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SILVER - $150/oz Possible In Coming Months Due To Tiny Size Of Physical Market
Silver Up 10.3% YTD - Should Continue To Outperform Gold And Other Assets
- Why Silver is in a Bull Market and How High Could it Go?
- Is Silver About Returns Or A Hedge Against Inflation & Systemic Risk?
- Silver: Very Small Global Supply
- Silver’s Unique Properties
- Silver: Increasing Technological, Industrial and Medical Demand
- Silver: Increasing Investment Demand
- Silver Undervalued Versus Gold
- Conclusion
Silver has been one of the top performing markets in recent months. Silver has risen to $21.41/oz and is up more than 10.3% year to date.
It is important to remember that silver rose to a recent nominal closing high $48.41/oz on April 28, 2011. This means that silver is nearly 60% below its record nominal high of just over three years ago.
Silver In U.S. Dollars and 50, 100, 200 Simple DMA - 5 Years (Thomson Reuters)
After more than 3 years of a brutal correction and subsequent consolidation, we believe silver is set to rise above that record nominal high in the coming months. We continue to be bullish on gold, platinum, palladium and particularly silver.
We believe that silver will likely surpass its non inflation adjusted high near $50 per ounce and its real high or inflation adjusted high of some $140 per ounce in the coming years.
2014 Asset Performance Year To Date (Thomson Reuters)
At the start of the year, silver was trading at $19.41/oz and most analysts were calling for further price falls. Sentiment today remains very poor.
Very few market participants and investors know about silver’s outperformance as silver gets little or no media attention. There is a huge focus given to the record highs in U.S. and some other stock markets. Therefore, silver remains the preserve of relatively few contrarian investors and store of wealth buyers.
Silver remains very undervalued on an historical basis (charts below), is undervalued against gold (chart below) and most stock and bond markets which are now at record highs. Yet, we believe silver is in the intermediate stage of a bull market that will rival or surpass that of the 1970s.
Why Silver is in a Bull Market and How High Could it Go?
Up until 2010 and 2011, precious metals had been the best performing asset classes in recent years with gold and silver outperforming equities, property and most asset classes over a 3, 5 and 10 year period.
They then became overvalued in the short term and were subject to sharp sell offs in 2011 and again in 2013. It is important to note that there were similar sell offs in the 1970s bull markets prior to the primary secular trend reasserting itself.
The fundamentals for gold and particularly silver are very bullish. The primary reason for our bullish outlook on silver is due to the following:
i) The continuing and increasing global macroeconomic, systemic, geo-political and monetary risks
ii) Silver's historic role as money and a store of value
iii) The declining and very small supply of silver
iv) Significant industrial demand and perhaps most importantly significant and increasing investment demand.
Favourable supply and demand factors and concerns regarding the emergence of inflation and stagflation as the massive global monetary and fiscal reflation affects the value of fiat currencies all point to higher silver prices in the long term.
In the 1970s silver rose from under $1.50/oz in 1970 to nearly $50/oz in 1980.
Thus, silver rose by more than 33.3 times or by more than 3,200%. Were silver to replicate its performance in the 1970s, it would have to rise by more than 33 times again. The average price of silver in 2001 was $4.37/oz and 33 fold increase would result in silver rising to over $145/oz.
While this price target may seem outlandish to some, it is worth remembering that silver's record high in 1980 adjusted for inflation (according to U.S. government inflation figures) was nearly $130/oz.
Real Silver Price 1720 To Today To Today (CPI Inflation Adjusted)
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 from a historical perspective.
Most assets in the world are now multiples of their price since the year 2000 and 20, 50, 100 years ago. Many markets and assets are at or near record levels. Silver remains well below record levels.
Admittedly, the final phase of the 1970s silver blow off was a speculative bubble as the billionaire Hunt brothers attempted to corner the silver market. In 1979, there were very few billionaires in the world. Today there are hundreds of billionaires, many multi billionaires, thousands of millionaires, hedge funds and many sovereign wealth funds. Small allocations by any of these to silver will see sharp price gains.
Indeed, the silver market is so small that it could very easily be cornered again - as could other precious metal markets. Indeed, this risk does not come just from private investors. There is also the possibility that resource nationalism and currency wars could see states seek to corner important strategic precious metal markets.
Is Silver About Returns Or A Hedge Against Inflation & Systemic Risk?
Silver is a hedge against macroeconomic, systemic, geopolitical and inflationary risk with the attractive added potential for significant capital gains.
Real asset allocation and prudent diversification would be an important reason to have an allocation to silver. Silver is highly correlated to the safe haven of gold and is in effect a leveraged sister of the precious yellow metal. Silver like gold is for wealth preservation purposes but silver has the potential to deliver substantial returns.
