Selling Your Silver for Dollars = Buying your Ticket on the Titanic

You may be getting a nicer room with the dollar price of precious metals nearing all time highs, but we've already hit the iceberg and the water's rushing in. Make no mistake.

There are many complex reasons why physical silver is the best investment available today, but the simple explanation comes down to one thing. SUPPLY AND DEMAND.

1. The supply and demand of dollars. The Federal Reserve Corporation is increasing the supply by trillions of dollars every year. Increased supply = decreased price. The demand for dollars is falling, especially in the foreign arena where other major economies are dumping them. Decreased demand = decreased price.

2. The supply and demand of Silver. Demand for physical silver is through the roof for both investors and industry. Central Banks around the world are buying PMs as fast as they can. Especially cash rich countries like China and Saudia Arabia who are desperately trying to diversify out of the Dollars they've been getting from us for the last 50 years. Increased demand = increased price.

Silver is a better alternative to gold because it is consumed by industry and is being used more and more. Computers, electronics, solar panels, cell phones, missiles all consume silver that is not replaced. No one knows how much silver is really available in the world. We have the historical silver to gold ratio of 16:1 or so, but some people believe the real ratio is closer to 1:1. If that is true, then silver should be around the same price as gold. Regarless of how much there is, increased consumption = decreased supply = increased price.

Much like oil, the earth only has so much precious metal inside of her. The easy stuff has already been pulled from the ground and it's getting harder and more expensive to maintain the same level of production. Higher oil prices drive the costs of mining up even more. Decreased supply = increased price.

It is especially foolish to sell your PMs if you have dollar income, savings, and/or bonds. All of those paper investments are heavily correlated. PMs allow you to truly diversify your investments. They also provide a hedge against the rising cost of food and gas. If it's true that the dollar is dying, then PMs will rise right along side of the day to day things you need to live. If the Federal Reserve Corp is able to make another hail mary save like they did in 2008, then the price of food and gas will fall along with PMs.

 

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It's clear they are buying gold. It isn't clear at all that any central bank is buying silver. If you have information to the contrary, I'd be interested in seeing it. Since your topic seems to be about Silver, the distinction is important.

Gold investing /= Silver investing

 

I'll keep pointing out that the dollar lost over 75% of its purchasing power between 1901 and 1964 -- while it was backed by silver. In other words, during that period, silver lost 75% of its value as well.

And, of course, silver fell from $50 in 1980 to $4 in 1992. If you factor in the dollar's loss of value due to inflation during that period, that's more than a 95% drop in actual value.

 

Almost all of these mentioned , except the solar cells could be replaced with copper, silver is nice to use, but there is no elemental reason why copper couldn't be used. The amount of silver used, was rather small anyway, and in the case of solar cells and solar mirrors, silver was superior for mirroring to increase the capture of light, but we are talking nanometers of thickness, well less than one ounce for a large roofing panel. Most of these needs are mentioned by silver producer consortium s than by the end users/ manufacturers, so I feel they are overinflated as to demand.IMO.

Jim

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Great points, and I think you are seeing the replacement happening. The last 3 years, industrial use is declining and what is growing is investment "use". Problem is, industrial use is truly destroying the silver into mostly unclaimable form. Investment "use" is not use at all, but simply inventory being put aside for later sale back into the market. Silver used to be in a deficit or consumption versus production. Today, strip out "investment" and there is a worldwide surplus of silver from mining. The demand for physical silver is not industrial disappearance its investor fear. To me, once the general public is no longer fearful, or another "great" investment comes along, this investment "use" will come flooding back onto the market. I think from $50 to $20 will take 10 times less time than $20 to $50 will, (assuming it makes $50). I sure hope it does hit $50 or more, I am going next week to clear out a safe deposit box.

Chris

 

Not to derail but, interesting screen name Buster.

 

The only even somewhat neutral source for silver supply and demand statistics is the annual World Silver Survey by the Silver Institute. But when you look at their numbers, it indicates that non-investment demand for silver on a world-wide basis never increases. It is virtually unchanged from 2001 to 2011. The only way this is even remotely possible is if all of the GDP growth statistics published around the world are falsified. Their charts also show that supply exactly equals demand every year, which implies that there are never any changes in world inventories of silver - another impossibility. There is also some strange action around 2008. Silver is largely produced as a byproduct, and even though mine production of other metals fell in the recession, silver mine production rose in the statistics. Are you picking up a pattern here? So rather than concentrate on what the reported numbers are, it might pay to concentrate on what they mean, or if they are even reliable. I don't think anybody really knows what silver supply and demand figures are, so no intelligent conclusions can be made.

