PM prices over the decades: What changed?

As the title of this thread states, I'm looking for honest answers as to why the markets have gone crazy in the last 5 years? I also wanted to add my own opinion to this confusion, which doesn't quite fit previous posts.

Basically, at this price point, I feel like selling some silver. Not because I have to but because I feel like taking some guaranteed gains while it's at new highs. The reason I've come to settle on this conclusion is by looking at the historical charts and considering things that are now happening that are total b.s.

Does anybody here ask themselves how PM's could basically sit, flat lined through decades of time and then all of a sudden sky rocket? The drops and the gains are now huge and fast. Does this sound similar to anything else that's been going on recently, within the past 5 to 10 years? Consider oil. When gas hit $4.00 a gallon, people blamed everything but the real cause of that short term spike. Insider speculation caused a barrel of oil to basically sell 26 times before it ever hit the market. These commodity traders who drive up grain, oil, food, etc... falsely drive up prices based on speculation. I honestly don't know what was going on in the 80s because I was too young, but I really don't think the commodity traders had an impact on things like they do now. Everything is based on speculation now. The housing market was driven up over speculation. All this speculation does is create bubbles. What do people do on this board every day?? All we do is speculate about how high silver can go without talking frankly about WHY it should go that high. Other than massive inflation that could be coming. Which I in no way will rule out.

But we've had very high interest rates and massive inflation in the past and PMs still remained flat lined. Why the change now? The way I'm seeing this is that RIGHT NOW, people don't know where to dump their money. There is zero incentive to put anything in the banks, paying 0.75% on savings accounts and even CDs have rates that are a joke. The stock market is coming back a little now. If the economy starts improving and banks start paying more, we should see money moving out of PMs back to other investment devices.

This is probably the most bearish post I've ever written here. I'm usually with the never sell crowd but right now I'm thinking what harm is there in taking a little profit? For the short term, we may be seeing the best of what PMs have to offer. I indeed think new floors and ceilings have been set. After what we've seen, I doubt we'll ever be able to pick up silver at $8 an ounce again. BUT, we very easily could see $17 again. That price point was SOOO short lived and this current run up so fast, that it all just doesn't seem real to me. There was a time when we hit $21 and then it dropped back quite a bit. I was hoping for a COUPLE YEARS just to see $20 again!

Then it came and went so fast I barely remember it and now we're at over $32. My question is, is this real or just speculation like everything else? If it's speculation, it may be best to at least partially sell off and run while the gettings good. I guess my point is, the dynamics and timing behind these dramatic run ups is almost too much for even me to believe. And I've been very bullish the past few years. So please don't view me as somebody that's always trying to be the downer, that wants to rain on everybody's parade. I've been at the other extreme.

I just think people need to ask more, maybe better questions about how we got here and why. The country held huge debts in the 80s and 90s with no change. Now all of a sudden it's a wild ride.

Thanks for reading and I eagerly await your responses.

 

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I'm inclined to agree with you which is why I've recently started selling off some of the silver items in my collection that I've never particularly cared for. Nothing wrong with locking in some profits just in case silver turns out to be another one of the many bubbles we've seen in history's past.

 

Ok so I am a laymen investor, but I think to a point you are probably right. Speculation and panic drive markets. When the stock market crashed, the masses sold at a loss thinking that it would get worse. Alot jumped into PMs and other investments to hedge against any further losses.
I did not have a bunch of money invested in the stock market, but everything I do have has just about come back to what it was. My mutual funds were cut almost in half and now they are just about back. I sold some stocks to purchase stronger companies when they were low and have seen real gains from all of them.

IMO taking a profit from your investments is not a bad thing. Just don't let yourself get out of a position to continue.
I sold some of my silver when it got into the $25 dollar range, but Since I have still added a little bit here and there. I don't think buying in all at once and selling all at once will work for me in the long run so I take a profit when I can and move my money around to different things I think may be beneficial in my future.
But that is just my take on it.

 

Vess1,

I think taking a little profit is a good idea also. It doesn't seem that prices can continue to be this high for any length of time, but you just never know.

The real isue is how much "New" Fed-created money is out there. They have been pumping out the Federal Reserve Notes (paper and digital) at an alarming pace, as well as raising the debt ceiling, and bailing out everyone that has a hand out, with this new cash. So, I would say part of it is speculation and part of it is the fact that there are more Fed notes and demand deposits that are sitting around bidding for PM's as well as everything else.

