Is It Time For Silver?

Any gold that's traded, that's not physical gold, is what's called "paper gold"...it doesn't exist. Paper gold is a derivative; it's a side bet on gold...but used to obtain "price discovery". The same thing happens with silver or any other commodity.

Whenever futures contracts can be settled in cash (vs. physical delivery), the actual amount of the physical commodity becomes less relevant. You're not trading gold...you're trading the "idea" of gold...relative to some currency.

I believe that derivatives have the effect of increasing supply of a commodity. They meet the demand of speculators that don't actually care about the underlying commodity...but would buy it if derivatives were not available.

In other words, I believe that both gold and silver would be considerably higher (in Dollar terms) if there were no derivatives. If true, I then wonder if careful management of derivatives markets might be a more effective/efficient tool for managing inflation than monetary policy alone...but I digress.

Here's an interesting article that puts physical gold and speculative "paper gold" into perspective...

https://www.bullionstar.com/blogs/b...ce-is-it-the-paper-market-or-physical-market/

 

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Price discovery of any commodity is set in the derivatives (futures) markets. These contracts can be settled in cash and don't require physical delivery. This increases the "virtual" commodity to meet "virtual" (speculative) demand.

The Gold-Silver Ratio (GSR) seems like a good measure to track when the speculative interest of one (or both) gets out of whack. With the use of derivatives, one can use the GSR as a contrarian indicator to go long one commodity and short the other (or vise versa) based on which extreme the GSR indicates.

Of course, nothing is for sure...but the GSR puts the odds in your favor. It's like counting cards in blackjack...the boot is still half full and all outta face cards!

 

For at least that last 600 years or so, an ounce of gold has bought "a nice men's suit in London".

 

We’re still right around 80 on the GSR. Silver still on the March!

 

We've broken 80 (currently at 79.58). Next stop...75!

 

I've even heard it extended to togas in Rome. But did nice suits really go from $115 in 1976, to $600 in 1980, back to $300 in 1984, down to $250 or so in 2002, then up to $1800 in 2011, back down to $1100 in 2015, and now back up to $1500?

Over the very, very long term, gold is probably more stable in value than greenbacks. (Probably; I can still imagine scenarios that would take it down to a fraction of its current pricing.) But over the very, very long term, it seems foolish to park value in gold instead of something that generates returns.

 

I agree 100%. However, gold and silver become popular during times of uncertainty.

 

Of course. But they're also uncertain during times of popularity.

 

If people thought this trend would last a while , why not buy into a functional gold mine company rather than buying the physical ? Usually a higher % of gain and it can be dumped in an instant if the market collapses which it will someday, but every one figures they are smarter than the average stacker, so they will know exactly when to take the profits and chortle. But the vast majority will ride it down again , sure it is just a fake-out move by Evil ole JP Morgan, and soon they will be more above than even before!! There is no rational factor as to why precious metal are increasing in price, only irrational. 1/10 of the available gold hasn't become radioactive, all is still in play, so its not scarcity. It must be Magic!!!

 

Evil ol JP sits on the largest stockpile private of phyzz AG in history.

Seems rational that after quietly accumulating a half billion ounces at low prices the last 5 years they would now have a vested interest in substantially higher prices at which to unload, all the while making money in the futures markets on the way up... with plenty o means to push things in a fortuitous direction.

Or is this "irrational" ?

 

JPM traders have also been caught manipulating markets. They get a little slap on the wrist and put in time out by the SEC but its just a facade. Its been shown the SEC doesn't give a shit and probably is right there with them making its own plays in the markets with JPM and the other big dog trading houses.

 

It'll be interesting to see if the GSR can break above 82 tomorrow or if this is just a dead-cat bounce...

 

If it makes people feel they are never wrong ~ its JP Morgan instead!!, then that's fine, but that is what the bullion dealers wish you to think to continue purchasing.

Some JPM traders were caught in bad/illegal trades and were exposed, but if you read some columnists that are not writing for a Bullion sales company, you will find there is no evidence except hearsay by the traders, that the company knew about it and higher ups did also. Law requires evidence, so at best such charges are not going any place. It sometimes seems that people easily accepts that if they lose money, its someone else's fault and not theirs for not ignoring the sweet tune of huge riches that are found on bullion forums. Best of luck in the long run. IMO, Jim

 

It is always interesting that members tend to say when they buy PM, but seldom when they sell them, so maybe they want to be with the crowd or they are embarrassed that they did so. If you feel anonymous enough, please tells us when you gave up this particular bump and felt the price couldn't go up more in a reasonable time. Jim

 

I invest in (some may say "hoard") uncirculated rolls of numismatic silver of the '30s to the '60s. From the tech bubble of the late '90s to the financial crisis of 2008, folks were giving away their rolls...and I backed up the truck!

When silver reached almost $50/Oz...my buying slowed, but I never sold. It's not in my DNA to sell coins...once bought. I'll leave that to my heirs. I would make a lousy coin dealer. Every case would have a sign that reads, "For Display Purposes, Only".

For GSR purposes (and as I stated in advance), I would have "rung the register" of my options position (if I had one) when the GSR broke 80...even though I think it will test 75. It's all about managing risk, reaching predefined goals, then walking away.

 

And if you find can't do that, then you should realize that you're hoarding, not "investing" or "playing the market". Speaking from very personal experience here.

 

Lol...sorry, I edited the last line. I am, as you rightly point out, a coin "hoarder". It's a disease, really. No cure that I know of. A wife, maybe.

 

Only if you marry one who isn't also a hoarder. Descended from a line of Depression-raised hoarders.

 

Not always a disease.. I was onto something when I was mass buying European coins (90's to 60's era) a few years back. I have probably amassed the largest capital of Pre-Euro Netherlands coins you'll find online, I have in the neighborhood of 40,000+ coins from Netherlands (around 20k Guilders face). A while back it seemed like every week or two a handful of ebay sellers would have piles of Dutch Guilders coins, but now I can guarantee you you're not going to find anybody with more than about 1 pound of it in one listing, and even that may take months to find such listings. It's been a few years since I've seen a large lot.

The longer I hold onto them the more someone might be willing to pay top dollar to have my whole collection.

 

I have twelve (12) sealed Mint bags of Memorial cents...(P/D) from 1959-1964.
I keep hoping the same thing.