This is Why NO $50 Silver

As silver prices increase, renewed production becomes more economically viable and Supply will eventually overtake Demand. We may have another year or two of "limited" upside potential...then look for a crash (imho).

 

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so please explain why in the meantime, while demand exceeds supply, that pricing can not go to $50 an ounce or higher? Do you understand the difference between the physical and the paper market? Do you own physical or paper?

 

I think I understand your post to mean that supply will rise to meet demand. However implicit in your argument seems to be the assumption that demand for physical silver is not growing or will not outpace supply. I think the demand for investment silver and as an industrial input are growing and will grow faster if economies show more signs of recovery. I also think there is a disconnect between the title of your thread vs. the content of your post. Great fodder for thought.

Bluesboy65

PS also might add that there are a significant amount of shorts and short covering that factor in as well.

 

supply=demand?

Traditionally when silver has made gains holders of large quantities have sold off portions of their hordes to realize profits, upgrade to gold, or to purchase more silver when prices dip again. I think more investors are going to be less willing to sell off their silver until we see a more stable market. I'm expecting a tighter supply with higher premiums. Oh, and if the spot price dips, don't bet that you will be able to obtain physical near that price either. Are you saying that you expect a major market correction in silver? Any company that is willing to invest in mining for more silver should be expecting higher prices in the future. There is a big demand for bullion and mints are not keeping up with that demand. I don't believe that a $50 an ounce high for spot this year is unrealistic. Actually I think it may be conservative. Just my honest opinion.

 

I'm just saying that there's a lot of silver reserves out there that don't require a whole lot of investment to bring back online. With silver prices in the mid-30's (and I have to admit...I never thought prices would get this high), it's very "economically viable" to bring idle resources back online. Even if demand increases, "my opinion" is that supply will still outpace demand in the coming few years.

Think about it...the Silver Bugs' main argument for higher prices is that some heavy-hitting financials have huge short positions that can't be covered with physical silver...and they stand to lose $Billions covering their positions, thus driving up silver prices. If those same financials can protect their investment by spending $Millions to flood the market with physical silver...why wouldn't they?

I currently own a lot of physical silver myself...but I'm not delusional. :goofer:

 

I agree there is a mixed message here. I disagree about silver not reaching $50 oz. but 2 years is a long time to sustain a bull market. Precious metals are fickle and volatile, there are going to some serious spikes in both directions before we sail through this storm.

 

I guess you would have to read the linked article to understand the connection. I probably should have cut/pasted the article into the OP, but I've been admonished for doing that in the past...sorry.

I wonder what the dimensions would be for an 800 lbs silver bar. :scratch: Don't know if it will fit in my safety deposit box.

 

It will go higher than 50 this year

/thread

 

I wonder what the dimensions would be for an 800 lbs silver bar. :scratch: Don't know if it will fit in my safety deposit box.

Read more: http://www.cointalk.com/showthread.php?t=163365&pagenumber=#ixzz1H7qtZkDO​

Well that's almost 12,000 troy ounces so you're looking at a small sized suitcase. About 13" wide X 28" long X 7" thick. It would fit in my safety deposit box. : )

 

http://www.silvercoinstoday.com/us-mint-sales-proof-american-silver-eagles-hit-860000/103642/

The above link shows the silver bullion products produced by the U.S. for the 2010 year. I'm not going to do all the math for you but when you start adding up those ounces 3.8 million starts looking like a drop in the bucket.

 

True...3.8 Million Oz/year is a little more than one half of 1% of the total mine production in 2008. The charts below are from the Kitco Site and are a couple of years out of date, but the trends are clear...increasing supply, decreasing demand, and millions of ounces of physical bullion silver sold to investors and ETFs each year.

The article I cited in the OP is just one example of more production capacity coming online just as the market fundamentals are deteriorating (imho). Perhaps I'm wrong...but that's the way I see it. Thoughts?

 

I guess I have to disagree with the statement that silver won't be able to hold on at $50 an ounce, but I have a caveat to add to that. In two years $50 may have the buying power of last year's $20. People look at silver performing well and think it's a fluke, but I believe it was an undervalued commodity that is now racing to keep up with inflation. The price changes are a reflection of a weakened dollar. For silver to remain trading at the $36 spot in seems to currently be lingering in, the dollar will have to stabilize. They say that in life only death and taxes are certain. I nominate inflation to complete the set.