The inflation problem is the main reason I own PM's in the first place, since it is the only "real" monetary wealth - but cashing out - at least a little - to relieve some of the stress is a good idea. There is some "value" in not worrying about going completely upside down on the whole thing, even though you can't put a price tag on it!

 

I do not think there is a significant distinction between an investor and a speculator so in that sense, most of the people posting here are speculators; people invisting in some thing with the expectation of a future return. If the object of investment is a "false bubble" then the speculaor is taking huge risk because he is basically paying too much for his investment.

The last time we had "massive inflation" as defined by the CPI was in the 70's. At that time we had just come off the gold standard and the Hunt's were manipulating the silver market. So people had some skepticism about how well our fiat system would work out and there was a physical shortage of silver. I believe for PM's to rise in value there has to be a real/perceived shortage or threatened shortage in supply OR the underlying monetary system comes under stress.

In today's market I believe there a confluence of events that are creating instability in the market. These things are geopolitical risk, sovereign debt issues that threaten stability of fiat systems, a diminishing physical supply, overly accomodative policies by central banks, threat to supply of oil & rising demand in emerging markets that will create a high demand and even shortage for raw materials and manufactured goods. These factors and others are driving speculators like you and I both into and out of PM's.

So you need to know what your best estimation of future events are in order to determine whether it is the right time for you to either buy or sell into the recent strength. Of course it goes without saying that no one knows the future and thats where the risk comes in. BTW, the debt that formed in the 80's was nothing compared to our current debt levels and current deficit speding; these two time frames cannot really even be compared. We are in uncharted territory with respect to debt and spending.

Regards,

Bluesboy65

 

Vess1, I do share a lot of the same concerns and opinions that you do. I just can't figure out why silver took this long to start ramping up. Back in 2007, I had this feeling silver was going to start climbing to new highs, So I bought, and I waited way longer than I thought. So, as fast as it shot up, I can't help but think a bubble is in the not so distant future. Speculation, huge demand, market uncertainty, inflation, and economic instability all helped get silver to where it is today. As other investments come along and offer new ways for investors to make a quick buck, silver will begin to decline.

 

I'm not sure what you mean by "decades of time" but the price of gold between 1933 and 1971 was set by the US government. i.e. in 1971 gold was = $35/oz. This is because governments could exchange their dollars for US gold at that rate. Likewise, silver was artificially set by the fact that currency had silver in it, in some fashion until that time and the government would still redeem dollar denominated silver certificates until 1968.

After that money went 100% fiat and the relationship between gold and silver was broken. The price of both have been highly manipulated by the central bankers (who not coincidently, hold vast amounts of gold) So the point of this is that comparisons to past prices are only good for the last 4 decades. Gold & silver are not the same type of investment. Bankers hold gold as a hedge against the dollar and almost all central banks hold gold as an asset of the bank. Silver on the other hand is highly speculative and hence it's risk is higher.

 

21 December 2012 :devil:

Seriously, though...speculation is a big factor, but global trade is another. There's a lot more competition for raw materials. Have you bought any rare earths lately?!

 

Many still hold the position that an investment brings a return, such as a dividend or interest. Speculation was expecting someone else would like to take your position for more than you paid for it. Most stocks, and certainly commodities are speculative in nature. Commodities often are negatively biased as there are storage and transport expenses to consider. Someone will always be the unlucky speculator who bought at the exact peak. The luckiest speculator is the person who sold it to him/her. IMO.

Jim

 

I do believe that unless China drops its limitation in rare earth sales, that this will draw much of the speculation from PM to RE. Since the US and Australian mines will need at least a year to get into actual production/sales on a large scale, I don't expect a large rush into these areas until the latter part of this year. This is the period, IMO, similar to $5 silver, but that is my interpretation. Maybe there will be found synthetic substitutes, but the science for that is not positive IMO. For disclosure, I do own stock in RE areas.

Jim

 

Vess1, to answer your question. IMO This is the result of leaving the gold standard. While things have been adjusted since the 80's to prevent manipulation by market participants, nothing has been done to stop manipulation by the creators. Having a gold standard in place ensures a controlled system without intervention.

 

Howdy vess, all,

No one ever went broke taking profits. If that percentage of your portfolio/wealth you have devoted bullion has grown to an uncomfortable level due to the bull market - rebalance. You'll sleep better and while I don't know about you, I really like my sleep. ;-)


Now, most of this you will probably know or be aware of but let's go over it again.

