How Low Will Silver Go?

US stocks no. The Nikkei is getting nailed though, which isn't surprising considering its parabolic rise. It's not looking good for the Yen and so the USD will likely continue to gain in strength against other weakening currencies (not necessarily against goods and services with regards to actual buying power) but we could still see (likely not much) lower metals prices, although stocks and bonds get the benefits of QE and should continue to perform as long as they are pumping.

It's worth bearing in mind that we are following the Japanese model. They have been at it longer than us, and are a good bellwether for how Keynesian policies end up. US markets will probably outlast a lot of others, but all leveraged markets are on the path to the same outcome (infinite counter party risk with minimal underlying assets undermining solvency making unwinding impossible). Leverage was used in this way in the Great Depression, in 2008, and once again leverage is back at all time highs.

 

Log in or Sign up to hide this ad.

I am of the opinion that the costs presented here are on the high side.

The Silver Institute states a cash cost of $8.88 per ounce. Some may disagree with this number but I feel it is reasonable and in the ballpark based on the fact annual mine output was 600 million ounces just 10 years ago at a board price of $5.00 and lower. I just don't believe the cost dynamics as being suggested in this thread over the last 10 years.

Be that as it may these folks don't operate under some kind of wildcat business model. Miners are not commodity speculators. Their production and price is fixed (for the short term - 12 - 24 months or so) through forward contracts, hedges and other such mechanisms. Impact from today's prices on mine production is another 1 to 2 years down the road.

As for the impact of scrap silver - it was a significant source of supply at $5.00 an ounce and will remain so at most price levels.

Well that is the way this Dumb Old farmer sees it.

 

My Cousin-In-Law (if there is such a thing) is the head of the Michigan Sugar Beet Association (used to be, anyway)...and farms about 5000 acres. He's the most astute commodities trader I know!

He has a warehouse size building where they maintain the equipment and there's an office off that. In his office, he has a bank of computer monitors...twelve (12) or more...running all sorts of real-time commodity analysis and trading programs. Throughout the year, he spends way more time in front of the computer screens than he does in the fields...not how I pictured a "Farmer" at all!

 

OK. Keep telling yourself that. Currently, the stock market is correcting, tho it's possible this may be a fake out and the market will head higher in the short term. But, given that the market has detached itself from fundamentals, we will probably see a major correction before the end of the year. Again, this is my view.

Also, there was some criticism of a headline indicating that silver shorts are playing a dangerous game. Given how leveraged the forex and futures markets can be, I think it's fair to say that those who shorted at the 20-22.25 range have gotten clobbered.

Mind you, I'm not cheering for people to lose money. I hope the precious metals bears do well in the stock market. I just don't get a psychological kick going into stock market forums and rubbing it into investors when they are down. That's what unfortunately happens in this bullion forum. Let's let everyone have their opinion and not take things personally.

 

The Nikkei is getting nailed because the yen is temporarily gaining versus the U.S. dollar, which is bad news for Japanese exporters that are hurting. I made the point that a strong currency is bad for exporters, and strangely certain members here found that hard to accept, though all central banks operate under that assumption. The dollar's correction is why silver is now gaining strength, tho this will likely reverse at some point. I also agree with you 100% that QE is simply a mimicking of the Japanese model and it has proven to be ineffective for bringing about a recovery in the long term.

 

No, absolutely not, you should in no way be offended by me calling your theories baseless.

baseless [ˈbeɪslɪs] adj not based on fact; unfounded a baseless supposition


Just for one example, the point you poorly tried to defend yesterday.

"You must assign some value to something for you to determine if it undervalued or overvalued." That is a statement that is based in fact, conventional thinking, and common sense. When you say, "I have no idea of the value, but I still can determine that it is undervalued", that is not based in fact, conventional thinking or common sense. That is something else, maybe faith, I do not know, but it is on the radical fringe of convention wisdom. So when I call your theories baseless, it is not an insult, it just is what it is. There are many folks, who believe many things that are not based in fact.

Now if you are insulted and you would like your theories to be based in fact, you need to change your way of thinking because faith cannot magical be changed into fact just by typing it over and over and over again.

Now for the second part, I understand why you misunderstood and took it as ribbing you, but I honestly want to know. It just makes no sense to me why you waste time researching when you always believe silver is a good buy. For me, I need to research, as of right now, since silver has gone lower, and I am thinking we are fairly valued now. I need to know things like fair value, buy\sell spreads, etc. etc. since my bullish\bearish stance will change. I need to know when to sell, short or buy. I do them all.

You on the other hand do not need to know these things since the only thing you do is buy. Silver is a buy today, just as it was when it was at $45 (you have a great old post back there there explaining how silver was such a bargain at $45). These things like fair value make no difference to you, it is a buy plain and simple. ALL day every day. So I would really like to understand your logic for my own curiosity as to why you would spend your valuable time this way.

