Gold/silver paper smackdown coming?

Wow, lots to respond to. I will try in just one post.

First, I agree with Jim. I know its hard for us to get it through our little skulls, but MOST OF THE WORLD DOES NOT WORSHIP GOLD AND SILVER. MOST OF THE WORLD WILL NEVER WISH TO BUY SILVER, REGARDLESS OF PRICE. They just don't. They DON'T want to buy PM. I don't know another way to say it. ANY comparision between an item we may worship and the "whole world" is meaningless garbage meant to mislead others. Sorry, but that is the simple truth. I see comparisons like this pretty frequently, and 99% of the time its by huckster salesmen trying to get you to pay them a fat commission. ANY ARGUMENT like this should make everyone's hair stand up on the back of your neck, since most of the time the person telling you it is trying to con you.

Regarding JPM, that is a favorite target. They are the "market maker" for silver. How do you "make markets"? You create shorts. That is simply how modern markets work. Please reseach it. You will see the same with other markets as well. I have looked into the issue, and see nothing nefarious at all about it. If they didn't create these shorts, the silver market would be highly illiquid and a MUCH worst market than it is today. I have posted repeatedly here about this, and why liquid markets are much preferable.

Regarding supply demand, I read the silver institute, (9th consecutive increase in production, to a record high btw for those claiming silver is "running out"), as they produced 761.6 ounces of silver, and industry used 486.5 ounces. I am assuming industrial demand completely used up the silver so its gone forever. That leaves 275.1 million more ounces above ground than before, right? In just one year we have 275.1 million MORE ounces than we ever have had in human history in human hands. What I am viewing is an ever increasing, burgeoning stockpile of silver in human hands, more than ever in history. I sure as heck don't see some catastrophic "death of silver". What am I missing?

Yeah, a lot is in coins, in jewelry, etc. But look at just ASE production figures. Just through 2011, only for bullion coins, there are over 282 MILLION OUNCES struck. This is only ONE coin series. Look how many there are out there! There are literally BILLIONS and BILLIONS of ounces in private hands waiting to be melted at the right price.

Look, I love silver, I always have. I have bought silver longer than some of you have been alive. I simply believe falling for the hysteria that "silver is running out any day now" is falling for scare tactics. Scared is not the state of mind you should be in when making investment decisions.

Is PM better for investing than coins? Absolutely. Should most investors hold a portion of their money in PM? Yes, I agree with that. Is PM the only asset worth holding, or is silver running out, or is silver being manipulated horrendously by big bad JPM on behalf of the "man", or is it "different this time"? Absolutely, unequivacably not in my view. Its a commodity that has its place in an investment portfolio, and has a place in my coin collection as well.

Just my opinion.

Chris

 

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Guess we will just have to agree to disagree, i'm not wasting any more of my time on this.

 

Sorry you believe its a waste of time. I have changed my mind on issues since I have been here on CT, and believe an unchallenged belief is a dangerous belief. We of course can have differences of opinions and still be friends, (ask Inflexion ), I simply feel its healthy to have to defend your beliefs to understand why you believe the way you do.

Peace.

 

So through 2011 there are 282 MOz of eagles. That would barely cover 1 year of mining shortfall, with every single eagle coming to market. Yes there are other coins, but my point is that it's not really all that much silver compared to how much demand there is, roughly only 1/3 of a year's worth of mining supply for all those eagles.

The world may not revere gold and silver at this point (although it is engrained in the human psychi since the dawn of civilization), but if and when paper currencies fail they will be forced into a new reality where gold and silver will be the only respected form of money. I'm not saying it has to happen, but for those who believe it will happen owning gold and silver beforehand is a shrewd play. It doesn't really matter if people want to buy it today, because it is in preparation for tomorrow.

