Is silver over valued??

I'm still bullish on silver. I will be a buyer until it hits $25 oz. Which it will. Silver is a store of wealth like gold. However, unlike gold, silver has almost endless industrial applications. Accordingly, the price of silver should rise, or at least stay stable, in any economic recovery. Once the economy gets going people holding gold as a hedge will sell and its price will fall.

Gold prices are a bubble based entirely on possessing it as a store of wealth. Not so with silver. The bursting of any silver bubble due to people holding it solely as a store of wealth should be cushioned by silver's industrial uses as the economy improves.

I think its a tremendous buying opportunity with silver under $20 oz.

 

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Another interesting concept is that, with gold so high, silver has begun functioning as the "Poor Man's Gold" according to some recent stories in the financial press. I think there is validity to that argument in some quarters, and personally I think silver is undervalued relative to gold. But like any other PM investment, do your own research and don't bet the farm when prices are high. Good luck and God Bless

 

I look at it just the opposite. When silver reached $50+ the market traded relatively freely. Subsequently, the CFTC intervened and implemented a lot of rules preventing silver "speculators" from buying oversized positions, but put no such restriction on selling. So we have been in the situation for the past few decades where large banks such as JP Morgan, HSBC and Scotiabank could make large speculative profits through massive short selling without demonstrating that they could deliver physical silver. This is changing now with the new regulations on position limits under discussion, so we may get a free market in silver for the first time in a very long time. It will be interesting to see what the price does. I'm betting that it will go up a lot.

 

If the following s the case

"Subsequently, the CFTC intervened and implemented a lot of rules preventing silver "speculators" from buying oversized positions, but put no such restriction on selling."

How are the massive short sells covered?

 

Could be Cloud. I know the market was operating well in 1980, its just the run up was not caused by any demand spike or supply shock, it was simply a classic cornering of the market, which the Hunt's attempted but underestimated the physical supply of silver that could and did undermine their attempt. Silver probably would have hit $30 in 1980, but it never would have hit the highs it did without them trying to corner the market. That is why I think that price is unjustifiably high as a goal. Could silver hit what would be a new all time high of $30, (absent what Hunt's did)? Yeah, it could, I am not too hopeful but it could. Could it hit over $50? I seriously doubt it.

Most of silvers industrial uses go away at such high prices. Like I discussed in a platinum thread, industrial uses both plus and minuses. They give stability to a market, at a price, but above that price there are substitutes for most applications. Having heavy industrial use effectively caps a metals price. Who would be buying all of the silver at $40? I am prety sure most industries wouldn't be, they would be switching to another metal. I am not in my former job anymore where they used various metals, but talking to former coworkers there is already a lot of dusting off of 30 year old projects going on around the country making plans for discontinueing inclusion of many metals in manufacturing. So do you think, long term, that speculative PM buyers will continue to be enough demand to buy up all of the new silver coming onto the market that is overpriced for industy? Too much of a run up would be detrimental to silver prices in the long run. If silver slowly goes up, and maybe stays around $20 all of next year I would be much more bullish on its prospects than if it did jump up to $24 or higher. Too fast of a run up will kill its industrial demand.

 

They are rolled-over or settled in cash. But the point is that the CFTC's own regulations say that the futures market has the function of "price discovery" and is not supposed to set the price. However, when paper trading dominates physical trading, this doesn't happen. The solution is to limit the number of contracts speculators can hold without having physical silver [or any other commodity] to back it.

 

Regarding the first point, that isn't what happened. The market never provided more silver than the Hunt's could afford to purchase. The CFTC changed the rules regarding delivery to collapse the price and left the Hunts with large losses on their long contracts.

Regarding the second point, silver has few good substitutes for most applications, and is generally a very small part of the total cost of items that it is used in. So even if silver doubled in price, it probably represents a very small increase in overall cost that is unlikely to cause industrial users to completely redesign their product around a substitute that wouldn't perform as well.

But we will have to wait and see. Silver is just about the only thing you can buy today for the same price it sold at three decades ago.

 

But its 20 times higher than 3 decades and a couple of years ago. Be careful on your timeframes.