 

You, on the other hand, made false accusations about MarketWatch journalists, attacked a headline which simply pointed to higher U.S. Mint sales, and now probably will not address that silver shorts in the forex and futures markets have taken it in the behind recently. So, while you made some correct calls on silver perhaps over the intermediate term, it's not like you need to condescend to InfleXion in the manner that you do.

 

Not putting words in your mouth at all. By posting that graph, you were effectively conveying the message that inventories were very low. I was attempting to correct that for other board members, that even though that graph was SHOWING a huge dropoff to near nothingness, in fact inventories at COMEX were still historically quite high still.

I thought it was a very valid point, a point which could influence someone opinion of the physical market. I stand by "correcting" the inference the graph you posted was making.

 

I posted the graph in the context of showing how backwardation has impacted physical outflows which was the topic at hand, not overall inventory levels.

If other people want to incorrectly assume that means inventories are at historic lows then shame on them. I did not think that nor did I imply that. I understand you wanting to clear the air about the graph which is fine.

 

And you keep telling yourself the sky is falling.

 

Well, I'll tell you what I don't and that is get "offended" when people attack me.

Now let's take your pearls of wisdom here step by step

So I make false accusations about MarketWatch journlists?

Here are the headlines that I made false "accustions about" These are the headlines that you said you agree with.

1. Silver shorts playing a "dangerous game" and the jist is they will lose huge when the expected massive runup comes
2. Physical silver a huge demand - "artificial suppression" will not last long


Reguardless of what is in the articles BOTH these headlines are designed to trigger a response, they are sensationlism and I don't like it. let's look at the first one. C'mon, I already explained my points, shorting silver can be safe or risky, you know this, you know shorting can be used as hedge, you also know the shorts have done well over the last 18 months and you also know that the only financial folks who are "expecting" a massive runup are on the fringe and are not financial mainstreamers.

What is my false accusation, I don't like the headline, I don't think it is responsible journalism.

Now the second one is a real doosey. You know quite well that silver demand is not HUGE. So you think when you read the article and it points to the fact that mint sales are higher, that justifies the headline. IT DOES NOT. The headline was specifically designed for sensationalism. I don't like it. The second part is even worse. They are talking like "artificial suppression" is a fact, but we both know, there is nothing to justify artificially suppression. Poor journalism, plain and simple. As a side note, if folks are indeed trying to artificially trying to supress silver, they really suck at it. Silver has been trading at 50 -100% premium vs cost of production for a good part of the last 18 month. "THEY" has just recently "got it down" to fair value. Like I said, they suck at it.


So where are my false accusations!!!!!

Now about being condescnding, yeah maybe, but I have tried everything else. I tried to be a friend, I tried being nice, I tried being a jerk, I tried logic, I tried reasoning, but nothing works. I would try hitting folks over the head with a 2x4 if I could. Don't you think I know I am a Butthead.

Now don't get me wrong, I have no issue with folks posting their opinions, but this goes far beyond that. Folks post and repeat things that are out right untruths and refuse to do simple research such as read a perspectus if it does not agree with their mentality. The facts just don't matter, this is closer to a cult to some as opposed to investing. Thats what ticks me off. Instead of vilifying me, why don't you go back a year or so and read the posts. Read how I posted silver was overvalued at $48 and was called a liar for even suggesting such blasphemy. Go back and read how I was asked not to post on this formum and I had no buisness here unless I was pro bullion and thought it SILVER, SILVER, SILVER to the moon. Folks read this board and are influenced with what they do with their hard earned dollar. Don't you think it is a good idea to have some other views beside the stacker rhetoric?

So yes, I admit I can be condecending, but if you don't like it, not to worry, I gave myself a timeout last month, and I will do it again shortly, before JIm (DesertGem) gets tired of my attitude and does it for me. This place DOES bring out the worst in me, so maybe I will see you next month after my time out.

Cheers...

Oh BTW, I am actaully sincere about knowing why infleXion does research. It make no sense to me and i have a curious mind.

 

Researching is never a waste of time. You have it backwards. My assessment of silver is based on many years of research, not the other way around. So then you have those years of research to contend with if you want to change my mind. It's not something you will be able to do with your current methods. I require sources.

I still stand by the fact that you need not know fair value to know whether something is undervalued or overvalued. Supply and demand tells us as much. When demand exceeds supply then something is undervalued. It's as simple as that. If you can't wrap your head around that I won't lose any sleep over it.

As I've said before price doesn't matter much to me. I understand that it does to you since you are a trader, but I'm not a trader. I'm simply holding sound money awaiting its return to dominance as has always occurred in past monetary cycles. Inevitably gold and silver will return to the baseline for valuation. Pricing in dollar denominated terms is on its way out as the debt saturation burden becomes increasingly unsustainable. Fiat currency is a barbarous relic as far as I am concerned. When metals return to money again out of necessity to enforce fiscal responsibility and avoid the historic pitfalls we are currently repeating then I will start paying attention to their buying power. Until then I am accumulating in preparation, like China is doing.

