Are Silver Prices set to Skyrocket???
The price of silver and gold are on the move again. Mainly because the Fed has held back on raising interest rates again. However; without any of that, I still believe that the price of silver is still going to be heading for dramatic highs. Below is an article that I believe explains it pretty well. I am siting the source as Joshua Rodriguez; printed in the Gold-Eagle News website. But I am including some of my own commentary to the article. Not to change the meaning, but to add my opinion and perspective. I will include it underscore so my many international readers understand my input when they look at the translated version.
CYA: SE:
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There are few assets in the financial industry that have the ability to spark a debate quite like precious metals, and this is definitely true for silver. While the bearish view on the precious metal is understandable, the truth is that the bears are sorely mistaken. There are three factors that you have to keep in mind when it comes to assessing the price of silver -- and all three factors are screaming: “Buy the precious metal…Today.”
Demand is another major key…and it's showing signs of growth in silver's value as well. One of the best ways to gauge demand for silver is to look at the US Mint. In the first five months of the new year, the US Mint sold more than 23.4 million ounces of silver. When we look at the same period in recent years, this figure shows dramatic growth. At the moment silver demand from the US Mint is up this year by about 40%...that's dramatic!
I also believe when you look at the technology, medical, and energy sectors of the economy, you'll see the potential for explosion. Solar and medical use a lot of silver. Whether the fed or government likes it or not, these sectors of the economy are going to be moving. And when they do, silver will be in greater demand. And because unlike gold, silver is a commodity with an industrial use, the price will be reflected because of the demand being higher that the supply. And there's nothing the government or banks will be able to do about it. They can manipulate gold and silver as an investment, but they can't manipulate the need for it as an industrial commodity.
Currently, for every ounce of gold that is being produced around the world, about 9 ounces of silver are being produced. So, at that rate, silver should cost about one-ninth of what gold costs. However, the ratio is far lower than that. In fact, at the moment, you would have to buy nearly 79 ounces of silver for your silver to have the same value as one ounce of gold. Consequently, this ratio simply doesn't make sense -- and suggests a tremendous upside potential for the price of silver.
I definitely agree with the Gold to Silver ratio being too high. However; I disagree with the writer that based on his calculations, silver should cost 1/9th of what gold costs. As properly mentioned in the supply and demand section, most Silver is produced as a by-product of mining for other metals. As such, it doesn't cost the same to mine for silver as it does to mine for gold. But again, I do believe that the ratio is too larger. Based on availability, supply/demand, use, etc. I believe that the true ration between Silver and Gold, should be more on the line of about 35-40:1. Meaning, about 35 to 40 ounces of silver for every ounce of gold. At one time in history, the accepted norm for a ratio was around 16:1. But that was at a time when silver and gold were actually money and paper currency was backed by silver and gold. That is no longer the case. MONEY, as in the paper version, is backed by faith in a government; trade balances; and political stability. I do believe that a 35 or 40:1 ratio is an accurate amount. Of course, some could say that silver is at the correct price, and gold is OVER-PRICED and should be at $680-$700 an ounce right now. I don't accept this. Gold is basically an investment and an international currency between countries. Silver on the other hand is more scarce and has many more practical uses. Mainly in industrial uses. As such, I would say that minus any manipulation, I believe that today, Silver should be worth about $35-$40 an ounce, and gold should be worth anywhere between $1250 and $1600. I base that off of historical data on: "WHAT COULD I BUY WITH AN OUNCE OF SILVER OR GOLD THROUGHOUT HISTORY"? Piece of land; extravagant meal per person; fine set of clothes, etc. So I agree that the ratio is too high and that it should be closer. But I believe it should be a ratio of about 35 or 40:1 and that gold isn't too far off pace of what it should be in today's value. But silver is way undervalued.
At the moment, market conditions are anything but negative. In fact, stocks have been struggling all year to make it into the green! This alone has increased safe-haven demand in a big way. However, economic conditions aren't positive either, helping to boost the price of silver.
Now, it looks like even more news may send safe haven demand skyrocketing. Later this month, the British consumers will vote on a Brexit. If the vote is passed, it will likely be devastating to the market and global economy. This will lead to further gains in silver.
I definitely believe that economic and market conditions will have an impact and raise the price of silver and gold. I just don't believe it will be for the reasons the writer suggests. Traditionally, it is true that silver and gold worked as a safe haven vs the stock market. And it's true that the stock market is definitely inflated and looking for a crash. But if you look back to 2008 when the market crashed, so did silver and gold. It use to be that there was the stock market; bonds/securities; and cash. Cash included silver and gold. As one went up, another went down, and another went sideways. It was pretty predictable. But since the time of "Quantitative Easing" and devaluing the dollar by printing a lot of it; along with real low interest rates and the push for people to take on debt; the stocks, bonds, and cash cycles are out of sync. I believe the stock market will take a big dive. But what will matter a lot is the strength (Real or imagined) of the dollar. Also, whether or not the PAPER Silver and PAPER Gold are finally pushed out. The main reason Silver and Gold are suppressed and are low, is because there's too much PAPER Silver and Gold out there. Currently, there is almost 200 times more PAPER silver and gold out there, than there is physical silver and gold to back it up. When the stock market crashes, and if the dollar gets so weak with devaluing and low interest rates, people are going to want physical silver and gold. If the people holding PAPER silver and gold start demanding to trade their paper in, it is going to cause a major price increase in silver and gold. Paper sellers are going to be forced to take DOLLARS or wait up to 6 months for their physical silver or gold. In the mean time, prices are going to skyrocket. This along with a weak dollar and a stock market crash; and no one interested in bonds or other government backed paper, is going to put silver and gold off the chart.