 

We'll see how it goes. I expect the price for silver to rise a lot more unless we have a deflationary price collapse. Everyone has to look at the data and draw their own conclusion about what a "normal" price would be.

 

Let`s look at some aspects of silver.....It has the highest thermal and electrical conductivity of ANY element and metal.
Regarding jewelry, China has seen a demand for it increase, as it`s much more affordable than gold and has a long way to go to even be half of gold`s price.

The newcomer that wants to invest in the PMs has a wide variety to choose from regarding silver.....Older and newer bullion including rounds and art bars that could have more value on the secondary market, or just be worth spot. Foreign currency and random issues, and even silver in its purest form such as the Canadian maple leafs which are .9999. They can buy something as little as a 5 gram bar, all the way up to a 100 troy ounce bar.

A blind man can see where America is heading right now.....Trillions in debt,(mainly to China that wants no more of it) decaying infrastructure, drastic loss of manufacturing which will never come back, a dollar that continues to lose purchasing power and yet continues to be printed at a fanatic pace, the constant pressure to take oil off of the dollar, ever increasingly prone to terrorist attacks, (which can frighten the panzies on Wall street enough to wet themselves) and more and more political turmoil and civil unrest as well.

They say silver is the "poor man`s gold" like it`s a bad thing. There`s nothing wrong with that, and in all reality silver is the "smart man`s gold." I`ll continue to buy silver until it hits the $35-38 mark.....which might seem unfathomable to some but could be a reality sooner than We think.

 

The problem that I have with that sort of approach to analysis is that when it is done, you don't know any more than you did to start with. Does it mean there will be inflation or deflation? Nobody knows. Does it tell you what the "correct" price for silver should be? Nope. Should you buy or sell? Flip a coin. If dollars are being printed at a fanatic pace, why is the money supply falling? Will China resume debt purchases? They haven't commented on it so nobody really knows.

I'm not picking on your comments, but I wanted to use it as an illustration of the futility of trying to perform any sort of macro analysis on politics or economics, and expect to make money from the conclusions. It just isn't that easy. I think silver prices will rise, but not for the reasons you state.

 

I just want to throw a couple points out. You are right about silver's properties, so why isn't it used in wiring? Too expensive. Pots and pans? Too expensive. Heck even copper is on the verge of being too expensive for wiring, and it already is for pots and pans. Your point is valid that silver is an exceptional metal in many regards, its just that almost any metal is replaceable in industrial applications. So if silver DID go to $30 long term then the demand would decline more swiftly. This is the danger of relying on industrial applications for excessive price appreciation.

As for speculative demand, I do not consider that a stable long term consumption, in fact I consider it an overhang to potential price increases since this can easily return to the marketplace.

Just pointing those out for consideration. Not to say they mean silver will not hit the prices you think. Personally I love silver and platinum, always have. Gold to me looks dirty.

 

I'm not picking on your comments, but I wanted to use it as an illustration of the futility of trying to perform any sort of macro analysis on politics or economics, and expect to make money from the conclusions. It just isn't that easy. I think silver prices will rise, but not for the reasons you state.[/QUOTE]

Sometimes it actually is easy to make money from a simple analysis.....The problem is We as people tend to cling on to "good ol days," with a hint of arrogance thrown in for good measure. Not too many people want to admit that America is far more fragile now than ever. We blow money on fighting ideologies while using politically correct tactics in Afghanistan and Iraq. We love to throw money at all of Our problems without spending the time to truly fix them. The average child in public school roughly is worth $5000 a year,(the most ever) and yet Our children still fall further every year academically. Go to any department store and see where the majority of products are now made......literally a blitz of Chinese crap. Find me one toy in Walmart or Target that`s made in America.(thanks for selling out there Hasbro) I talk to people of all walks and professions, and there is not a whole lot of optimism regarding where America is headed. People are well aware that both parties will not bring manufacturing back here.....and so those are a fraction of the reasons that I have for my outlook/analysis on the economy.

As far as silver goes, I think that with it being a cheap alternative to gold, whether in jewelry or bullion, it will continue to rise. Even if the electronic industry were to switch to other metals that would not perform to level of silver, I don`t think it will ever drive silver down drastically. Besides, too many people are starting to invest in silver for either some of the reasons I listed or ones that I did not. Faith in Our governments and the dollar is dwindling.