The reason I spend my time this way is because I thirst for knowledge. Eventually that lead me to want to understand why things are the way they are, and what I can do to make things better. Due to what I have learned about how the system oppresses our people through the use of money, and subsequently what I learned about the history of money, and specifically how fiat currency lowers the quality of life for our citizenry by enabling fiscal irresponsibility, corporate fascism, and endless wars I have taken it upon myself, with no compensation from anyone, to do whatever I can to lead people to understand how sound money works and why it is necessary to shield themselves in this class war.

 

OK, well that is a start. It just seems you get very emotional in this forum. At least, more so than someone who dispassionately presents a contrary view. You really identify with your position, which I don't want to get on a high horse about.

So you are telling me that InfleXion really gets that much of a rise out of you? I disagree with him as much as I agree with him (I don't think manipulation is as big of a factor as he thinks), but you seem to take things to the other extreme. If people were jerks to you (and I believe you, since anonymity emboldens people), there's no point in being a jerk back to others who had nothing to do with it. Medoraman, for example, pretty much shares your views yet he comes across much more cool-headed, which probably helps him with his investment decisions.

OK, cool. No problem. You seem to be able to switch gears here and be reasonable. Maybe a break from the internet is a good thing. I agree that the internet has brought out the worst in me at times. By the way, if you called a top at 48, that's great. That alone vindicates you and adds to your credibility. I'd like to see more contrary viewpoints. I'll be reading more of what you have to say.

 

I'm going to post something that is obvious but bears repeating. Many silver stackers are long-term investors, or rather extremely long-term investors. Many of those who tend to be bearish on silver are intermediate-term traders. So, one source of dispute is time horizon. The longer one's time horizon, the more likely there is to be success or at least an evening out of an investment, due to dollar-cost averaging. Plus, if a stacker buys numismatic coins, there is plenty of opportunity to build up his net worth over time, despite the silver market's fluctuations. Stacking silver month after month or year after year can only be positive, assuming the stacking continues year after year, especially over a period of decades. I understand that there is criticism of those who bought near $50, but I don't think many silver bulls here bought at the top and stopped buying since. Those people probably have disappeared by now. So there is no point in castigating people for buying primarily at the top in this forum when those people chasing the "hot" money are probably long gone.

 

Ok, last post before my time out. I agree with much of what you said, but I don't want infleXion to be singled out, there are many, and like I said earlier, it is not the opinions, it is the untruth's, there is a difference.

Also, just to be clear,I never claimed to call a top at $48, Trying to call tops and bottoms is a fools game. I just said is what highly overvalued, just as I did at $42, $35 etc. etc.

Well, its time for my time out.

Cheers........

 

Could you please steer me in the direction of how you are ascertaining that inventory values are historically quite high?

Jesse Crossroads came out with an article yesterday indicating that we are near all time lows, but his chart is comparing against the 2011 low, and only goes back to 2008 even though his setting is "Max". I was under the impression the SLV and the GLD came out in 2006 and thus there were no inventories prior to 2006, but this makes it appear there were none prior to 2008 which doesn't add up to me.

I would be interested to find out how far back inventories go prior to this chart and what data is available on that. Since you are claiming current inventories are historically high I will put the burden of proof on you to quantify that

http://jessescrossroadscafe.blogspot.com/2013/06/comex-gold-registered-ounces-available.html

 

The chart was posted here on CT a few weeks ago. It showed increasing physical gold in Comex starting at the bull market and increasing as the bull market went along. Yes, its down now, but not nearly as low as it was at the beginning of the bull market. My point was if you show a 15 year chart of inventories its a much different picture than showing the last few years. Heck, find a 30 year chart.

I was complaining about your charts cherrypicking dates. You need to look at historical averages, and not just what happened at the top of a bull market, to make sense of any inventory data.

Btw, sorry, I tried to find on Googling it, but all I find is rehashing of your assertions and cherrypicked charts from PM permabulls. Someone here posted it recently though. Hopefully they can help us.

 

The Kitco site shows supply/demand fundamentals through 2009. I wouldn't be surprised if these charts have reversed themselves since then. The hard part is finding information on a site that isn't trying to sell you something...even if it's just selling an idea, it's selling something.

 

Silver's tanking again today. It's under $22 and it looks like it may stay there...

 

$100 bags online in stock for less than $1800, and that is before today's price declines. Still too high a premium, but looking more promising. I wonder if it weakens a little more, and a guy walked around a coin show with $3200 in his pocket if he might be able to pick up a couple of hundred face...... Some don't believe me, but I just love silver, (for the right price).