Silver is Getting Creepy
Los Angeles: (David M. Engstrom, August 16, 2013) What kind of news would it be if stocks were up 24% since June 27? The mainstream press would be throwing a ticker tape parade and popping champagne corks. It would not just proclaim the markets and the economy have been saved - the whole world would be saved.
Well, I can tell you for sure, stocks are not up 24% in the last 60 days. But silver is. For weeks, Lear Capital has been telling people on national television and radio that Silver is trading below its all-in cost of production and now may be your best time to buy. The silver price has been caught in a battle between those who would trade the paper version of the metal and those who would only deal in the physical metal itself. While the paper traders have pushed the price down, the physical buyers have have fought to pull the price back up.
As of today, the physical buyers have taken control and the silver price has crept up 24% from multi-year lows. I say crept because it has largely gone unnoticed by the financial talking heads in the mainstream media. I ask again - Do you think a 24% gain in stocks in this short time would be so ignored?
While this move may have gone unrecognized it should not have been unexpected, at least to those who knew the silver price could not trade for long below the cost of production. I'm no genius, but when you can find the reported cost of production by a multitude of mines on the internet and it's below the current spot price, anyone should be able to surmise that condition has a short shelf life.
Gold is also making a strong move, however, it is silver that seems to have the greater head of steam. Thirty days ago the silver to gold ratio was 65:1. Today, silver has closed the gap and the ratio has dropped to 59:1. Three years ago in August 2010, the ratio was 65:1 and by January 2011, the ratio dropped to 48:1 as both metals moved higher. By July 2011, the ratio dropped to 40:1, its lowest point in over 20 years, before climbing back to the 65:1 level.
If history is about to repeat, (I have to say now that past performance is no indication of future results) and the gold price remained static, that reveals the potential of silver to reach $28 in the next 6 months and $34 in the next year. There isn't anyone who would shun those types of gains. If the gold price moves just 5% over the next 6 months and 10% over the next year, that could see silver prices rising to $30 in 6 months and $36 over the next year.
Today's indicators tell us that both the gold and silver moves ahead could be even more dramatic. In an article, Gold Inventories Plummet, we learn that the inventory of gold held by the COMEX has dropped to its lowest level ever. That means, investors are pulling their gold out of the COMEX for fear that any contracts written against their inventory could result in the demand for delivery and loss of their holdings.
On the silver side, there just isn't supply left anymore to feed the giant industrial machine that consumes silver faster than it can be produced. Three times this year the U.S. Mint has run out of silver. Other mints have resorted to rationing to avoid running out.
Historically, dating back to Biblical Times and more recently through various coinage acts of the United States, the silver to gold ratio has been 16:1. The last time the ratio approached that level was in 1980 when the silver price peaked at $54/oz. and gold $850/oz. Adjusting for even the weakest estimates of inflation, analysts claim silver today should trade over $100 an ounce and gold near $2000. By these measures, both gold and silver show great potential. Mix in some geopolitical unrest, supply shortfalls, rising market uncertainty and a shaky economy and you get a formula for huge gains ahead.
But, don't get greedy. In these days of uncertainty, returns of even 5% or 6% are hard to come by. And when found, the risk meter is off the charts as interest rates begin to rise, housing runs out of gas and the markets once again appear vulnerable to weak economic data and world turmoil.
With both gold and silver prices cheap by historical standards, don't let an opportunity to own either, creep from your grasp.
As always, the opinions expressed herein are mine and mine alone. If you agree with them I would be honored to have you follow me @DaveTheGoldDr
Well, I can tell you for sure, stocks are not up 24% in the last 60 days. But silver is. For weeks, Lear Capital has been telling people on national television and radio that Silver is trading below its all-in cost of production and now may be your best time to buy. The silver price has been caught in a battle between those who would trade the paper version of the metal and those who would only deal in the physical metal itself. While the paper traders have pushed the price down, the physical buyers have have fought to pull the price back up.
As of today, the physical buyers have taken control and the silver price has crept up 24% from multi-year lows. I say crept because it has largely gone unnoticed by the financial talking heads in the mainstream media. I ask again - Do you think a 24% gain in stocks in this short time would be so ignored?
While this move may have gone unrecognized it should not have been unexpected, at least to those who knew the silver price could not trade for long below the cost of production. I'm no genius, but when you can find the reported cost of production by a multitude of mines on the internet and it's below the current spot price, anyone should be able to surmise that condition has a short shelf life.
Gold is also making a strong move, however, it is silver that seems to have the greater head of steam. Thirty days ago the silver to gold ratio was 65:1. Today, silver has closed the gap and the ratio has dropped to 59:1. Three years ago in August 2010, the ratio was 65:1 and by January 2011, the ratio dropped to 48:1 as both metals moved higher. By July 2011, the ratio dropped to 40:1, its lowest point in over 20 years, before climbing back to the 65:1 level.
If history is about to repeat, (I have to say now that past performance is no indication of future results) and the gold price remained static, that reveals the potential of silver to reach $28 in the next 6 months and $34 in the next year. There isn't anyone who would shun those types of gains. If the gold price moves just 5% over the next 6 months and 10% over the next year, that could see silver prices rising to $30 in 6 months and $36 over the next year.
Today's indicators tell us that both the gold and silver moves ahead could be even more dramatic. In an article, Gold Inventories Plummet, we learn that the inventory of gold held by the COMEX has dropped to its lowest level ever. That means, investors are pulling their gold out of the COMEX for fear that any contracts written against their inventory could result in the demand for delivery and loss of their holdings.
On the silver side, there just isn't supply left anymore to feed the giant industrial machine that consumes silver faster than it can be produced. Three times this year the U.S. Mint has run out of silver. Other mints have resorted to rationing to avoid running out.
Historically, dating back to Biblical Times and more recently through various coinage acts of the United States, the silver to gold ratio has been 16:1. The last time the ratio approached that level was in 1980 when the silver price peaked at $54/oz. and gold $850/oz. Adjusting for even the weakest estimates of inflation, analysts claim silver today should trade over $100 an ounce and gold near $2000. By these measures, both gold and silver show great potential. Mix in some geopolitical unrest, supply shortfalls, rising market uncertainty and a shaky economy and you get a formula for huge gains ahead.
But, don't get greedy. In these days of uncertainty, returns of even 5% or 6% are hard to come by. And when found, the risk meter is off the charts as interest rates begin to rise, housing runs out of gas and the markets once again appear vulnerable to weak economic data and world turmoil.
With both gold and silver prices cheap by historical standards, don't let an opportunity to own either, creep from your grasp.
As always, the opinions expressed herein are mine and mine alone. If you agree with them I would be honored to have you follow me @DaveTheGoldDr