This present bull market started in 2001/2002 and is still going strong. The duration shouldn't be a surprise because most bull markets in natural resources tend to last 12-15 years or so. This is because it's difficult to bring more supply onto the market quickly (i.e. explore, discover, assay, permit, develop p&e, extract, refine, market).

So, supply is limited at best and perhaps even having passed Peal Gold, if you will. By this I mean that new discoveries will be smaller and more expensive to extract.

As for the demand side, you've always had the survivalists and the folks that just like to have some bullion, but now you've got central govt's making major gold buys from the IMF in order to flush out their treasuries with something other than greenbacks. Most of our major trading partners are sitting on so many dollars other things look more attractive. You've got a lot of people fearing inflation and deciding they want a little gold in there portfolio - this includes individuals and instituations.

Many of us don't see any way forward except with a nasty bout of inflation. Quantitative Easing is a spin word for debasing the currency. They've been doing it to stimulate the economy under fairly standard Keynesian dogma but they elephant in the room is the Undfunded Liabilities facing our gov't. They're basically around $100 trillion freakin dollars and include social security, medicare/aid, various trust funds, debt service, etc. The numbers are so enormous that there is no viable combination of benefit reductions (defaults) and tax increases that will pay this tab. That leaves them no alternative but to monetize it [spin for print enough dollars to pay it off]. I've read estimates that they need to halve the value of the dollar over the next decase in order to attack it with the former means.

The fiscal status of the country and states and local gov'ts is sufficiently dire that not only are they demonstrating in wisconsin, but you've got others talking about reneging on pensions. Whether or not they should is irrevelant. What matters is there are a a lot of ordinary people very scared. Coming after the dot.com meltdown followed by the real estate bubble bursting and the wall street mortgage mess - where a lot of these same ordinary people lost a lot of their savings - oh and their loss of housing value . . . can you read 'strore of wealth'.

geez, it's been a bloody perfect storm for the all time kinghell*******gold&silverbullmarket.

peace,

rono




You've always had the survivalists and I don't know that we've got any more today than years back.

 

That's the other issue I've considered. As you say, all of this should have created a perfect storm and it pretty much has. I'm just a casual collector so whatever I do isn't going to make or break me. But to me, it seems gains like we've seen should not be this easy and this fast. It's driven by fear, speculation, confusion, etc. It just doesn't seem sustainable without at least some short term dips along the way. Which we've barely seen.
I'm just going to take some gains and ride it out with the rest. If a significant dip comes along, I'll probably buy back double what I sell. If $32 is the new floor, than so be it. Maybe in time, I'll buy back at that level and I'm really not out anything.

As has been mentioned, this idea of uncharted territory is the only thing that really makes me nervous. You just don't know what's going to happen when we have government at every level that is bankrupt. With this being the fact of life now, anything is possible.

 

Unbelievably political. :rollling:

I'd respond, but I think I would be banned for being political.

 

Perhaps you would simply like to defend the unprecedented defict spending and debt problem and help us understand how Yak's conclusions are unwarranted. I think the points raised state a problem that is directly attributable to the current price of PM's.

Regards,

Bluesboy65

 

I do appologize hya: ...that happens to me when I watch too much CSPAN.

 

edited

What's really going on in this country, and has been going on for quite some time is the concentration of wealth. It is a class war provoked by rich people who cry "Class War" when anyone fights back.

edited

What do you call the tax subsidies to the oil companies? What they don't make enough?

What do you call the bailouts, where you have Wall Streeters walking away with huge amounts of cash after they've just caused the collapse of the economy? Why has not one of them gone to jail? What party is it that STILL fights regulations on those people?

As far as the dollar no longer being the global currency: What do you recommend? That the US forces everyone else to value the dollar?

 

If this is true, and I believe it is, then future silver prices will be driven by these 5 things ( I'm sure there are others). Soooo, I think a person has to ask themselves these questions. Do I feel these 5 things are going to change in the future for the better? Or are they going to get worse? If they do change for the better, is it going to happen over night? Are things so messed up that we are at the point of no return?
Not asking for answers to these questions on this forum, but just saying perhaps it would be useful for us all to ask ourselves these questions and many other questions, to better assist our understanding of the silver market.
As always, really appreciate everyones input on these silver forums. Have learned so much.

 

Sorry, never mind...