I totally agree that there is going to be continued growth in silver. The question however is: "How many UPS and DOWSN" will there be in the process? The government and the fed have a lot of power. They can continue to manipulate the dollar as well as the price of silver and gold for years to come. They can bail out banks and companies. All of this is going to have an impact on the price of silver and gold. But if you do as I've suggested in the past, and purchase silver and gold as a way of protecting wealth; as a way of supplementing your income; as a way to reduce debt; and as a part of your retirement; then you'll be fine. I doubt that the 200:1 paper to physical ratio will ever come back to 1:1 and silver would be worth $3400 an ounce. Very unlikely. Chances are, those in power will CRASH silver and gold first so they can get the price really low so they can get rid of the paper. But by then, physical possession of silver and gold could be put into regulations. Either way, the value is going to eventually be worth much more; and you'll already have the silver and gold in your possession. But mind you, I said the VALUE. Not HOW MANY DOLLARS is it worth. That is irrelevant. What is relevant, is can you buy with that ounce of gold and silver what you can buy with it today, 5 years ago, 10 years, 20 years, 50 years, ago? If you're wanting to buy silver and gold, like you do stocks and bonds, in order to "Make a Profit"; then GO AWAY!!! You are part of the problem. You are probably buying PAPER silver and gold anyway. If we put $1000 in the bank, at no interest, then in 10 years, you won't be able to buy the same thing with the $1000 that you can buy with it today. That is a FACT!!! Been that way for hundreds of years. But if you can put an ounce of gold in a safe place, then in 10 years you should confidently be able to purchase with it, the same things you can purchase with it today.
CYA: SE:
******************************************************************
There are few assets in the financial industry that have the ability to spark a debate quite like precious metals, and this is definitely true for silver. While the bearish view on the precious metal is understandable, the truth is that the bears are sorely mistaken. There are three factors that you have to keep in mind when it comes to assessing the price of silver -- and all three factors are screaming: “Buy the precious metal…Today.”
Factor #1: Supply & Demand
First and foremost, when it comes to any commodity, it's incredibly important to pay attention to both supply and demand. In the case of silver, there's something to be said about what we're seeing. On the supply side, growth in silver's supply just isn't what it has been in the past. With commodities hitting lows, mines for commodities like zinc, lead, copper and other metals are shutting down. Because silver is primarily mined as a by-product to other metals, this is causing supplies to slow down.Demand is another major key…and it's showing signs of growth in silver's value as well. One of the best ways to gauge demand for silver is to look at the US Mint. In the first five months of the new year, the US Mint sold more than 23.4 million ounces of silver. When we look at the same period in recent years, this figure shows dramatic growth. At the moment silver demand from the US Mint is up this year by about 40%...that's dramatic!
I also believe when you look at the technology, medical, and energy sectors of the economy, you'll see the potential for explosion. Solar and medical use a lot of silver. Whether the fed or government likes it or not, these sectors of the economy are going to be moving. And when they do, silver will be in greater demand. And because unlike gold, silver is a commodity with an industrial use, the price will be reflected because of the demand being higher that the supply. And there's nothing the government or banks will be able to do about it. They can manipulate gold and silver as an investment, but they can't manipulate the need for it as an industrial commodity.
Factor #2: Gold Silver Price Ratio
Another factor that is important to pay attention to is the ratio of gold and silver product compared to gold and silver's price ratio. The truth is that both of these commodities are precious metals…and they are both considered safe havens. So, the ratio of production surrounding the two precious metals should closely match their price ratio. Surprisingly, that's not what we're seeing.Currently, for every ounce of gold that is being produced around the world, about 9 ounces of silver are being produced. So, at that rate, silver should cost about one-ninth of what gold costs. However, the ratio is far lower than that. In fact, at the moment, you would have to buy nearly 79 ounces of silver for your silver to have the same value as one ounce of gold. Consequently, this ratio simply doesn't make sense -- and suggests a tremendous upside potential for the price of silver.
