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Silver - The World’s Most Undervalued Asset

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Today’s AM fix was USD 1,289.75, EUR 930.02 and GBP 767.07 per ounce.              

Yesterday’s AM fix was USD 1,302.00, EUR 938.45 and GBP 772.79 per ounce.


Gold and silver fell for a second straight session today despite escalating tensions between Russia and the West.



Silver in U.S. Dollars, 2 Years - (Thomson Reuters)

Markets await this week's U.S. jobs report and a Federal Reserve policy meeting for further hints regarding the fragile U.S. economy and the extent to which ultra loose monetary policies will continue.

Tensions between the West and Russia over Ukraine remained very high after the United States imposed new sanctions on key Russian business figures. This prompted Moscow to denounce "Cold War" tactics. President Obama announced the U.S. would impose a new round of sanctions on individuals and companies in Russia. Obama said the sanctions will focus on “some areas of high-tech defense exports” to Russia.


Violence continues in eastern Ukraine and risks deteriorating. The Cold War rhetoric and geopolitical risk is being overlooked for now.

In the physical markets, data showed China's gold purchases via main conduit Hong Kong fell to a four-month low in March. Net gold imports totaled 80.6 metric tons in March, compared with 111.4 tons in February.


Imports remained very high in the first quarter and are on track to equal the record level of demand seen in 2013 (see chart).

Shanghai gold prices have now recovered to a premium of about $1 an ounce indicating a slight uptick in demand. An increase in physical demand across Asia appears to be providing a strong floor for gold.


Silver - The World’s Most Undervalued Asset

Silver dipped to $19.10/oz overnight and remains under pressure this morning . With the gold silver ratio at just over 66 ($1,290/$19.38/oz), silver remains a compelling buy at these levels.

The stealth phenomenon that is silver stackers or long term store of value buyers of silver coins and bars continues and is seen in the record levels of demand for silver eagles from the U.S. Mint.

The US Mint sold 13,879,000 ounces of me in Q1, 2014. This is just over 2% less than the 14,223,000 sold in the first quarter last year. March sales were the fourth-biggest month ever and the US Mint is now on pace to exceed 2013 totals.

Silver stackers remain the smart, informed buyers. They realise that silver is undervalued versus gold with the gold silver ratio at 66:1. This is particularly the case on a long term historical basis. The long term historical average, gold to silver ratio is 15:1.

This is because it is estimated that geologically there are some 15 parts of silver in the ground for every 1 part of gold. In 1980 the ratio nearly reached 15 ($850oz/$50oz=17) and the average in the 20th century has been around 40:1.



Silver is unique in terms of being both a monetary and an industrial metal. Silver’s industrial uses should mean that the gold silver ratio will likely gradually regress to the average in the last 100 hundred years. If the tiny silver market was to see significant investment funds enter it than the ratio could return closer to the historical average of 15:1 as it did as recently as 1980.

Silver is undervalued when compared with gold, platinum, palladium, base metals including copper, oil, stocks and the DJIA and Nasdaq, bonds and the U.S. dollar. Ted Butler has an excellent research note on this today with some excellent charts showing silver’s relative value to these benchmarks.

Silver at below $20/oz, remains less than half of its nominal record price in 1980 and very undervalued from a historical basis. The average nominal price of silver in 1979 and 1980 was $21.80/oz and $16.39/oz respectively.

There are very few, if any assets that remain at the same price levels as they were more than 30 years ago.

In today's dollars and adjusted for inflation that would equate to an inflation adjusted average price of some $60/oz and $44/oz in 1979 and 1980. It is for this reason that we believe silver will be valued at well over $50/oz in the coming years and silver remains an incredible opportunity.


A picture or a chart truly is worth a thousand words and the chart above showing silver prices adjusted for inflation shows how undervalued silver remains.

Silver industrial and investment demand is increasing very significantly and meanwhile supply is falling. The fact that the huge majority of the investment public and financial services industry remains unaware of the fundamentals in silver means that the bull market in silver likely remains in its intermediate stage.


Silver, like gold, has been and is increasingly again being regarded by many investment managers as a great financial hedge against terrorism, war, fiat currency crises, deflation, inflation, stagflation and even the worst case scenario of hyperinflation.


Today, people in Iceland, Cyprus, Iran and Ukraine can attest to the value of silver as a store of value against currency devaluation.

Protect Your Wealth With Store Of Value Silver Eagles

 

 

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Tue, 05/06/2014 - 15:12 | 4732974 cfosnock
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The US mint has been allocating its bullion for over a year which would indicate a tight market but on the flip side the world mints are still able to scronge enough silver to producing record amounts of bullion coins.