For those who believe the economy will recover (without free market capitalism I find this a tough pill to swallow), financial markets are fair and sustainable (in spite of high frequency robot trading growing exponentially and now accounting for roughly 90% of all market action), and government spending is not out of control (in spite of exponentially growing debt that GDP cannot possibly keep up with without severe spending cuts) then there's not much of a case to own precious metals, although I think silver is a good play regardless strictly due to supply and demand factors independently of everything else.

I'm not saying silver is running out, but the numbers are clear that supply has not met demand for over a decade, and this is even true going back a century when there used to be a giant silver stockpile that is no longer sitting ready for consumption. Unless this trend reverses suddenly there will come a day where the price will have to be high enough for people to want to sell it, but the risk in that scenario is that if the price goes high enough to shake confidence in paper money that would actually increase demand and inhibit people from wanting to sell, especially if it ends up in a hyperinflation where the price is going up faster than markets can adjust.

PMs may be commodities, but as I've stated before, unlike other non-metal commodities they are also elements that cannot be reproduced like corn and pork bellies. There is a finite supply on our planet unlike these other things. I find it highly unlikely that we will drain the supply, but I also find it highly probable that in order to get necessary future supply to market the price will have to go much higher.

 

What "shortfall"? I just explained we have 275 Million MORE ounces above ground just in one year than we used industrially. In my view, we are creating massive PILES of silver every year, more and more above ground, not the other way around. If we dug up 761.6 million ounces of silver, and industry consumed 486.5 million ounces, where did it go? Its STILL HERE. 275 million ounces, almost 19 million POUNDS, are now in human hands that never were before, just from one year of mining. Is that not true?

Regarding the hope that future events will force all humankind to buy a product they don't wish to buy today, well, I can just say we will see.

I know I am sounding like a raging bear but I am not. I am more a middle of the road guy regarding metals, basically considering them condensed oil and a nice inflation hedge. Plus, I simply like owning it.

 

Things I like about silver

Here are the reasons I like silver. An average guy can buy $20 - $50 of it a week without breaking the bank.
Since I started buying in 2001 the price has gone up 625%
I like mildly numismatic things like pre-64 "junk silver", since they might even rise more than the price of silver.
There are some really neat silver coins out there that you can pick up for around spot.
It's easy to sell when the time comes.
They might even be a barter/real money item in the near future.
There is no counterparty risk for the buyer or seller. You are trading something that has real value.
After collecting for over 12 years I have realized that I am a silver bug, and not a gold bug.
Mining and refining silver does not use poisonous chemicals like gold does.
I know something about it now, and have never regretted purchasing silver coins.

Today silver is going up, and I like that too.

 

Bix Weir opinion-piece:
http://www.roadtoroota.com/public/330.cfm

If I read that Bix Weir right, US law does not require domestically-sourced US Silver ore in ASE planchets. So it's erroneous to conflate "US mining shortfalls" with anything related to US ASE production. Which is fairly insignificant in the big picture anyway, I posted global data/percentages previously (see links below.)

US Silver Coin production consumes a scant ~4% of the annual global Ag production. Also, fwiw US retail demand FELL last year... the US Mint got the memo! http://www.cointalk.com/t220993/#post1618330
Likewise, the USA accounts for less than 4% global retail Gold bullion investment and US retail demand for Au bullion has been FALLING for 3 years. That's TREND not opinion.
http://www.cointalk.com/t219973/

US Mint "shortages" are not indicative of global PM supply, in fact. US ore production is irrelevant, there's enough (global ore) supply to meet (falling) US coin-demand. The issue is PLANCHET PRICE. I have asked here before: What percentage of the US Mint's Silver planchet production from the Perth Mint? (Apparently, no one here knows.) If ~30% (or more??) is foreign production we must admit that FOREIGN SILVER PLANCHET PRICE (not US ore) is likely to be the decisive factor in any excess Ag coin production. Heck, AUD forex might be a bigger deal (for all we know) than US Mint sales estimates. I also looked at the 2012 US Mint report and see (confirmed) that negative seignorage is a stated concern. That's a much bigger issue that any fantastical "Silver shortage" and rather disappointing to those seeking a conspiracy theory.