I definitely agree with the Gold to Silver ratio being too high. However; I disagree with the writer that based on his calculations, silver should cost 1/9th of what gold costs. As properly mentioned in the supply and demand section, most Silver is produced as a by-product of mining for other metals. As such, it doesn't cost the same to mine for silver as it does to mine for gold. But again, I do believe that the ratio is too larger. Based on availability, supply/demand, use, etc. I believe that the true ration between Silver and Gold, should be more on the line of about 35-40:1. Meaning, about 35 to 40 ounces of silver for every ounce of gold. At one time in history, the accepted norm for a ratio was around 16:1. But that was at a time when silver and gold were actually money and paper currency was backed by silver and gold. That is no longer the case. MONEY, as in the paper version, is backed by faith in a government; trade balances; and political stability. I do believe that a 35 or 40:1 ratio is an accurate amount. Of course, some could say that silver is at the correct price, and gold is OVER-PRICED and should be at $680-$700 an ounce right now. I don't accept this. Gold is basically an investment and an international currency between countries. Silver on the other hand is more scarce and has many more practical uses. Mainly in industrial uses. As such, I would say that minus any manipulation, I believe that today, Silver should be worth about $35-$40 an ounce, and gold should be worth anywhere between $1250 and $1600. I base that off of historical data on: "WHAT COULD I BUY WITH AN OUNCE OF SILVER OR GOLD THROUGHOUT HISTORY"? Piece of land; extravagant meal per person; fine set of clothes, etc. So I agree that the ratio is too high and that it should be closer. But I believe it should be a ratio of about 35 or 40:1 and that gold isn't too far off pace of what it should be in today's value. But silver is way undervalued.
Factor #3: Economic And Market Conditions
Finally, silver like gold is considered to be a safe haven investment. Therefore, the value of the commodity moves inversely with economic and market developments. When economic or market conditions are negative, the price of silver tends to climb as safe haven demand grows. Adversely, when economic or market conditions are positive, the price of the precious metal falls as safe haven demand declines.At the moment, market conditions are anything but negative. In fact, stocks have been struggling all year to make it into the green! This alone has increased safe-haven demand in a big way. However, economic conditions aren't positive either, helping to boost the price of silver.
Now, it looks like even more news may send safe haven demand skyrocketing. Later this month, the British consumers will vote on a Brexit. If the vote is passed, it will likely be devastating to the market and global economy. This will lead to further gains in silver.
I definitely believe that economic and market conditions will have an impact and raise the price of silver and gold. I just don't believe it will be for the reasons the writer suggests. Traditionally, it is true that silver and gold worked as a safe haven vs the stock market. And it's true that the stock market is definitely inflated and looking for a crash. But if you look back to 2008 when the market crashed, so did silver and gold. It use to be that there was the stock market; bonds/securities; and cash. Cash included silver and gold. As one went up, another went down, and another went sideways. It was pretty predictable. But since the time of "Quantitative Easing" and devaluing the dollar by printing a lot of it; along with real low interest rates and the push for people to take on debt; the stocks, bonds, and cash cycles are out of sync. I believe the stock market will take a big dive. But what will matter a lot is the strength (Real or imagined) of the dollar. Also, whether or not the PAPER Silver and PAPER Gold are finally pushed out. The main reason Silver and Gold are suppressed and are low, is because there's too much PAPER Silver and Gold out there. Currently, there is almost 200 times more PAPER silver and gold out there, than there is physical silver and gold to back it up. When the stock market crashes, and if the dollar gets so weak with devaluing and low interest rates, people are going to want physical silver and gold. If the people holding PAPER silver and gold start demanding to trade their paper in, it is going to cause a major price increase in silver and gold. Paper sellers are going to be forced to take DOLLARS or wait up to 6 months for their physical silver or gold. In the mean time, prices are going to skyrocket. This along with a weak dollar and a stock market crash; and no one interested in bonds or other government backed paper, is going to put silver and gold off the chart.
Final Thoughts
As mentioned above, all signs seem to be pointing toward continued growth in silver. Now, with the Brexit on the table, that growth can turn into rocket-like action very quickly. So, if you're thinking about getting in on the precious metal, now may be the time.I totally agree that there is going to be continued growth in silver. The question however is: "How many UPS and DOWSN" will there be in the process? The government and the fed have a lot of power. They can continue to manipulate the dollar as well as the price of silver and gold for years to come. They can bail out banks and companies. All of this is going to have an impact on the price of silver and gold. But if you do as I've suggested in the past, and purchase silver and gold as a way of protecting wealth; as a way of supplementing your income; as a way to reduce debt; and as a part of your retirement; then you'll be fine. I doubt that the 200:1 paper to physical ratio will ever come back to 1:1 and silver would be worth $3400 an ounce. Very unlikely. Chances are, those in power will CRASH silver and gold first so they can get the price really low so they can get rid of the paper. But by then, physical possession of silver and gold could be put into regulations. Either way, the value is going to eventually be worth much more; and you'll already have the silver and gold in your possession. But mind you, I said the VALUE. Not HOW MANY DOLLARS is it worth. That is irrelevant. What is relevant, is can you buy with that ounce of gold and silver what you can buy with it today, 5 years ago, 10 years, 20 years, 50 years, ago? If you're wanting to buy silver and gold, like you do stocks and bonds, in order to "Make a Profit"; then GO AWAY!!! You are part of the problem. You are probably buying PAPER silver and gold anyway. If we put $1000 in the bank, at no interest, then in 10 years, you won't be able to buy the same thing with the $1000 that you can buy with it today. That is a FACT!!! Been that way for hundreds of years. But if you can put an ounce of gold in a safe place, then in 10 years you should confidently be able to purchase with it, the same things you can purchase with it today.
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