Falling Prices/Margins? I'll Bite

With the newest pullback in silver from $21.50 back below $19.50 coupled with margins coming down, I see it as a great time to get some more silver.

I wonder how much lower silver can go before we have short term shortages in coins and bars? Don't want to find out though. If I can get it to my door for under $21, that merits a tube/month.

Seems like every time there is a huge buying opportunity in silver, the dealers end up running out before the demand is eaten up. They get it back in a few days, but the window of opportunity usually closes by the time that happens.

 

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It seems pretty shaky, even with all of the current world conflict and financial problems of BRIC nations. The US market is doing very well because the world has no other real safe haven. Paper is currently much more preferred over metals. I wonder what it would take to drive PM into crisis mode. Maybe ebola outbreak in Washington D.C. or on Wall Street ??

 

I think its a good time to buy. I can't see it going below $15 and my guess is the $18.20-$18.40 low will hold.

What other commodity can you buy for less than half the price it was in 1980? (yes there was the hunt brothers, although I think there influence on the price rise is vastly overstated, gold was also on a huge run at the same time as well)

 

What boggles the mind is that silver has fallen 10% since July 10th and margins came down. I honestly believe those waiting for $18 are going to have to watch it sail by because the dealers won't have enough to satisfy the burst of demand.

If any popular stock fell that much in a short period of time the pundits and newsletters would be all over it. How much bullion will dealers want to stock with smaller margins and tepid demand? The big down days of the last year and a half have seen the shelves wiped clean of any investment priced bullion, and I was one who got there 20 minutes too late and couldn't get in on it.

 

On the brightside the big online dealers have been staying in stock. Provident Metals actually had a sale on 1 oz rounds for .29 over spot any quantity that ended Sunday. (best price I've ever seen from a retailer)

I actually think retail demand is slowing down at the moment. Silver eagles sales have slowed significantly over the last 2-3 months. I don't think retail demand has too significant an impact upon the price however.

 

When Doge coin becomes Such Worthless. Much Black Swann.

 

I don't think it has any impact. The price is completely divorced from the physical market in my opinion. What stacker has the power to play in the futures markets?

 

Crises cause short term spikes in PM prices, due to panic buying. Until utilities, credit card institutions, banks, and the federal government accept PMs for payment, we won't see a fiat collapse.

An ebola outbreak in DC probably wouldn't do it. You'd need an event akin to:

1) Yellowstone exploding as a super volcano.
2) A great flood or great drought in America's heartland, destroying all crops and rendering soil tainted for replanting. A similar outcome could be achieved by multiple nuclear meltdowns in the same region.
3) A hacker shutting off or manipulating the banking or finance system.

Short of something on that scale, we won't see a collapse in the dollar significant enough to sustain long-term PM values.

That said, silver *is* under-priced relative to other PMs (gold, platinum, iridium, palladium), but more importantly, platinum is oversold relative to palladium (and gold to a lesser extent). We *should* see a reversal of this once the news agencies decide to stop covering the Palladium shortages in Russia.

We'll likely see Palladium prices down near $700 per ounce by year end, and barring improved efficiency of Palladium use in catalytic converters, we'll likely witness $500 Palladium by the end of 2015.

 

I think the greatest support for PMs will be from people with one foot in the regular economy and one foot in the "shadow" economy. But people doing this don't have to put their cash into PMs either. They can put it into anything physical that they believe will retain it's value. But PM's are a bit more compact than a room full of rolled treasure maps or art posters.

 

http://www.miningweekly.com/article...ectronic-silver-price-benchmarking-2014-08-15

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2152324

http://www.silver-coin-investor.com/Gold-and-Silver-Of-Cartels-Algorithms-and-Artificial-Prices.html

 

"China's net gold imports in July from main conduit Hong Kong tumbled to their lowest since June 2011 because the country already has ample supply from shipments in earlier months, while jewellers there are waiting for lower prices."

Yahoo Financial News 8/26/14

 

As interest rates rise and inflation creeps up, prices will begin to float up over time. Inflation is only a matter of time at this point - rates really cant get any lower, so there is only one way to go.

 

Not necessarily. If the decision makers declare there is no inflation, then there won't be any inflation policy. We could always go below zero with interest rates like the ECB.

 

And high-end gemstones are even more compact than PMs.

Edit: One carat of gold at $1300/TrOz (currently ~$1284/TrOz) costs $8.36.

 

Interest rates rising will hurt all precious metals markets unless you engage in the lending of gold and silver to attain yield. Although i love precious metals in the long run, and in particular silver due to industrial and electrical uses (not withstanding China used silver as currency for 2000 years and ignored gold). In the coming years as rates rise, and metals slowly drop in price due to the fact that although a ton of money was printed by the fed, the velocity of money has collapsed by a greater degree, leading to the dizzying news of deflation, which any average american disagrees with when they buy groceries or pay their other array of rising bills and taxes. What caused this disconnect? The people who received this money from the fed directly plowed it back into the bond market, hence rates as low as they are. As rates rise, all metals and commodities which yield 0% will slowly drift down, silver cost to produce is approx 5 dollars above current spot, so many silver miners will go bankrupt before silver comes back up in my opinion

 

Interesting perspective, but wouldn't it work the other way around? If interest rates rise, then wouldn't people sell PM and invest those funds in other ways to earn a better return?

If a person only looks at inflation and ignores other investment opportunities, then they may be tempted to put their money into PM, but I think those people are by far the minority.

 

Silver seems to like being in the $18-$23 range lately. I take that as a good thing, since it seems like it is trading in a range instead of collapsing. I think if we hang on to some of it, it will come in handy in a few years. I think of it as an insurance policy. It's great if I don't have to use it, but if there is a collapse of the fiat monetary system it will be a good thing to have.

 

I gave up on timing the market. I just focus on making good buys when good times roll around. No more all-in or all-out at one time decisions. If the prices sit there and stink for a few years or even a decade, still doesn't really concern me. Physical for me is only six percent of my overall portfolio. I'm trying to get it to ten, but that's a feat. Hopefully by winter or spring.

 

I just scored some "junk" US silver (including some Barber) for 15x face, so I guess I'm back in the game. It's just too good to pass up at that price.

 

Silver is doing some surprising things this morning. It went from $19.25 to $19.14. It must have been bid up some time early this morning, but then reverted to the price we thought it was at. I wonder if it will keep going down, or if it will go back up. Probably it will stay in the low 19 doldrums.