 

Inflation is the hidden tax =)

I'm not sure where to draw the line exactly with the impact from this, but I noticed that part of the original statement in this thread indicates reliance on silver prices rising, but if it can't get above $50 then it's sort of a paradox. Maybe too nitpicky ;]

It makes sense that greater profits make production more economically viable, but I'm not sure how much that actually equates to producing more quantity. I figure they are getting it out of the ground as fast as they can already, although it would provide capital for additional ventures. It does seem like the graphs contradict most of the articles I've been reading. However, the justification of a lessening supply isn't regarding global production, but rather that China is now importing instead of exporting (~200 million oz / year swing), and a lot of the items behind the demand are using silver in a largely unrecoupable manner.

 

My only thought on your charts is that it does not accurately reflect the latest demand from the silver run -up. MANY more people are investing in silver since Nov.10-Jan.11

 

Thanks for the charts - good information. Since we understand the value of silver in dollar terms, I think it is helpful to look at the dollar index to help round out the picture. Here is a link to a chart of the US Dollar over the past decade and is currently at 75.72 (that's pretty low). The chart shows that the value of the dollar has been falling over the past decade.
http://data.cnbc.com/quotes/.DXY/tab/2
In fact the value of the dollar has been falling for a long time but this historic data in this source is limited.

Also, here is an interesting chart that shows the total US government debt over the last century.



I don't think it's a stretch to think that there may be some connection between debt, the dollar and the price of silver.

Bluesboy65

 

Here's a Wall Street Journel article from December 2010 that discusses the supply/demand dynamic of silver. I've seen a number of investment bubbles come and go and here's my concern with silver...

Investors are like frogs in a pond...and investments are like lilypads. The Frog wants to sit on the most comfortable lily pad possible. When the Frog finds the best lilypad in the pond, he'll do most anything to stay put. However, once a better looking lilypad floats by, that Frog will jump in a heartbeat, abandoning anything associated with the old lilypad.

The investor Frogs have been sitting on the Silver lilypad for a while. Frankly, with interest rates low, inflation on the rise, high unemployment, and so-so corporate earnings...the Silver lilypad is still looking pretty good! Consider, though, that while that Frog is sitting there, he's sopping up all the excess silver supply (and then some). It's the investor that's driving the price...not market fundamentals.

The Investors' silver isn't being used for anything...it's just sitting there. Once the Frog decides to jump, all that silver will hit the market at the same time...and I gotta tell ya, if you weren't around 31 years ago (Mar 1980)...it's a sight to behold!!



Another very good article by the International Business Times states...

So you have huge stock piles of investor silver just sitting around, mine operators falling over themselves to put closed mines back into production, and industrial users looking for alternatives...looks like a bubble building to me!

When will it POP? Your guess is as good as mine. Personally, I got in at $7/Oz so I feel comfortable taking a little off the table at these prices. I may not make as much as I possibly could, but I won't lose as much, either. Something to think about. :thumb:

 

Not mine...but it might fit in the overhead carry-on storage.

 

Remind me to never anger the man that can pick up 800 lb bars of silver !

I hope your box isn't a high one, BTW !

 

I think a lot of personal feelings are being expressed, versus looking at this logically.

Investors/collectors in physical silver make a very small part of the market. The current raw production barely meets industrial demands. While gold continues to pile up, silver is being used for industrial demands faster than it is being produced. Now China is planning to produce solar panels, that need silver, using a process that is older and requires a lot more silver than several new advanced processes. They plan to double solar panel production every year for 4 or 5 years straight. They stopped exporting, which was 1/2 their production, and now import as well. Several companies can expand or start production by the end of this year and have exclusive contracts with China to sell them everything they produce.

The US Mint can only us silver that comes from the US, so as far as coinage goes they have tied up a lot. And, that is just a fraction of what the industry needs today. Even at $150 an ounce silver for industrial use is far better than any alternatives. Remember, when gold was $150 an ounce it was used for electronics, it was cost effective to use it that way.

And as silver moves up in value, that value will remain sustained by more and more private citizens that will buy it as an investment. Hopefully we go back to a silver standard, many states are setting this up as we speak, and the historical value of 1 part gold for 16 parts silver our forefathers even recognized come back. SO, unless you feel that gold is going to drop to $320 an ounce.....?????!!!!

 

Reasonable counter-point...and it's true that China took away an important tax benefit that now discourages Silver exportation. However, no bubble was ever inflated without a good story! ...we'll see.