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Guest Post: Why I'm Buying Silver At $30
Submitted by Jeff Clark of Casey Research
Why I'm Buying Silver at $30
The silver price has bounced 27% since January 28, a huge advance for a measly 16 trading days. It's already soared past its 2010 high and was selling for less than $16 this time last year, a double in 12 months. So, is it pricy? Or should we ignore the run-up and keep buying?
I've read a few articles that say we should expect silver to drop to the $25 level, and one pinpointed $22. Others, of course, see bullish tea leaves for the near term and believe it's headed higher. Of those that assert silver will decline, most believe it will be temporary, though one writer claims the bull market in precious metals is over (I think he's a holdout from the gold-is-a-bubble camp).
These authors could be right about a near-term decline, but I'm less concerned with what the price does this month or even the next few months, and more focused on where it's likely headed over the next few years. Caution: the chart ahead may cause excitement.
While there are lots of reasons to be bullish on silver, what everyone really wants to know is how high the price can go. Here's one hint, based strictly on historical price performance.
Silver rose an incredible 3,646% from the November 1971 low of $1.32 to its January 21, 1980 high of $49.45 (London PM fix prices). Our current advance, through February 4, is 596%. At $30, silver would have to climb over five times to match the last great bull market. If it did, the price would hit $160.89 per ounce (from its bottom of $4.295 on March 30, 2001).
You'll also notice silver has a record of outperforming gold in these two bull markets. In spite of the price dropping 26.9% in 2008 (while gold gained 5%), the metal has outrun its yellow cousin by 38.6% since their respective lows in 2001.
Gold advanced 2,333% in the 1970s; it's currently up 430%. If it matched the last run, the price would hit $6,227.26 per ounce, a return of four-and-a-half times the gold you buy today.
From solely a historical price perspective, the chart certainly suggests we've got a long way to go with both metals. The question is if the fundamentals support such price advances (show me a healthy dollar and no threat of inflation, and we'll talk), but my point for the moment is that there is an established precedence for the price of these metals to climb much higher. And just as important, to keep one's eye on the big picture.
So, yes, I'm buying silver at $30, in part because I think the potential for enormous gains is high.
However, I'll add that I'm not draining my cash account to do so. I think it's important for the precious metals investor to always be in the game, but given silver's volatility and the precarious nature of most markets right now, prudence suggests we keep some powder dry as well.
Let's say one of the soothsayers noted above is correct and silver temporarily falls to $25. If you snag it at that level, your endgame return would be 543%, vs. the 436% gain from $30 (excluding premiums and storage costs). That's more than another 100% gain on your original investment.
But how does one buy silver not knowing if the price will plummet or soar? For example, silver could take off from these levels, never to see $30 again, leaving those of you waiting for a sell-off out of the market. Or it could sink to $25, making investors who went all in now regret they didn't wait for a better price. Or it could trade sideways until, say, next fall, leaving both parties uncertain and on the sidelines.
In my opinion, there's a one-word answer to the question. It solves all dilemmas – it keeps you in the market, while simultaneously letting you buy at lower prices if that occurs. It lets you build your position bigger and bigger without the worry of whether you're getting a good price.
That one-word verb is, accumulate. Or in the vernacular made popular in the '80s by the financial planning community, dollar cost average. In other words, buy a little now, buy a little next month, etc., until you have a position sufficient in size to fight off inflation and any other economic woe we're likely to encounter over the next few years.
So my advice is, buy, hold, repeat. Because if our silver market ends up looking anything like that left bar in the chart, you may regret not having bought at $30, too.
[By the way, we updated the numbers on the market cap for Pan American Silver from our article last week… check out how tiny one of the largest silver producers is compared to other popular stocks here.]
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When the ratio gets to 30 & under I might do some trading for au.
You sure? He advocates flipping Ag into Au once the g/s ratio hits ~40:1. Seems like he sees Ag as a vehicle to acquire more Au...
Yes he does that sometimes. I have not heard him say anything yet about it. When the time is right, he will say it is time to trade. I think he probably thinks that silver has a way to run yet, so why bother. I think he is a major silver bug. He has a booklet out about the ratios etc. I have it around here somewhere. The thing is, these trades are very few and far between mainly because the ratios never are right. But I think it is getting about that time, unless he feels that it is going lower.