 

Silver over $42 now ... $42.16

All Hail Silver!!!

I actually bought another roll (20 ounces) of 2011 ASE's on Tuesday. Adding it to my stash of 942 silver eagles. I didnt think i would make money on that roll in 2 days! I just can't get enough of these.

 

Of course supply equals demand Cloud, that is capitalism. Prices rise to equilibirum is established. Right?

As to industrial demand and investment, I would categorize industrial demand being the usage of the metal, and excess purchases not being consumed as investment. Again, I do not see the short circuit.

Do you have some quantification of silver production from silver mines versus other mines? The silver institute says Mexico surpassed Peru as the world's leading producer, and Mexico is primarily silver mines versus Peru's copper mines. They also say byproduct from gold fell while lead/zinc byproduct and silver mines increased production.

Look at the demand bar:

http://www.silverinstitute.org/supply_demand.php#supply

See the huge spike in "investment"? Zero net investment in 2003 to 17% of total silver in 2010.

P.S. "Coins" are rising sharply too, which I would also lump into "investment", meaning not real consumption.

 

Does silver have any redeeming attributes?

 

Informative and relevant but I think the simple point was that silver is also an industrial commodity.

 

Of course. It also sometimes goes up.

 

It is antibacterial...... for some reason.......

 

Yes! This is one of the more interesting pluses of silver, and with the medical industry being the fastest growing it bodes well.

Also Buster, while the ~16:1 gold/silver ratio has been fairly consistent from around 1500 to 1900, historically it has been quite varied. However, the very similar ratio in the earth's crust is certainly a compelling driver IMO. I think we will gravitate toward that ratio, if for no other reason, because there are a lot more people buying silver than gold, because the average person can't afford gold in today's economy.

 

Yep they used to put it in milk years ago to keep it from spoiling. Seeeeee, silver does have some value.

 

Don't give in completely to that compulsion, though -- platinum is 12 times as abundant as gold, almost half as abundant as silver. On the other hand, if you'd like to swap platinum for silver based on abundance, I'll be generous enough to give you three ounces of silver for every ounce of platinum...

 

It is true that Silver did Fall from high prices in 1980. It's also true that Silver stayed flat for a long time. It's also true that the silver that sold for nearly $50 an ounce in 1980 had been purchased for $1.50 - $2.00 in 1978. So $4.00 silver could be considered to have a much lower base price if that is the game we are playing. Real Estate has lost over 1/2 it's value in the last 4 years. The dollar lost 1/4 of it's value last week if you consider the price of milk as an index.

My point is, that people who trade in stocks, bonds, commodities, currencies make their money by trading. Not by holding. Earnings are posted with sales. "Profit Taking" causes much of the fluctuations. NOBODY can say what tomorrow will bring, because it hasn't happened yet. The past is history. The only thing that matters is TODAY. If selling silver gets what is wanted today, then SELL ! I mean you can hold all the silver in the world and still be hit by a meteor on your way to the safe deposit box. Seriously though, traders will show profits and losses while hoarders don't show anything at all except a passing interest. IMHO

 

You guys look for any excuse! Yes, it is antimicrobial. Silver, as you toning and anti-toning people know, combines when free Ag+ or colloidal Ag+, with sulfides. The enzymes of bacteria and even some viruses have susceptable enzymes that have sulfur bonds. Disrupt the bonds and the enzymes don't work. Many of you older than 60 may have had silver nitrate swabbed on your throat tonsil area before antibiotics. Current use is mainly in bandages and covering, but not a big amount. A silver dime could be reused in milk for centuries with little measurable weight loss. When I started teaching college microbiology, we could still find silver dimes in change to do the experiments in lab.

Jim

p.s. I would not recommend forgoing pasteurization in favor of silver dimes in raw milk.

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I don't agree. Annual supply frequently doesn't match annual demand. That's what causes surplus and shortage situations that must eventually be reflected in the price. For something like silver where there has historically been a large inventory until recently, annual supply was less than annual demand for a long time with the difference made up by the liquidation of inventories. And I find it difficult to believe that industrial usage of silver is a virtual constant. Think about it -- the data shows mine supply increasing but industrial demand constant, yet the price of silver rose a lot over the same period. I know that your answer is "investment" but it isn't satisfactory. The charts assume "investment" is coming out of current production and make no reference to increases and decreases in world inventories. It looks like their plug figure to me.

I don't know what agenda the organization might have, but their numbers don't pass the reasonableness test for me.

 

GASP dollars, not even the lowly Euro. Just give me payment in good old swiss Francs .