 

I'm all in favor of simple analysis. But it has to be analysis and not a rehash of the same tired old stuff written by numerous internet bloggers who copy from each other and sell the mantra to the public. They usually have no investment credentials or experience. Some are pretty good writers and salesmen, but they are not analysts. I see people repeat their words and try to pass it off for analysis, and I try to point out to anyone who cares to listen that it is not, so they do not get hurt. If anyone cares to hold a different opinion, that's okay with me. After all, in the end we are all on our own.

 

I disagree with what you wrote. Silver has no good substitutes for many industrial uses. It is also used in such small quantities in each item that a double in the price probably would not lead to very much decline in demand. The common uses that you used as examples hardly represent normal uses for silver. If your analysis was correct, industrial use would have declined as silver rose from $5 to $20, but it didn't.

 

I never said $5 was the correct price at the time for silver, I thought it was cheap that is why I bought then.

If silver is used in tiny quantities, then how is 700 million ounces of production going to be used every year? If it is sizable quantities, then any long term sustained price appreciation will affect demand. Simple economics. If silver stays above $20 then substitutes will be made, maybe temporary maybe permanent. Years ago there was a price spike in copper and most copper pans ceased manufacture. How many are made today? Even when copper got cheap in the 90's how many were made? Almost none, because the market found a substitute and never again used copper in that way. Same with any metal, a price spike will cause industry to find substitutes, maybe temporary, maybe permanent. Silver used to be used in many uses that it is now too expensive for, and as the price continues to climb its remaining uses will dwindle, along with industrial demand.

You don't have to believe me Cloud. I do not know specifics about silver, but I do talk to former workers in the automotive industry that work has begun again on reducing copper and nickel usage in that industry do to price increases. Industry will not sit idly by and accept all increases PM investors would hope for.

 

A Profound Presentation

Thank you for saving me the time, by your profound reminder that the need?/interest in Silver has diminished, and even though Warren has tried to replace the Hunt brothers, Silver needs to be lobbied.

Gold is a Noble metal that doesn't? oxidize, the most malleable metal known to man, is a desirable color, etc.... Silver is generally a metal less? desirable than stainless steel, which rapidly oxidizes to a relatively ugly color. Silver has been used in coins/jewelry, but is considerably less stable than it's more valued PM counterpart.

I'm amazed that Silver value has been shored to its' current level by speculation, regardless of its' functional value. I truly hope that "investors" can continue to stimulate interest, because this old fool still has much Silver acquired in the Hunt bothers era. Go Silver Go :thumb:

 

@imrich......I don`t think You have anything to worry about, even though silver oxidizes when exposed.....it still has the highest sheen of ANY metal when polished. With gold at it`s highest levels, We`re seeing more people gravitate towards either silver jewelry and bullion. (China has seen a big spike in silver jewelry for that very reason)

We all can debate on how silver will be used in industry.....but personally speaking I think that the jewelry/bullion buyers are going to keep it rising nonetheless, provided gold does not plummet to the $200-$400 range. (which it never will)

Gold and silver are first mentioned in the book of Genesis which historians have dated roughly about 1400-1450 BC. The mystique and allure of gold & silver are in Our genes. Many people have done research as to exactly why this is, and have not come up with anything substantial other than what We`ve already known.
I never discount the psychological aspect of Our fascination with the PMs......Mankind will still cling to them long after His ways and civilization are no more.

 

Sometimes a simple analysis can come from simple observations. I`m no analyst, or an investment officer of any kind. All I do is observe, (much more than most) and talk to people of many professions, and then come to my own conclusions. (rehashed or not) When I spend hours in a department store looking at where various products are made, (while the significant other shops for Her stuff) and see that many of them USE TO BE made here....I don`t think any of Us need an analyst to tell Us what`s going on with America.....We just need to open Our eyes and get out of denial.

 

I should have written more precisely that the value of the silver used in each individual item manufactured is a small dollar value in relation to total cost. Therefore, it is less likely to be replaced with inferior materials when the price rises. My main point is that if price increases were going to cause a drop in industrial demand, it would have happened already when the price rose from $5 to $20.