Wed, 04/30/2014 - 06:15 | 4711165 Big Boss Man
Big Boss Man's picture

Just curious as to when you guys go to the local coin store, do you pay sales tax on purchases of silver ?
In NY State, purchases over $1000.00 are not subject to state/local taxation.

Wed, 04/30/2014 - 04:53 | 4711112 Notsobadwlad
Notsobadwlad's picture

People should read the Silver Institute reports and not listen to those touting their own book.

There is no shortage of silver. Silver was money many times in the history of the world, but not now.

The only case where silver will be money again is if the governments who control a country, region, territory or the entire planet decide to make it money.

When photographic use of silver died, the silver industry needed another place to sell their commodity otherwise there would be a huge excess.

Read the report and do not listen to touts.

Wed, 04/30/2014 - 01:15 | 4710942 Seeking Aphids
Seeking Aphids's picture

I have heard from insiders that GS claims that APS is getting into bubble territory. But we all know that is shit.

Wed, 04/30/2014 - 03:18 | 4711047 SAT 800
SAT 800's picture

The article is correct. Silver is the most undervalued hard asset on the planet; just like 2001 all over again, when it was 4.25, intra day; and at that time, also the most undervalued asset on the planet. When the "Beast", the mass mind, rolls over and decides it isn't comfy being asleep anymore, your head's going to explode.

Wed, 04/30/2014 - 00:40 | 4710903 I Write Code
I Write Code's picture

I'd say gold is more useful, it's just too expensive.

... now that silver isn't used any more for photography.

Wed, 04/30/2014 - 03:18 | 4711048 SAT 800
SAT 800's picture

Your opinion is meaningless. What part of most undervalued asset is it that you don't understand?

Wed, 04/30/2014 - 04:55 | 4711116 Notsobadwlad
Notsobadwlad's picture

Silver is not undervalued. It is overpriced. If it was not for the touts pushing silver as money (which it is not) there would be a massive excess of silver and prices would crater.

Read the Silver Institute reports.

Tue, 04/29/2014 - 21:48 | 4710421 takla
takla's picture

patients,all the fundimentals point to increased usage[solar] and the easy fruits been picked,,,now if we can rid ourselves of the manipulation.....

Tue, 04/29/2014 - 20:20 | 4710091 ali-ali-al-qomfri
ali-ali-al-qomfri's picture

well I cerrainly apologise for buying@21.66 and not informing my good friends on ZH , becuase once I buy the price goes down (that applies to any investment etc.), I'm willing to make it up by offering stock and bond purchase advise so you can do the oppsite and win. Cheers.

Tue, 04/29/2014 - 22:06 | 4710497 tempo
tempo's picture

Civil unrest means protection and silver.

Wed, 04/30/2014 - 04:59 | 4711119 Notsobadwlad
Notsobadwlad's picture

So please tell the board how silver provides you with protection during civil unreast. Will you stash it or trade it during civil unrest. Who will trade what you need for it? Are you going to go down to the local grocery store and trade your silver for food? How does that work exactly if the system has broken down?

Tue, 04/29/2014 - 20:06 | 4710050 lex parsimoniae
lex parsimoniae's picture

It seems to me that the concern about near term silver valuation is due to the 'trader' mentality. While I can symapathize with frustration over the dearth of uncompromised investment vehicles due to corruption in the various marketplaces, PM's today are no better -In The Short Term-.

However, I believe they are second to none as a store of value over time. How much time? Who is to say, but I'll place my bets on the side of history and hope to have the purchasing power I store away today, available for when the SHTF. 

Lex

Tue, 04/29/2014 - 19:44 | 4709967 s2man
s2man's picture

I read almost the same exact article this week (bullionbullscanada? silverdoctors?).  I aledge they cut/paste.

Tue, 04/29/2014 - 19:19 | 4709854 brennanblue
brennanblue's picture

clif high mentiones the words 'coiled spring' coming up in his latest webbot data report... http://www.youtube.com/watch?v=QxoI9jEM14c#t=1730 - minute 28.5 or so.
If you beleive Ag is unique and valuable, might be time to go solar with your stack... For those bugging in, of course...

Tue, 04/29/2014 - 20:32 | 4710133 sunnydays
sunnydays's picture

OMG seriously?  Cliff High and webbot?!  You don't really follow that do you.  That is all fraud and made up stuff.  I remember in 2009 hearing how he said silver would be $650 an ounce that year.  I can't believe there are still gulliable people who listen to anything he says anymore.  He sells the fear and is never correct.  

Tue, 04/29/2014 - 20:41 | 4710166 quasimodo
quasimodo's picture

LMFAO! I had forgot about that one........HAHAHA! Thanks for the laugh

Tue, 04/29/2014 - 22:37 | 4710630 willwork4food
willwork4food's picture

Cliff High might not have said it absolutely would do that, just that the linguistics suggested it might and he thought it could from the data. The data did not take into allowance the obvious JPM/SACS manipulation. I understand he is a businessman but I believe he is on the same team as we are.

