How Low Will Silver Go?

I would guess that is because many believe they have found the only real monetary value in the world (a rock) or that PMs is all that can save them from the pending economic collapse so of course the value could never go down on this miracle material. From what I can tell the real drivers behind rising PM prices are fear and instability so they are going to naturally ebb and flow with that. Funny people tend to stack PMs because of a fear but purchase retail PM products like jewelry because of optimism.

 

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Very astute observation

 

I just put some of my money into Silver Wheaton in a bet that silver will go up in the next few years. We'll see. The time to buy is when there is blood in the streets, and the price of silver has been hammered for a while now. It may be time for a rebound, or I may be crying in my beer. It's done now, so we'll see.

 

Even a blind squirrel

 

Two great investment truisms

1) The time to buy is when there is blood in the streets
2) Never try to catch a falling knife

I agree with both so I just have to figure out when the knive hits the pool of blood in the street and I am set. As one can guess easier espoused upon than done.

 

Lol, you are right. Like I said before, I am usually ok with the blood in the streets, (not to say you won't lose sleep over the decision though), I simply am stupid and keep trying to catch that falling knife. If I had better timing I might have more than a couple of nickels to rub together. Oh well, we do what we can do. I simply wish the PM downturn was a touch bloodier. For some reason a price in the teens would make me feel much more comfortable, or nearer $1000 for gold.

 

Lol, here is a new one to me, and I have been reading PM stories for 30 years now:

http://news.goldseek.com/GoldSeek/1370356200.php

About 3/4's the way down. Seriously, they are taking the "value" of ore bearing dirt per ton and comparing it with mulch. LMAO!!!!!! Nevermind that dirt may only contain .0001% parts of gold, or the major costs incurred to extract the gold, no, at goldseek they are equating it to consumer purchases of topsoil, compost, and mulch. Talk about an apple to loch ness monster comparison!

I THOUGHT I had read it all, but I was sadly mistaken it appears.

For full disclosure, I actually own a couple of miners. I am not against owning mining company stocks at all, but this comparison is beyond the pale.

 

You may get your wish about the price in the teens. In any event, I don't think $22 is a screaming good deal that will only be availabe a few weeks and then never to be seen again. I believe there is time, so I am going to be patient. Even if I am wrong, and miss the bottom completely, there are still a lot of good things to put your money into.

For me, I may start picking up very small quanties of junk and near junk silver, only because I like it and it is cheaper than it has been in a while. Not exactly what I would call for investment purposes.

 

I only buy things for my retirement account every 3 months, so I have put my 3 month allocation into SLW. I hope the blood in the streets isn't mine because I tried to catch a falling knife. I am going to take the summer off of trying to be a brilliant investor and I'm going to try not to look at the price of silver much nor the stock market. Whatever it does, I'm done for about 3 months now.

 

Many times that is a wise choice. TBH, besides loving to hold pm, that is a huge advantage of buying physical like we do. I can stick it in the SDB and not have to think about it. Unless you are a professional, trying to time and day trade anything usually is a money losing proposition. I just took out the leverage on my after tax stocks I play with, and will probably do the same with them.

I am going to have to buy some gold or silver, though. The price is now reasonable enough I do not feel bad feeding my addiction as much as I did for the past couple of years.

 

You are referring to silver. I specifically said gold. If you want someone to disagree with you can defer to Antal E. Fekete.

 

I am not talking about spot price. Spot price is highly influenced by futures. Comparing spot to futures to make any determination for backwardation is recursive and muddy. You need to compare the physical price to the nearest future.

The only thing that I would infer from backwardation is that the futures price is becoming less relevant. Arbitrage only works if you can take delivery of your metal for the price of the future. So the big timers can do that but nobody outside the exchange system can. Most of the futures get rolled over further into the future anyway and aren't very relevant for actual buyers and sellers notwithstanding that it does influence the spot price.

 

The dollar is not strengthening. Gas is still $4/gallon. Food prices are still up. Services are not getting any cheaper. Metals are down because of coordinated paper selloffs. The dollar index is only going higher because the Euro and especially the Yen are weaker currencies. To say the USD is strengthening when $85 bn per month is being created is silly.

The Fed can only unwind if they destroy dollars that they have already gifted to the big 5 derivatives banks. These banks require that money to stay solvent. It is not possible to unwind the position without crashing the system. Do you really think they're going to jack up interest rates to 15% or 20% like Volcker did and force all the debtors out there to pay through the nose? It's not realistic. They can't unwind without free market competition, regardless of whether they would like to. Unfortunately the methods they use to keep these banks above water have killed free market competition so there is no option other than to prop up the derivatives holders.

 

This is the result of backwardation.

 

truth spoken...err...typed

 

Ah, no, you are without question incorrect, the dollar IS strengthening. When you say "Services are not getting cheaper" what you mean is the dollar is not deflating. Two very different things. The fact that the dollar is not deflating BTW is a good thing for the economy. Now as far as printing money goes, of course that puts some "downward pressure" on the dollar, but the dollar can and IS strengthening in that environment. To deny the facts is what is silly.

Now as far as unwinding, as I have said and will continue to say. The ride WILL be bumpy, but it is certainly possible to unwind without crashing the system. The Fed is just not as stupid as you think they are.

 

No, The Fed is not going to crash the system until it's of no further use to them. They are holding trillions of dollars in T-bills now and they can't sell them without tanking the US. They don't want to kill the host. They have saddled us all with about $42,000 of debt for each person. Do you think they will get it out of us?

 

i don't know how true this is. "strengthening" is a relative term. strengthening relative to other fiat currencies? sure maybe. strengthening as compared to it's purchasing power yesterday, no. it's really a simple thing to imagine/envision. without any beliefs or personal bias; if you keep "creating" money, the other money becomes less valuable. its actually as simple as a formula. if there is only one dollar in circulation, it is 1/1. if you print 10 more, now your dollar is 1/11. it is worth less.

so, regardless, the dollar is not strengthening compared to it's historical purchasing power. period. there are more today than there were yesterday. relative to other failing currencies, sure, it is the ship sinking slower than the others.

 

There are a few hints that we may have hit a floor. Here's an interesting article. Read to the end to get the punchline:

http://www.marketwatch.com/story/silver-shorts-play-a-dangerous-game-2013-06-03

 

Rysherms,

Of course strengthening is a relative term. That is how we measure the "strength" of a currency, it is always compared to another currency or basket of currency's. That is by definition. The accepted index for measuring the strength of the dollar is the DXY where the greenback is compared to a basket of currencies. The dollar is strengthening against this accepted yardstick, there is no argument.

When you are talking about purchasing power, that is NOT the strength of the dollar. That is something different, that is inflation and deflation. If you say the dollar is inflating, that would be correct at the tune of about 2% annually right now. Please understand though, that moderate inflation is considered good by all but the most radical economists. It should also be noted, the dollar can be inflating and strengthening at the same time because they are two separate things.

Now, about your simple formula. If we were measuring things in a vacuum, I might agree, but we are not and there is nothing simple about it.
There are many other forces at work. If what you are saying was true, then inflation should have been, much, much higher than 2 %, but it wasn't and there is no guarantee it will "catch up". The puzzle has many, many pieces.