60/40 has been the rate I have seen bandied about.Gld/Slvr.
Because Gold is MONEY, and Silver is (also, at least was when I was a kid).But now it's far cheaper because The Carpet Baggers decided it be so.
Buy, dig, bury, hide....and don't tell anyone.
Dont forget GPS, and give to someone you want to save if you are deceased.
Won't make a hill of beans buried and not a soul knows but you, and your gone.
The sweat of a lifetime for nothing,and loved ones your in charge of.
It's all figured in!
Maybe I misunderstand the history of silver prices in the 70's to 1980. I thought that big run-up in silver prices was due to the Hunt Bros manipulation of the market creating a silver bubble that burst in 1980. Seems to me that using the 1971-80 price run-up in silver is not a fair comparison to where silver could go now unless you want to argue that the market is being manipulated (JP Morgan notwithstanding) and silver is in a bubble.
People like Blythe have been manipulating PM for a long, long time. The trouble is that now, we are approaching the end game for a fiat regime. So yes this time it is different. They are running our of bazooka shells.........
Much has been written about the Hunts and their ultimate undoing. It would be to your advantage to read up on that. Google is your friend.
Did I not mention that I was purchasing xag(option) contracts just above 30 two days ago. While they were still relatatively cheap. I t/p on my position a kept a core trade in the 29's.
im assuming most on this site have not taken out equity loans
on their houses to purchase. I get the feeling most on this site
who are buying and have been buying silver have been doing it for
at least a few years. My point being that even though i am today buying
in at mid to high 30's if next week the price were to drop to mid 20's
or even low 20's neither myself or most would be upset in fact i feel most
would be overjoyed to have a buy opportunity at a lower price. yes in hindsight we
would all like to think we bought at the bottom and on every dip but seeing how this
site seems to be filled with long term holders rather than speculators i doubt anyone here
would be greatly upset with a drop in price and a great buying opportunity. If like me this is a play against everything that is going on and wrong and is for the long term a drop in
can only be seen as a good thing in the long run
Or hedge. Numismatic value is static due to PM values. For roughly the same price these days, one may purchase collector coins that always seem to have a base value regardless of PM fluctuations. ie.....a 2008W ASE compared to a 2011. Proofs are still carrying a premium way above market, but keep your eyes open.
There are plenty of exceptions to your comment, but you're in the right for the most part. Numismatic premiums are coming down on some previously coveted years/mint marks. ASEs have always been bullion, other than the proofs as you point out. Proof ASEs are not for the bullion buyer in any case. There is no reason anyone should be paying attention to bullion/numis spreads at this stage of the game. I have been selling out of the generic rounds and small ingots so that I can roll the money into ASEs or Maples. The rounds are bringing full price barely below ASEs anyway, so why not.
@ "why.."
here is another "why..." that answers the first "why..".
here is why ! y, the crooked letter
Matt Taibbi: "Why Isn’t Wall Street in Jail?"http://www.democracynow.org/2011/2/22/matt_taibbi_why_isnt_wall_street
.
"Why I'm Buying Silver At $30" ..
because bullion can't lie to your face, bury you with
flowers and then snear at your grave for being a fool
for believing.
Beautiful comment
If you're going to buy ETFs only buy PSLV. It's the only one properly backed by physical. Why would you buy SLV?
Those are both good. I'm off shore so 4 points and hedging are just fine for me. xag trade.
Everyone of these commentaries always leave out the obvious..
The more The Ber-Nake Prints... the less the dollar is worth... and the more prices will rise in everything.
Silver will go up as much as Ber-Nake Prints away the dollars value.
It is that simple... so the swings? sure to be expected, profit takers and / or other.
But for the long run... If You believe The Ber-Nake is going to stop printing dollars... stop buying Silver... but if you think he will continue to print dollars out of thin air and charge the sheepeople the interest payments.. then BUY SILVER!!!
here is a POMO schedule to help ya'll see the light!
http://www.newyorkfed.org/markets/tot_operation_schedule.html
Good Luck and dont over think it...
Yeah... i know...It's just LeMet gossip...But...
The latest from our STALKER source...