Tue, 04/29/2014 - 19:06 | 4709817 Flakmeister
Flakmeister's picture

Uh oh...

Looks like a sell signal...

Tue, 04/29/2014 - 18:41 | 4709740 KingdomKum
KingdomKum's picture

we few,  we happy few,  we band of silver stackers  .  .  .

Tue, 04/29/2014 - 18:36 | 4709721 Thisson
Thisson's picture

I like both gold and silver, but the "arguments" presented in this article are nonsense:

1) The amount of silver in the earth, compared to the amount of gold in the earth's crust, is completely irrelevant.  Scarcity and value are separate concepts;

2) The nominal price of silver in 1980, a year when the price was artificially manipulated higher (by the attempt of the Hunt brothers to corner the market) is a cherrypicked number and is also completely irrelevant to today's price.

Does anyone here really think silver will be remonetized?  The fact that it is an industrial metal in short supply means that it likely cannot.  That is what makes gold so great as money - it has no real competing industrial use that consumes it in any significant quantity.

 

Tue, 04/29/2014 - 18:50 | 4709764 TPTB_r_TBTF
TPTB_r_TBTF's picture

Does anyone here really think gold will be remonetized?

 

i do not want to carry gold around.

a currency backed by gold would need auditing.  So who is the auditor?  Not you, i donT trust you!  So, ok, i will be the auditor.  What, you donT trust me?  Ok, Honestann can be the auditor.  Everyone trusts her, right?  She's honest.  Even has the nick to prove it.

Tue, 04/29/2014 - 19:08 | 4709831 Thisson
Thisson's picture

Understood, but there's a difference between using gold as money and using gold to back money.  And yes, I do think that gold has the potential to be used as money again; and clearly, so do Central Banks or they wouldn't hoard it, would they?

Tue, 05/06/2014 - 15:20 | 4733005 cfosnock
cfosnock's picture

This is true but IMHO the only reason they would do so and prefer gold over silver is becuase they own the vast majority of it and they can control it.

Tue, 04/29/2014 - 20:32 | 4710132 aminorex
aminorex's picture

And you think that paper gold derivatives are sound money?  Paper claims *always* turn to fractional reserve.  Good luck getting the gold.  Cryptocurrency is better.  They cannot take a secret from you by inflation or taxation, it's anonymous, survives changes in governments.  Immature now, so it's cheap. As the risk goes down, the cost goes up.

Wed, 04/30/2014 - 07:11 | 4711227 Thisson
Thisson's picture

No, I haven't said anything about "paper gold derivatives."  I think it is wise to own physical precious metals, both gold and silver, but I think the catalysts for realizing value in each metal is different.  I think the case can be made that Gold is money, will be increasingly recognized as such, and that demand for gold will rise accordingly.  For silver, I think the case for an increase in valuation lies in its industrial uses, and that once this economy is repaired (by fixing how our money works!), the economy will grow and demand for silver will rise.

Tue, 04/29/2014 - 22:31 | 4710597 IndianaJohn
IndianaJohn's picture

aminorex, -- phonestar, is that you? And about that Mt. Gox.

Tue, 04/29/2014 - 18:36 | 4709720 pc_babe
pc_babe's picture

Graphene ... is that like zirconium?

Tue, 04/29/2014 - 19:07 | 4709825 Flakmeister
Flakmeister's picture

Actually it is a helluva lot more useful and interesting....

Tue, 04/29/2014 - 18:20 | 4709679 pies_lancuchowy
pies_lancuchowy's picture

''The long term historical average, gold to silver ratio is 15:1.

This is because it is estimated that geologically there are some 15 parts of silver in the ground for every 1 part of gold.''

 

0/5 for you , my clueless friend

Tue, 04/29/2014 - 18:01 | 4709630 RaiZH
RaiZH's picture

Nice... I just bought 40 ounces today :D  

Tue, 04/29/2014 - 17:21 | 4709487 Latitude25
Latitude25's picture

Goldcore.  The "go by" for ZH for nearly all info having to do with gold.  There is a lot more information available that is very interesting.  For instance a series of youtube videos by belangp:

https://www.youtube.com/watch?v=wx87Hv2WdwY

Tue, 04/29/2014 - 17:17 | 4709473 RevRex
RevRex's picture

It's hard not to stack it when rounds can be had delivered for $20.16 an oz.

 

 

I bought last time at $20.00 delivered.

