Hello everybody,as you know I'm new to this game of silver,and wish I would have started years ago,but as I've gotten a bad case of the silver bug and had some time on my hands this weekend I decided to do some studying and looking around at what the big boys are doing. Some of my info came from an old friend in the big business feild,whom requested that I not share exact quotes from him and not to use his name. The rest came from internet research and reading market reports till my eyes bleed. So here's what I came up with,I'll share with you and you all can make your comments and own analasises for me to read if you like. First of all I'll tell you I don't know crud about most of what I'm going to pass on to you where company names are concerned,and that my friend told me to follow their lead. Anyway apparently some large investment companys are quietly dumping gold and buying silver as fast as they can,what this means I do not actually know,but some of the companys mentioned were Morgan Stanley and Vangaurd which I have heard of,the others mentioned were State street global,Citadel,Blackrock, and AXA Group,which I havn't heard of before but was assured they are major players in investing. I was looking at alot of different charts,analyasises and anything else I came across on the internet,and as far as I can tell they all say silver is going to get real hot in the next three years,mainly from lower mining outputs of silver,higher silver coinage demands and higher technology demands,which are only brought down slightly by losses in demands from photography uses and some other smaller uses. And of course I believe they are predicting a low value of the USD in the near future,but don't have anything to back this up. But my friend stated that only a full blown all out war would stop the silver prices from climbing in the next few years,an hopefully that is not likely. I was told to expect 100+ dollar spot prices on silver with in the next few years and for the gold/silver ratio to tighten up drastically whatever that means? Anyway because I know that my old friend knows his stuff and works everyday in the investment feild I trust his views,but I don't expect you to take my word for it,after all you don't know me from adam,and thats the bottom line, Apparently this big firm buying has been in the past week,so if anyone knows how to see what whos buying then they might want to check it out for themselves. Don't crucify me,I'm just learning myself but wanted to share a big time investors veiws, guys who play with other peoples billions must know something,cause I sure don't,just wanted to share,so what do you all think?
I think what you have uncovered and expressed very well is the standard case for buying silver as an investment today. The only other thing you should be aware of is the timeframe. I think a very good case can be made that silver prices have a high probability of rising a lot. But I wouldn't count in it happening in days, weeks, or months. The $100 target price within a few years is not out of line with forecasts I've seen from several different sources. Many pretty intelligent investors are expecting the old high in silver prices to be exceeded in this cycle.
Thank you Cloudsweeper, at least I'm not wondering if I've totally lost the mark, and may in fact be on a path that others are traveling also. Now if I could just come into some cash I could make a investment and risk it!
Gold and silver are somewhat seasonal. The gold season is ending, and the silver season is beginning. We already saw the advancement of gold, seasonally on time. Silver is seasonally high around February to early April. That is usually the best time to sell. The silver gold ratio now stands at 64:1, meaning you could buy 64 ounces of silver for the same ounce of gold. The ratio is market related, because silver is also an industrial commodity. As the ecomony improves, silver is bought for things industrial. This has an effect to close the ratio gap. I hear people say historically that silver was 16:1 to gold. But, you can't go by that now-a-days. The price of silver and gold is a product of what it cost to refine and produce it. So, in recent history, this ratio was closer to 55:1, which isn't an unreasonable target. There are two future uses of silver which I don't think anyone know the full impact of at this time. Electric cars will be using Silver in the batteries, and solar power needs an entire back plane of silver to conduct the thermal electricity. These are technologies of the future.....nobody knows how/when they will impact the price of silver.
Thanks silverlover, I hadn't even considered the needs of silver nitride batteries if they ever catch on, and they might not as there is some new battery technology that is about to hit the market soon that will make everything we use now obsolete. If the solar power panels need a silver background that is another good use or silver as the re is more and more solar powered units being deployed all the time,heck even I have a couple of low wattage panels for different things. Our electric fence uses solar panels to recharge the 12 volt car battery and it keeps it topped off nicely,I can attest to that through "shocking research" sorry about the pun. But yes I get buzzed now and then and not in a fun way I might add. Silver is a good electrical conductor that resists corrosion compared to copper and aluminum,it's why so much is used on open contact points,and I think it will be hard to replace anytime in the near future.
Cost/Benefit needs to be factored into the equation. As silver rises in price - substitutes will be will be employed. Alternative energy is already on the fringe as far as cost effectiveness is concerned. $100.00 per ounce silver would require a large spike in oil prices for it to remain competitive in energy. A large spike in oil prices makes bio-fuels more economical and bio-fuels are a competitor to solar, wind and electrical alternative energies. Rare earth minerals are also vital to the alternative energy industry whose production is controled virtually 100% by China. Silver is a very complex market. It is a precious metal. It is an industrial metal. It is a monetary metal. It is a hedge metal. It is a political metal. It is the best alternative for many things. It is probably the most complicated market of all the commodities and it could be its price that keeps it from reaching its full potential.