It's just math/accounting, folks; if the US Mint isn't as successful in the bullion business they WILL scale back accordingly. http://www.usmint.gov/about_the_mint/?action=annual_report

There's no Silver supply shortage hitting the US bullion coin market. The problem is US Mint margins and PM planchet price volatility (with decreasing US collector demand.) And NONE of this -- dwarfed US retail bullion data -- has anything to do with POS/POG on global markets. Beware the perils of faulty correlation suggesting otherwise.

 

It is true, but it's beside the point. The shortfall is there in that demand exceeds new supply each year. This is the shortfall I am referring to, and that is met each year by going out and purchasing the existing silver you are referring to which is labelled "old silver scrap". The fact that existing silver must be purchased to meet demand means that people must be willing to sell. Yes, they will sell for the right price. Since the demand is outpacing new supply now more so in 2011 than ever before the available supply is getting tighter. It doesn't matter how much silver is out there if it won't come to market. We agree that it will, but I think the question is what price will be needed to sustain this since mining supply is not getting the job done by itself, and is even losing ground to overall demand. If the trend is any indication then increases in demand will continue to outpace increases in mining supply. While that increases the overall potential for silver to come to market it still requires former demand to become future supply which is a variable I don't think anyone can predict since it ultimately hinges upon societial psychology. I of course am doing my best to influence that psychology because I feel it is imperative for people to own precious metals to protect themselves from what I perceive to be a mathematically inevitable conclusion. I could be wrong, but that's where I'm at.

 

We are close to agreeing, I simply view mined silver as going to industry, and "extra" going to everything else. So, we must "take back" or melt some of the "everything else" pile each year to make NEW "everything else". Basically old coins and tea sets are being melted to make NEW coins and tea pots each year.

IF current mining was insufficient to cover industrial needs I would be more concerned and worried. However, industry has relationships with the miners, so I feel industry will get what raw materials they need, (maybe at a price they don't like, but still), but I simply believe it would be coins, tea sets, and other uses of silver outside industry that would feel a physical shortfall if there came to be one.

That is my view of it, and why I really only consider industrial consumption as the real "consumption" of silver.

Like I said, if industrial consumption were above mining levels, I would be right there with you. Well, actually, maybe not. I would probably be quietly buying up silver and not really bringing up the issue for fear of competition.

 

I can definitely get on board with your point that since industrial demand does not exceed mining supply we are not facing an imminent shortage, and that investment demand is not consumption. However for a shortage not to occur it requires a continued willingness of those holding the "everything else" pile to be willing to part with their silver, or at the very least to stop snatching it up. If people aren't willing to sell then it may as well be in a landfill somewhere. This ultimately depends on faith in the dollar as well as the price of silver. I am confident the price will go where needed to avoid a shortage and pull that "everything else" onto the market, but I have no idea what the price will need to be. Maybe it won't need to rise at all, or maybe it will. That's what hinges on psychology.

 

Fair enough.

I would basicaly expect to see, if this happens, shortages of coins, jewelry, and "other uses" to be the ones not being available. If a lot of modern coins suddenly became not available due to lack of raw material, (I am not talking about the current situation of ASE's which I view as the mint misprojecting demand, with spillover to maple leafs), then I would view this as a potential inflection point in physical availability. As such, I believe it could preview a price increase, I simply do not view it as an ode that will mean industry will be shorted.

I have worked in industries that had periodic shortages. All metal manufacturers take care of long time customers in a shortage situation. If a metal is short, long time customers will get put on allocation and new buyers get shut out. I would wager the same would happen in any potential PM shortage. I just think we are quite a ways away from any potential "true" silver shortage.

 

If the price comes up a bit a lot of stuff may come onto the market. It could be that nobody wants to sell at the current price, because they are waiting for it to go back up to $45. I know I would sell a lot more silver if the price got to $50 than I would at $30.