*The uncanny London trader took some money off his silver table, looking for a short term correction. But, I think it is back on again, or will be, as he is still looking for $35 silver in March.
*He does have one new client who just bought $80,000 in diamonds. When asked how much this client was going to put into gold and silver, he said 100 times as much money.
He's only going to print until June. Then he's going to stop for good. Honest to God, hope to die.
The Bernank is an honorable public servant and would never lie to the masses.
<gag, choke, cough, vomit>
CD,
No way we see QE3.
Like I said, NO way WE see QE3.
Yes he will stop printing.
Dos,
do yourself a favor Bro! buy some silver / gold just in case he doesnt... it wont hurt ya, I promise!
Be well, JW
why? QE hasn't totally wrecked japan in an apocalypse yet. Why would the Bernank believe that would occur here?
The federal budget has 1.7T of deficit fat in it plus the rollovers of the other 14T. Where is this money going to come from?
I don't see any way to make the math work without QE, which is why I remain in the inflationist camp
When I first started checking the POMO schedule to help with buying and selling choices I had to type in "POMO sched" before Google would show the NYfed's website. Now "POMO " brings it to #3 position. Once "PO" brings up the site you'll know silver and gold are overbought. Until then I'll stay bullish.
i agree with the premise of whether or not bernanke will continue printing
however it seems he is going to be backed into a corner concerning QE3
aside from ending the fed or a policy coming out of nowhere that alleviates the
debt burden our only realistic way out of the debt problem is by inflation. In a deflationary environment it is completely unrealistic even with draconian measures that the debt would ever be payed off let alone down even a reasonable amount. My point is just that in the end gold/silver are a play to protect against inflation that if held for the long term are not adversely affected by manipulation. Betting long silver/gold can be solely seen as a play that either A we will at some point try to pay the debt off with inflation or B that we choose a route other than inflation and it crashes and its one of the few things that will hold their value throughout the world through it all
There will be QE3, it just won't be called that and it won't be obvious to the average trader, let alone the typical MSM reporter. The funds will flow thru those unaudited channels. PMs will react by dropping but it will be a head fake. The result could be a full year (or more?) of sideways movement. Look at a 10 year silver chart for some inspiration every time you get the urge to unload. While you're gazing at the chart take note of the slow or flat periods in price.
Buy and hold.
If you insist on "trading" the moves you deserve to have your ass handed to you. Don't come back here whining about it and blaming all the ZHers who warned you.
Being in australia i always come to the chat late but this is the tasty bit for me. QE3.
It is important for many things.
i have always thought Ben Shalom will keep with QE as he is inflating the debt away. This level of debt has NEVER been paid off before.
He inflates away or defaults.
With the middle east in flames the neo-cons got another reason for it to continue.
Depends what the jews say now.
I smell greed and fear, but mostly greed. I'll stay on the sideline until we find out what the Bernank plans to do at the end of June.
I'm still in the deflationist camp and think we'll have another crash ala 2008. If so, silver will be back below $20.00.
I didn't like buying at $27.00 and am not buying over $30.00. At least not for now.
I smell greed and fear, but mostly greed
Could be, I think a lot of folks fear a major Black Swan event and instead of a $1.40 day rise, it goes 40-150x's rise,in a span of 60 seconds, more a day(try getting to your dealer).
If that happened, you would shite your pants,we are living in times unknown to any person on this site, or any person ever born in America.
That card is in the deck.For every hard asset.
DosZap es mi amigo tejano!
Buy and hold the physical is the best thing you can do if you have no PMs. It is important for everyone to have hard assets, and gold may be the best because it is portable.
...
The Bearing, unfortunately, is rethinking his no more buying gold resolution... The needle on my Paranoia Meter is ticking into the Red Zone again...
Be strong bearing!
i bought big on the last dip and its made me as nervous as anytime in 8 years of serious bullion buying.
i'm going to take it easy on gold now but silver i will dabble.
always value your posts
BD6
Someone on your side of the World is driving up the Price of Gold and Silver, back to where they were before NY tried to suppress the prices on 2/22/2011.
The yellow peril?
They are supporting it for sure, matey.
How is the pancreas?
