How Low Will Silver Go?

And I get off on tangents as well sir. I too will drop it. Sorry, its just a pet peeve of mine the lack of responsibility people are taking for their own part. I understand its very tangential to the subject here.

Btw, I do enjoy everyone's opinions as well. The major danger in life is only talking to people who agree with you. To truly try to learn, one must constantly be willing to have discussions with those with very different viewpoints. So I hope I have not offended anyone here with mine. I would love for Inflexion to come back and post, or some other PM long term bulls. I feel such discussions are constructive, even if no minds are changed.

 

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So on topic, I was reading an article about Anglo's new iron ore mine in Brazil. In the article they documented some examples of "mining inflation". Things like a hauling truck costing more than double today than in 2007, wage increase demands going up 20% annually, and the like. These kind of large price increases, well above inflation in most countries, is the basis why I believe you cannot simply take pm prices from 2000 or 1990 and adjust them for inflation. I believe the costs have gone up considerably more than regular inflation.

So, from my point of view, I simply do not see how silver can be much cheaper than $15 or gold $1000 long term, (unless of course major cost inputs like labor and oil crash downward). Short term, yeah, markets swing too far usually, but pm is simply getting down to price points, (market prices, maybe not premiums yet), I am comfortable buying for long term holding again. Even better would be if I could buy interesting numismatic items like "junk" world silver and gold.

Anyway, the article was in the WSJ a few days back if anyone with subscriptions wants to read it. I thought it detailed fairly well the ballooning costs of new ore in today's environment of high oil, high wages, and ever greedier governments.

 

Actually, I think I lost......

 

Oh, you mean those kids who, just a few years ago, couldn't figure change at the fast food where they were working? The ones who bought without ever sitting down and working out a budget and wouldn't have a clue as to how to do that? The ones who signed every one of the dozen or so places on their mortgage forms without reading, much less understanding, any of it?
Oh those people.
Yep, that would about do it.
and BTW, I don't blame the students for being "lazy" but squarely put 100% of the blame on the teaching (note, not just teachers, but the whole system including teachers, teachers unions, school administrators, people in political position, voters, school boards, the people who put school boards in place and most of all the parents who do not demand better, and do nothing to fix it)
The same people who bought silver and gold at the top and are selling now.

 

The cost of mining precious metals seems to be a recurring theme here. I'd say that's mostly irrelevant, at least insofar as establishing a floor for valuation. If prices drop below what has to be paid out to get silver or gold out of the ground and refined, then mining operations will likely shut down than take an ongoing loss. But their production amounts to very, very little of the world's supply, most of which was taken out of the ground a long time ago, and is continually being recycled. More than enough to offset the loss of "new" gold and silver will come into the market if current stockpilers were to capitulate (or be subjected to a margin call) and start to dump their holdings.

 

Why would you think that, that was what they were trying to prove? I see nothing that would indicate bias in any direction. As far as we know, they went in thinking the exact opposite, but this was how the data worked out.

 

Well maybe, but I also don't see how waiting 3 months to see how things shake out would hurt much either. You have been around the block, you know markets can be irrational, very irrational. I am just not thinking silver is just going to drop until it hits a bottom at fair value. My guess is, it will overshoot, maybe by a lot. Will it stay there? No, of course not, but I would argue it stayed ABOVE fair value for at least 3 years, so it possibly can do the same on the flip side.

They way I am looking at is, why should I buy fair value silver, when there is a good chance I could buy cheap silver. If it never gets cheap? Well, there others good things to buy.

 

Not disagreeing. I was simply posting as a basis for my position that long term sustainable pricing I believe is a touch higher than other think it is. I do not buy some of the numbers being bandied about by PM writers, as I think they are too high. OTOH my current long term sustainable number is a little higher than others on the other end. When pm gets to my long term number I will feel free to buy as I find items I wish to buy, and won't worry about trying to catch a bottom.

 

what if things "shake out" and gold goes back up to 1800 and silver to 33? can't hurt to pick some up now

 

Well, I have said, I cannot argue with some DCA here.

My point is though there may very well be a better play here. As many have mentioned, nobody "knows" were the price is truly going especially in the short term. Chris just made a post stressing this. I agree. What I think folks miss though, is it is certainly not a crapshoot or a coin toss either. From all the info I have available to me right now, I believe that ODDS of silver going down are higher than the odds of silver going. To take it further, I think the ODDS of a big spike are unlikley, yet the ODDS of a big drop are likley.

So for me, it is being on the correct side of the odds, so I will wait until I feel the ODDS are in favor of a rise. Given current economic conditions, I don't think we are there.

Now to answer your question about what if things shake out and Silver goes to 33? Well, you can't win them all, and the great thing about playing the odds are, you don't need to win them all. In addition the money not spent on Ag will probably have went to buying a little Vanguard PrimeCAP, and maybe that might pan out as well.

We will know more in three months

 

Maybe silver has bottomed last week? Won't know for a while but I like this price zone for picking up a few more oz of the White Metal.

 

Yeah, DCA is always prudent. My concern is we saw a drop and hold to $25, then drop and hold to $22, now a drop and hold to $19. Makes a dude nervous.

 

Yup, me too....... I just think a large downside drop could still be in the mix, and a large upside pop is unlikley, I'd rather risk missing the bottom, than risk exposure to what seems to be the "new normal" (gosh I hate that term) for silver now. It would take a lot of DCA to get you out of a hole to $13

 

I bought a bunch through an ETF at $18.65. Of course, I bought a little less at $23.30. I'm now doubling down.

 

Silver's dropped so fast that this latest bounce doesn't even have it back to its fourteen (14) day moving average (MA). I would wait for it to break the thirty (30) day MA before taking out a second mortgage on the house.

 

Especially since mortgage rates jumped last week.

 

They have moved up significantly lately. I am glad I refinanced 5 months ago.

 

No, not really. Once it broke 26, it immediately passed through 25 and went down to 23 in like... one day.

 

I guess I was talking in generalities. There always was movement above and below.

 

I did it a little earlier, almost 2 years ago but still managed to get an almost 2-point reduction from the original in the high 5's. Even though I didn't catch the bottom, I got close enough and that was still real good for my wallet, to the tune of 8 years and over $100k in interest being lopped off.

As for silver I took a hiatus from buying when it crossed $30 downward, and just started picking some up again a couple weeks ago... glad I waited a little while, got way more for the money. However, at this price point even if it drops more, I will continue buying again.