 

A stacker isn't going to sell at $50 - that price vindicates his beliefs and his strategy. A trader sells at $50, and looks at Kitco ten times a day.

 

True, at least for myself personally. In addition the uninformed buyers will pile in at $50+ as they begin to take notice.

My first sell target is $70 (fibonacci resistance at $75) with intent to buy back when $50 is retested, and only a small amount of profit taking. Then again at $114 (pattern resistance on a percentage basis - 9...21...49...114) with intent to buy back near the old fib resist mark. It could just blow through all of these though, so my core position will remain untouched until there is a new currency. That way if I can't buy back in after what I do sell it won't bother me.

 

Howdy folks,

A little volatility? And this is why it's so hard to actively trade the bullion markets. Nose bleed trips to whipsaw city. Nasty.

If you believe, as I do, that everyone should have some percentage of their weath in gold/silver bullion, you almost have to be a buy and hold investor. The paper price is bloody impossible to follow on a near term basis. However, this is why I really do love this bull market in gold and silver. The trend has been marvelous. With the exception of a few minor hiccups, this has been a steady easy climb. Most decent trends in the market might last for 3-5 years. In the commodity sector the trends can last to 12-15 years. Much of this is due to the nature of the beast. New supply has to be discovered, permitted, developed, mined, refined, and marketed. Takes a while.

And because of this trend and being a momentum investor, I simply overweighted the sector. Let's say I want to have 10% in pm's as my 'security blanket'. However, because I'm a bit of a player, I decide to up this to 20% while the trend lasts. In this case, the former is investment and the latter speculation. That's OK. Just acknowledge it.

And remember that the trend is your friend. Repeat it often. And ride this sucker as long it runs. This is the greatest bull market trend of our lifetimes, pray don't miss the train. There will be amply opportunity to get off without riding it all the way back to squat.

and so it goes,

peace,

rono

 

I was looking at the prices I paid for most of my silver today. I still have $12 on most of the Silver dollars and $5 on the halves. I think it's still a good investment, considering the prices today. A good price for a silver dollar is $30, and a half is $14 or so. Even though the price of silver has gone down a bit lately, I am not seeing any drop in the prices of silver you see in stores.

 

I ran across this chart of China's gold production and gold-buying since 2000:



Unfortunately, it contains a theoretical problem, in that it only measures net imports from Hong Kong, not a "net-net" from the entire world. Maybe someone can find a more complete chart.

 

This is likely on the low side. There's no way to know how much they are really pulling out of the ground since that relies on them being honest about it, and that doesn't even factor in all the gold they are getting out of Africa.

 

Hi folks,

The Chinese are buying a LOT of gold. It's only been since 2004 that private chinese citizens have been allowed to own gold. Even if they don't have quite as many 'survivalists' as we do, they've got their hoarders, investors, coin collectors AND nouveau riche capitalists buying bling.

In addition to this private demand, they have the chinese government that's been acquiring gold for years now. Please understand that this isn't weird or some sort of conspiracy, but rather simply a Utility Curve function from Econ 101. Being the trading partner they are, they've garnered literal tons of greenbacks in one form or another. Tons. Well, after a while, sitting on all these dollars, something else, anything else, looks pretty good. I'd want some gold, some francs, some euros, some yen, etc. Besides, the very last thing they want is for the dollar to drastically drop in value - while holding so many.

The other huge source of int'l demand is India, particularly now with their economic boom. More money ===>>> more gold. It's a cultural thing in India. You give it to your female relatives for all occasions and holidays and events. They keep it for ever as their 'social security'.

Nopers, the Chinese and Indian demand curves are very inelastic.

peace,

rono

 

After the action on gold/silver the last 3 days it is hard to believe people think there is no manipulation going on~ I think we are set for a big month, lot's of gold scheduled for delivery... we will see if they get it~