It is.hard not to.chase prices. The key is not always trying to be in the best asset class, but to keep an efficient portfolio at your maximum risk tolerance, perhaps weighted toward which macro themes you think will play out, if you really think you can see the future.
T77
But with your speculative money gamble away! Personally i am overweight commodities real estate and usa stocks right now.
Wish i hadnt sold all my silver late last year and gold also but i was buying since late nineties so dont cry for me! I didnt want to pay any taxes and.reporting requirement changes influenced my decisions.
At some point in most areas real estate will be.investable again. Save up your money and take a chance on a rent house at some point. There will be other opportunities. This wasnt your last chance to get rich!
Looks like there was a top or two you failed to call.
I read a FOFOA post the other day that gave me a new perspective on deflation. He notes that the deflationists make many valid and well researched points, on paper. He said that what they seem to miss is that in the real world vs. theory, the government will simply change the rules when it needs to suit their need to keep the debt afloat.
There may be a deflation then a hyperinflationary event.
fofoa.blogspot.com and ZeroHedge are places where great wisdom can be found.
Grasshoppers bitchez!
I'm going for the accumulate theme. The industrial uses intrigue me as well as the investment end. I'm big on BTFD and try to buy once a week, even if it's only a few ounces. I scored my first 200 oz's last Feb when it was $15 oz. I don't feel bad diluting the pool at this point because I, like the rest of you, am pretty confident it will go up. I'm also watching those roll over dates on ETF's. I have this strange idea that if the dollar is really down and silver really up, more people will bow out and want the physical. One of these months Comex will be short and then the real fun will start.
As far as forecasting prices...who knows? There is so much insanity in the world right now people move to what ever safe haven is the flavor of the day. I like what Turd has to say and he seems as real as anybody. I don't pay much attention to charts except to track the days price. I tend to believe that fear is a much bigger price mover then anything and no charts plot that.
Besides....Those Eagles are really nice to look at. Fond of the Maples too...shiny baubles.
Shed,
Newsflash,
One of these months Comex will be short and then the real fun will start.
They have been short numerous times, we would never know it.
How do we surmise and KNOW they HAVE already been SHORT?.
By paying FRN's way over the value of the metal to get people to not TAKE delivery,or try to.
There is a time real close(maybe mañana), where they do not have the FRN's necessary, or better yet, the sheeples say no!, I want my physical metal,period.
Time will tell and I'm long Silver so I'm happy to wait. Either way, I see it as a win/win.
Today's action told me one thing: Gold is the more geopolitically sensitive PM and silver the more industrial commodity sensitive. Until today, silver has been exploding higher leaving gold relatively in the dust. Today, silver peaked sooner and fell off further from its peak while gold turned higher after retracing.
If you're hedging against upheavals in the Middle East, threats to developed economies from oil shocks, threats to the dollar as reserve currency and inflation risks, then Gold is the one. If you're hedging against inflation from surging world demand for raw materials, silver is better. If markets start to tank, gold will do better.
There is an old saying that silver is for
optimists.
It is driven mostly by demand, rarely by fear.
Bingo,
And that's why Banks HOLD GOLD.
No harm, no foul holding both, as well as holding Pt and Pd.
Disclosure (again, how tiresome): most of mine ($ value) is in gold.
Caviar,
re silver....or perhaps hedging for inflation from diminishing supply of cheap, easily processed raw materials.
Whiz...BOOM...!
It just sounds better than Whizbang
I can't wait to see what Max Keiser's interview will be like with that JPM whistleblower, Andrew Maguire.
Just keep in mind you can have 2000% gains and 3000% gains without it being the end of fiat......the key is knowing when to sell, because after those huge run ups there were two decades of losses.
I look forward to your call.
Hehehe
I've sworn off topcalls!
It's nice to see you trading well TCT. Keep up the good work. You are correct. Xag is classified as a useable metal. The deposits of xau ore are far more vast than xag, and derivative of other metal extracts through refining. Thanks for you input.
"Xag"?
My periodic table seems to be missing that one.
Ok I'll appease you. Siver is considered a valuable and workable metal. Gold is workable but generally used for trading purposes. Highly malleable but not practical in everyday applications. Even conductors are using less gold. Silver is blended, and used in industrial applications much more readily and has good conductive qualities.
