe.
2) As lower-sell points are breached & liquidated, higher tiers (which may hold far less or 'hold more dear') may not rush to liquidate & 'meet demand' ; they may have a timeframe, instead.

I have no idea where the breakpoints/timeframe combinations are for these different tiers. But I think it's wrong to assume 'everyone' MUST sell at $35k./oz. And Gold/Silver may simply "become scarce" because it was already sold (the imagined supply really isn't there.)

I'm playing devil's advocate here, of course. But I don't believe most Americans have ANY Gold anymore. Effectively and for all practical purpose, retail 'US Gold' has already been consolidated to serious collectors/bullionists and now trades exclusively among that niche demographic, at ~>$1,500./oz. Who knows what sell-point(s) these holders require?

(That's my two cents, obviously.)

 

I agree that this happens with common stocks, but maybe not for a commodity.

 

Professionals will know to sell into strength, knowing they may not catch a top but will average into a good outcome. However, "retail" investors always want to catch a top or a bottom, and in so doing catch neither.

I guess I was talking more about "retail" investor psychology.

 

The difference, as I see it, is that as retail stock investors increase their buying, there are always shares to buy at higher prices. The same might not always be true for gold. As prices rise, the ability to buy it can diminish. This is unique to gold as far as I know, and has no parallel in the stock market.

 

I don't think we will ever see more informed consumers' unless you plant a chip in all our heads, besides' some of newer counterfeits coin are near impossible identify without some type of destructive/ultrasound testing or detailed analysis of the strike (even that is getting harder).

http://www.youtube.com/watch?feature=player_embedded&v=rh0Mcagio5Q

 

I agree. Listen, I would label myself a fairly "informed consumer", and even I would be a little worried in today's climate to buy certain PM. I wouldn't touch most bars, and only certain coins would I buy if I were in the market for more. I did buy some around $25 because I just wanted to, but bought items that aren't counterfeited and I personally could verify.

In this environment, I would be nervous to suggest to a friend to buy physical bullion without my help. If this information got public, or the fakes get a lot better and much larger quantities, I believe Jjack is very correct and it will definitely put a huge damper on bullion sales.

 

Jjack & medoraman-
Seriously? Really? C'mon! I addressed that ONE WILDLY OVERBLOWN INCIDENT of a shady Russian passing a couple duff bars in mid-town Manhattan back in September. It's NOT common - and really, did you see Fadl's foiled ingots? JOKE.

"... other merchants {...} remain unconcerned..."
http://www.cointalk.com/t213888-2/#post1566867

 

Have you seen the high quality fake Maple leaves, circulated WL halves, and other new fake bullion making its way into the US? The counterfeiters are getting better, and going after areas they have never touched before. Its enough for me, who has bought PM for about 25 years, to pause and make me look much harder at previously "safe" bullion purchases.

Were the bars of gold filled with tungsten found in China and elsewhere jokes? A bar to me is at higher risk since it does not have necessarily uniform striking and dimensions, so the only way to PROVE a bar is good is to cut it open. I don't want to mess with that.

Those fake WL halves really have me concerned. The counterfeiters were finally smart enough to artificially wear the coins, and fake coins that are not traditionally faked. How much longer will it be before washington quarters and roosevelt dimes are routinely faked and artificially worn so as to hide traces that they are fake? How many stories of these fake silver coins will it take in the media before the general public is convinced buying silver is a scam?

Just my concerns sir. I agree with jjack it probably will be a huge issue in the future. Unfortunately every year the chinese fakes get better and more numerous.

 

o.k., I respect your concerns but THAT NY STORY was balderdash and no one here picked up on that?! There's waaaay too much fake-hype and not enough calm consideration of what Paul Harvey used to call 'the rest of the story.' Just saying.

Don't know enough about the "fake Maples" but that sounds abit hysterical too. Do those ring true? And is this what you mean?
http://screwtapefiles.blogspot.com/2012/01/silver-stackers-on-alert-as.html

"The weight is only slightly under by about 0.5 grams, which wouldn’t be noticeable unless put on a scale. {...} The good thing is that although the fake Maples are fairly good, they are easily identified with close inspection."

 

Can you quantify what "masses" means? I don't know of a single person that lost money owning physical gold & silver in the 1980s or 1990s. In fact of those that I know who did own it then, are quite happy about it.

Why were they "forced"?

 

Loss of a job, medical expenses, payment for uninsured damages, etc. Life happens.

Besides, gold was just about the worst investment you could have held in the 80s and 90s and even the run-up over the past decade did not come close to making up for the lost opportunity of investing in stocks, bonds, and real estate in the early 80s.

 

Then this is nothing more than a statement of opinion rather than one based on any facts. It's not something that should constitute much of an argument against holding gold & silver.

 

This is the answer I would have given you Fatima. Over the course of a decade of two people retired and needed money, ran into health problems, money problems, etc and didn't have the ability to wait until the market went back up. I saw many of them, some every coin show, having to sell and not happy having to sell at such low PM markets. It happens though, with PM just like stocks or collectible coins or farmland or anything else in life. Sometimes you have to sell when the market is low if that is the main asset you own. That is another reason I preach diversity, you never know which market might be in a huge bear market when you need to sell. If you are diversified, you can sell assets in bull markets and afford to sit on undervalued assets until they go back up.

I know you are going to say its a "personal anecdote", (btw, isn't saying "don't know of a single person that lost money owning physical gold & silver in the 1980s or 1990s." a personal anecdote Fatima?), but I met men who had to sell in the 80's and 90's nearly every month. Some made money because they bought in the 70's, but others lost big because they bought when the market was "hot".

 

What you explained is life. It's not an explanation of why people were "forced" to give up gold holdings at a loss in the 80s & 90s.

 

You are an old man, you have bills and need to eat. Your only liquid asset is gold. You can say they are not "forced" if you wish to play a semantics game, but I would say if your only asset is gold you have to sell regardless of market conditions.

 

OK then you are giving advice to not put all your eggs in one basket. Exactly the same statement can be made about ANY investment so it's basically irrelevant in the context of this discussion.

In other words it doesn't have anything to do with how people fared who held gold and silver in the 1980s and 1990s.

 

Dude, are you just trying to twist words around? I will say it more clearly,

I PERSONALLY MET ME WHO NEEDED TO SELL GOLD WHEN THE MARKET WAS LOWER THAN WHEN THEY PURCHASED IT, THEREFOR THEY LOST MONEY OWNING GOLD.

The same is true of silver. My cousin was one who jumped on the silver bandwagon and was buying late 79. He was very vocal at the time about how silver was going straight up. He quietly sold his position in the mid/late 90's to invest in tech stocks. Both ends of that trade turned out badly for him.

Sorry, but to bury you head in the sand, put fingers in your ears, and keep telling yourself "no one can lose owning gold, no one can lose owning gold" does not make that statement true. People CAN and HAVE lost money holding nearly any investment.