Tue, 04/29/2014 - 17:17 | 4709470 BigJim
BigJim's picture

 Silver stackers remain the smart, informed buyers. They realise that silver is undervalued versus gold with the gold silver ratio at 66:1. This is particularly the case on a long term historical basis. The long term historical average, gold to silver ratio is 15:1.

This is because it is estimated that geologically there are some 15 parts of silver in the ground for every 1 part of gold. In 1980 the ratio nearly reached 15 ($850oz/$50oz=17) and the average in the 20th century has been around 40:1.

Silver stackers remain the most fucked-in-the-ass buyers for the last three years. I know; I've been buying since the 'lows' of $28, $24, $22, and $19.

When will this stupid 'silver is worth 1/15 of gold because there is only 15 times as much silver as gold in the earth's crust' meme going to die? There's far more gold in the world than Albanian Poodle shit, but that doesn't mean we can expect APS to trade at a premium to gold.

DEMAND has to be taken into consideration, too. Silver use may go up. It may go down. If (when?) 'they' manage to produce graphene cheaply, that'll be silver's use in electrical goods largely ended.

I like silver. Fuck knows I own enough of it to wish I didn't. And I'm holding onto it (sunk costs fallacy, etc). But I'm not remotely confident it'll get up to $50 again any time soon.

Tue, 04/29/2014 - 20:21 | 4710092 Grouchy Marx
Grouchy Marx's picture

BigJim: I own some BlackBerry stock. You’ll see 50 Silver long before I see 30 BBRY.

Count your blessings. You’ll always be able to take your tableware and silver to a plater and have it made to look deluxe.

My stock won't even get me a discount on a new phone. 

Tue, 04/29/2014 - 20:17 | 4710078 Againstthelie
Againstthelie's picture

Recently I read that the argumentation that the 16:1 ratio was false, because it were outdated numbers and today the ratio of silver:gold in the earth's crust has widened to around 60:1.

I own silver myself, but the pumping is not ok.

Wed, 04/30/2014 - 01:23 | 4710954 buyingsterling
buyingsterling's picture

RE 60 to 1 silver/gold in the earth's crust ratio

 

Can you offer a source? I've read in many places that most of the primary silver mines are tapped out, and the ratio in the crust is closer to 10 to 1. The USGS has said that silver will be the first extinct element on the periodic table (I suppose that means not available in industrial quantities).

Tue, 04/29/2014 - 20:35 | 4710143 aminorex
aminorex's picture

That's prima facie ludicrous.  There's simply no way that 75% of the earth's crustal PMs have been tapped.  In the long run, it doesn't matter if the earth runs out because we will be mining asteroids in 20-25 years time.

Tue, 04/29/2014 - 21:05 | 4710254 Dr. Sandi
Dr. Sandi's picture

Yeah, with rockets propelled by unicorn farts.

Tue, 04/29/2014 - 22:28 | 4710590 willwork4food
willwork4food's picture

And engineers paid with room & board.

Tue, 04/29/2014 - 20:09 | 4710054 Grouchy Marx
Grouchy Marx's picture

Just bought some Albanian poodles and they are stacking for me! 

Tue, 04/29/2014 - 18:18 | 4709668 TheReplacement
TheReplacement's picture

If and when it goes over $50 can I buy yours at $50?

Tue, 04/29/2014 - 17:44 | 4709578 kurt
kurt's picture

Where can I buy APS?

Tue, 04/29/2014 - 17:37 | 4709553 Latitude25
Latitude25's picture

I own plenty of silver and god knows it's a great deal.  The problem is that it weighs too damn much.  I'm not prepared to make a forkilft part of my relocation strategy.

Tue, 04/29/2014 - 18:54 | 4709780 TPTB_r_TBTF
TPTB_r_TBTF's picture

right next to my bugout bag is my bugout forklift.

Tue, 04/29/2014 - 22:16 | 4710534 willwork4food
willwork4food's picture

A bugout forklift. Yes, everbody needs one.

Tue, 04/29/2014 - 17:14 | 4709461 quasimodo
quasimodo's picture

"silver likely remains in its intermediate stage. "

So is the bullish stage $25?

Sorry, hard to not be sarc when we keep witnessing the ass poundings.

Tue, 04/29/2014 - 19:51 | 4709992 lex parsimoniae
lex parsimoniae's picture

Things that cannot continue have a tendency to stop.

Tue, 04/29/2014 - 20:12 | 4710063 Grouchy Marx
Grouchy Marx's picture

Attribution: Sir Isaac Newton.

Tue, 04/29/2014 - 19:39 | 4709939 MFL8240
MFL8240's picture

Easy to be sarcastic, how about criticizing the fraud in the system wherein JP Morgan and the rest of these Bullion banks undermine prices daily using illegal actions that goes unpunished?

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