Well, thanks for elaborating that point, but I was really just nitpicking you on the "x" in "xag" and "xau", which I believe is included because gold and silver are thereby officially considered currencies within the financial community.
Wait, gold and silver are officially considered currencies? How the Hell did the banksters allow THAT to happen? Somebody, quick, call Ben, Timmah, Jamie and Blyth! They've got some damage control to deal with, stat! But I guess they are too busy juggling all their gold and silver price suppression schemes to worry about such small matters right now ....
True, but you cannot compare the two scenarios.
In the OLD scenario, you received something of value.
In the NEW one, unless a major tectonic paradigm shift occurs,there may not be anything to trade even for,with guaranteed use,nor value).
Your statement is valid, don't be the last one out(IF, and a big IF)you can come out with a win.
First, define "loss". After you've done that I'd like your reasoning as to why prices in the "losing" years were lower than in the preceding years. Getting this right could be one of the most important pieces of information in your process of calling tops.
Just keep in mind you can have 2000% gains and 3000% gains without it being the end of fiat......the key is knowing when to sell, because after those huge run ups there were two decades of losses.
I hear this often, but am not sure I understand. If we assume that PMs are running due to the death of paper money, there won't be a top will there? Shouldn't you hold until you see what the new reserve currency will be (commodity basket, fiat basket, SDRs)?
I get your argument about two decades of losses, but that implies that the USD will be the reserve currency in twenty years. It also implies that the US will fix its balance sheet. I think we all know this is never going to happen.
More savant than idiot I'd say.
I'd say savvy savant.
ORI
I remain in physical silver but given the really bad performance in the bond market we may be reaching a crisis point in which the "Monetary Authorities" and their operational henchmen will bomb all equities in order to support bond purchases.
I sold over 30% of my PSLV and other IRA based silver on hopes of a pull back to around $25. It may not happen and then I'll be all back in at any price up to $100 or higher.
How high can silver go? I'm guessing that within 3 years it is at least $300 and in my opinion there are many very sound rationale reasons silver could trade at prices above that of gold, considering how much more rare and useful it is as both money and for technology and other fabrication.
Here are some of the reasons I believe the sky is more or less the limit with silver:
1. Above ground Available Silver bullion inventories have declined from about10 billion ounces in 1940 to around 1 billion today.
2. There is now approximately 3.8 billion ounces of above ground gold available.
3. Silver is not only a monetary precious metal but a highly useful and irreplaceable industrial metal used in high technology, medical and other manufacturing applications.
4. Very little of the silver used in industry is recycled.
5. The historic ratio between silver and gold is about 16.
6. The current ratio between silver and gold prices is about 48.
7. Physical demand for physical silver and silver coins is at all time highs and accelerating.
8. New applications of of silver (almost all non-recylable) such as HeiQ Materials, which "manufactures high-performance textile effects for the most demanding functionalities," in the area of anti microbial and other anti-germ technology using silver compounds are expanding even as silver mining production is just beginning to pull up from a very long down trend and the degree of increase is marginal compared to the increase in investor demand and price increases.
So, silver is actually substantially more rare than gold and yet the price ratios do not reflect the physical reality yet. This means that the long term price suppression of silver via the extreme concentrations of short positions by one or two of the largest Bullion banks has created a sling shot of potential upward price energy. If the CTFC investigation into silver price suppression or any of the current law suites, class action or otherwise, fully reveals the degree and level of ongoing suppression, silver may quickly revert to its historical ratios, and given its increasing rarity and industrial and technological usefulness, climb well beyond its less rare cousin, gold.
Duffminster
Nice summary, Duff.
In my book, own some gold / silver not for investments, but for survival. Anyone who thinks what is happening now, is some short-term thing, doesn't have a clue. This is the 4th Turning.
Gold's has never been an investment, its Insurance.
You have your wealth, you own enough Gold to backstop 100% of what you have now.
At best your even, and everyone not as sharp as you, is left with nothing.
We have a lot of sheeples in that category.
The sad fact is, a lot of folks KNOW they should buy, and been buying, they are too afraid of losing money on PM;s, not realizing they are being bent over and loaded up already.
Pray to GOD, that they are not left with hyperinflation and frns.