Howdy folks, Preachin' to the choir here. In addition to your friends, Jim Rogers has been beating the drum for both silver and palladium. Regarding the industrial uses mentioned, silver is the best electrical conductor - better than gold. They use gold for plugs because it will not corrode. Silver is also just starting to be used in medicine as a germicide and will perhaps have quite a demand here. Historically, silver and gold traded at between 15 and 20 to 1. It's 64 to 1 as I write and while you can argue that the historical ratio is no longer applicable, I hardly think that it should be 64 to 1. There are two metrics that I follow with regard to pm investing - the gold/XAU ratio and the gold/silver ratio. The former says to overweight mining stocks relative to bullion and the latter says to overweight silver relative to gold. I'd own silver mining stocks - HL, SSRI, SLW, PAAS, a little SLV the silver bullion ETF (must be held in a tax deferred or exempt account to avoid the 28% tax rate), CEF (Central Fund of Canada) is a closed end fund that invests in gold and silver bullion at a 55/45 ratio and is taxed at 15% on LTCGs - oh and a pot full of silver bullion in one form or another. peace, rono
I hope you are holding CEF in a tax deferred account also. It is a PFIC and if you don't file form 8621, you could be taxed at a rate of 100% of your profits. I also think the gold/silver ratio is garbage. You could invent a chicken/Toyota ratio and it would be just as meaningful.
Hi Cloudsweeper, Yes, I own CEF in an deferred account, however, what I've been finding out in recent years with PFICs and MLPs, is that Turbo Tax takes the hardship out of filing - particulary when coupled with digitally importing tax data from the source. As for the historic gold/silver ratio, while it might be garbage to you, there are many people around the world that still give it credence. Let's see, some 5000 years of history and even during the bull run of the 70's, gold topped out at 850 and silver at 50 in 1980 - er, 17 to 1. I understand what you're saying and you may be correct. However, when we're dealing with investor sentiment, what on earth does the truth or facts have to do with anything? Although this may sound 'tongue in cheek, I'm very serious. I've long said that if enough people believe a lie to be the truth AND ACT as if it WAS the truth, it might as well BE THE TRUTH. When discussing bullion investing and speculation, it's very hard to discount the folks that believe the ratio is destined to be 20 to 1 - just like it's very hard to ignore the survivalists. In both cases, they impact the market. peace, rono
Regardless of what ratio you believe to be appropriate--and I agree with rono that just the fact that so many people track the AU/AG ratio makes it important--you can do some homework and decide what ratio you think is correct and it will help you make more intelligent decisions about PM trading.
PS Thanks for the interesting POVs that several contributors have posted to this thread. Much food for thought here. Merry Christmas, y'all!
My point is that when you have a ratio tha fluctuates over time between 10:1 and 100:1, it's pretty hard to seriously consider it to be any sort of investment tool. This is particularly true when you consider the fact that the ratio can stay "too" high or "too" low for decades at a time. You could be correct and die of old age waiting for the market to catch up. Silver and gold are two separate investments with their own unique dynamics. About the only thing they have in common is that both will probably rise over the very long term because of the persistent inflationary bias built into the system. But that makes them no different from stocks, real estate, or any other type of equity investment. But it's okay to disagree. I'm just putting my thoughts out there for consideration by people who may not have made up their mind.
The silver to gold ratio is currently based off of what it costs to produce a .9999 fine silver coin vs. a .9999 gold coin. Currently, the cost for extracting that gold is about 60 times more expensive than silver. For one thing, silver is mined as a secondary to other metals such as zinc, copper, and lead. Therefore, the costs aren't calculated into what it takes to produce it. Since these companies don't deal in silver primarily, they treat it as surplus revenue. I think the only way you will have the gold silver ratio going back below 20 to 1 is if all production of gold and silver stopped, and all that was left was what is above ground. I don't think this is a likely scenario in my lifetime.....maybe my grandkids. So, maybe you could will all that silver for them, so when the PM is all depleted, they will be rich. But, us.....I don't think so.
Another possibility you haven't considered is a default by some of the big shorts in the futures market if they can't locate silver on the delivery date. If industrial customers holding the long side of the contracts suddenly found out that the silver they counted on to keep the factories going could not be delivered to them because it didn't exist, there would be instant panic and a bidding up of the price to unimaginably levels. No electronics maker wants to discontinue production because the $0.20 worth of silver they need in each item suddenly costs $1.00. So it isn't out of the question for $20 silver to suddenly go to $100.
Hi folks, Happy Holidays! Yeah, from everything I've read, JPM is possibly the largest short side position in silver. It's also pretty common knowledge that there is more paper silver floating around than available metal. Silver's a thin market and there is such enormous industrial demand that the paper silver tiger is going to get broken like a bloody pinata. Us peons hardly have to buy COMEX contracts and demand delivery - the big boys will take care of that for us. We just have to make sure we're positioned right when that sucker bursts so we can scoop up the goodies. I see much higher prices for both gold and silver, but more profit potential with silver. In the last bull market, gold topped out at $850 in 1980 and silver at $50. Those highs represented a, what, 2-3 fold increase for gold, but a TEN FOLD increase for silver. And I agree that we'll probably never see 20 to 1 again. However, we could easily see 30-40 to 1 and from the current 63 to 1, that would represent a tidy payoff. peace, rono