God helps those that help themselves. If the Ignorati refuse to buy PMs when you recommend it to them, whose fault is it?
Buy the fucking Silver dip, Bitches!
Good stuff
If somebody puts a bullet in Gadaffi's head tonight the oil and entire metals complex will plummet. At this level he better even not blink if you are long. Trade this bitch.
XAU is a clear complex head and shoulders pattern;point and figure suggesting 156 from current 209, or about 25% pullback.
Stocks like GG,AU, and ABX all project 20% pullbacks based on point and figure charts.
Most commodities return to where they broke out from, after a good run, which we have had. Silver goes back to 22-23 by June.
I am long for over 2 years and am just hedging my locked in profits. 36.00 stop on the hedge.
what about your natural gas longs? its chart showing a "dino fart fading away" formation..
Might want to invest in things that are made of REFINED oil.
http://www.bloomberg.com/news/2011-02-22/record-glut-of-refineries-sells-at-80-discount-as-margins-surge-real-m-a.html
This is weird. I'm getting CD from it.
The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.
The markets only fall when the banksters have eliminated all the short positions and only they themselves have positioned themselves to profit when the market falls
OR
When an unexpected world event catches the banksters with their pants down and the softwares they use to rig the markets go berserk beyond their control.
http://www.marketoracle.co.uk/Article24581.html
One word says it all...
Backwardation.
Backwardnation for mine.
well shoot, I waited all evening and there is no William the Fucktarded Bastard doing his drive-by trolling. I had a bunch of clever responses prepared for his inevitable inane remarks, but alas...no troll.
I wonder if he got fired already?
I guess I will have to wait until tomorrow to find out....I'm signing off of this thread.
HEADS UP ZH -> DXY JUST BROKE DOWN THROUGH 77.50 AND IS AT 77.44 -> VERY BAD NEWS FOR BLYTHE AS THIS IS SUPER BULLISH FOR PM'S
Whoa! This just in from Reuters!
Gold extends losses below $1,400What does this mean? EXTENDS LOSSES! Sell it all now well you still can! Gold drops below $1400!!!!!!!!!!!!!
Wait a fuck.....wtf..? $1400
umm, I bought @ $830 so I guess I am ok.
Reader's Digest Condensed Version:
Buy the fucking dip. Beetchezzzzz
Do you guys think its a good idea for me to buy some SLV calls right now?
I haven't read all the comments, but if silver would plummet below $30 or even $25 what will cause this enormous crash then, considering the appearant shortage and demand already present. These price levels can't be attributed by paper shorts (alone) then...
Read the comments mate, a smallish tight thread.
some good stuff here from some of the more sensible regulars.
Little bullshit, helps put things in perspective...
Silver could reach $25 again:
1. If the US Govt actually did some serious budget-cutting.
2. The Fed puts a halt to QE and swears off trying to inflate the FRN supply.
Think either of those are gonna happen?
It all depends on how fast inflation in the USA rises . If it won't move over 3-5% in 2011 which is likely as recession may restart in the end of year due to oil prices, than would these silver prices be sustainable? If instead, the growth in the USA returns with current low interest rates, inflation may become hyperinflation fast ( >8%) -then of course, metal is the thing to own.
Somehow I doubt that USD and EUR countries will become hyperinflationary this year because I doubt recovery, and hence pricing power, and hence big inflation. Are there arguments they should.
In case paper money system does not collapse in 2011 under 8-18% inflation in the USA and Europe, would the current Silver prices sustain?
I have to read Mises theory on money and what happened in 1971-1980 etc. to understand why precious metals seem to be already gaining so much when there is no real big inflation around, and why zerohedge is sure they will rise higher. Can there be a correction before further growth of them in prices, if any? What if there is another recession and inflation stays below 3%-5%- would that justify further short term growth of precious metals, especially silver, as its demand is kind of related to economic activity? Gold is less demanded in production, I guess.
Oil will rise, that is clear, due to supply uncertainties, but why precious metals abov current levels? What did they due during 1970 recessions?
Not in or before an election year.
Its so fucked - thats why the west will lose in the long game - in the last 20 years politicians , mostly socialist leaning , have shown they are happy to bankrupt their country to hold onto power. ie UK, USA.
Previously you only bankrupted the country to win WW2.