Silver: Declining Supply
In 1900 there were 12 billion ounces of silver in the world. By 1990, the internationally respected commodities-research firm CPM Group say that figure had been reduced to around 2.2 billion ounces of silver.
Incredibly today, that figure has fallen to less than 1.39 billion ounces in above ground refined silver (World Silver Survey 2014 P36-43). Thats means that all the refined silver in the world that is available for industrial and investment purposes is worth less than $30 billion. It puts the scale of the Federal Reserve's monthly QE into perspective - from $85 billion to $35 billion today.
It is estimated that between 50% and 90% of all the silver that has ever been mined has been consumed by the global photography, technology, medical, defense and electronic industries.
Silver World Demand, 2004-2013 (GFMS via Thomson Reuters)
On current supply and demand trends, the amount of above ground refined silver is projected to shrink to even lower levels in the coming years. Demand has been outstripping mining supply for most of the last 20 years, driving above ground supplies to historically low levels.
Few in the investment world are aware of this important fact.
Silver World Supply, 2004-2013 (GFMS via Thomson Reuters)
Total global silver supply from both production and scrap has only increased marginally in recent years (see chart) despite silver’s price gains. Meanwhile demand has been increasing, particularly investment demand.
This hasn't resulted in significantly higher prices yet because the world has been able to fill the gap from inventories and official government stockpiles.
However, today the U.S. government's stockpile is all but gone, and sales from other official sources, such as China, Russia and India, have ended. The decline in refined silver stocks, from around 2.2 billion ounces in 1990 to around 1.4 billion ounces today means that silver stocks are near an all time low.
The rigging or manipulation of the silver price has likely also contributed to silver’s failure to achieve higher prices.
Very importantly, silver is very unusual as its supply is inelastic.
This means that silver production will not ramp up significantly if the silver price returns to the record nominal highs near $50 per ounce or higher.
Silver - World Supply and Demand (Thomson Reuters)
Supply didn't increase significantly in the 1970s when silver rose more than 35 fold in price - from $1.40/oz in 1971 to a high of nearly $50/oz in 1980.
Importantly, silver is a byproduct metal and some 80% of mined silver is a byproduct of base metals. Higher prices for silver will not cause copper, nickel, zinc, lead or other base metal miners to increase their production.
In the event of a global stagflationary or deflationary slowdown, demand for base metals would likely fall thus further decreasing the supply of mined silver.
There are only a handful of pure silver mines remaining - many with depleting reserves. This inflexible supply means that we cannot expect significant mine supply to depress the price after silver rises in price.
It is extremely rare to find a good, service, commodity or investment that is price inelastic. This is another powerfully bullish aspect unique to silver.
Silver’s Unique Properties
Silver has many unique properties which make it ideal and indeed essential in global industry - especially in the global photography, technology, medical, defense and electronic industries. Yet, silver is a finite resource and the supply of silver is increasing only very incrementally.
Silver, unlike gold, is heavily used in industry and because of gold's much higher value, it gets recycled and all the gold mined in the world ever is still with us but a huge amount of silver has been used in photography, mirrors and other industrial uses in the last 200 years. The low price of silver makes recovery and recycling uneconomic.
Unlike gold, silver is like oil - as it is consumed in these many industrial applications it is gone forever.
Why is this indispensable metal in such demand? The reasons are simple. Silver has a number of unique properties including its strength, excellent malleability and ductility, its unparalleled electrical and thermal conductivity, its sensitivity to and high reflectance of light and the ability to endure extreme temperature ranges.
Silver has the highest electrical conductivity of all metals, even higher than copper. It was used in the electromagnets used for enriching uranium during World War II (mainly because of the wartime shortage of copper). Silver has the highest thermal conductivity and optical reflectivity of all metals. Silver’s unique properties restrict its substitution in most applications.
Silver: Increasing Technological and Industrial Demand
Industrial applications for silver have always been significant but have increased significantly in recent years.
Silver uses have expanded to include iphones, ipads, cell phones, flat-screen televisions and many other modern high tech devices. It is used in film, mirrors, batteries, medical devices, electrical appliances such as fridges, toasters, washing machines.
Silver is used in solar energy and photovoltaic cells and this is another growth sector for silver industrial demand.
Growing middle classes in China, India and many other countries are now demanding the quality of life and standard of living enjoyed by many in the West. Technological demand for silver may increase.
Silver: Medical Demand
Silver is known as the 'healthy metal' and has many and increasing medical applications.
In a world that is showing increasing concern about the spread of diseases and pandemics such as various flus, ebola and other viruses, silver is being increasingly tapped for its biocidal properties.
Research is ongoing on the use of silver and its compounds for therapeutic uses and on its potential use as a disinfectant in hospitals and other medical facilities.
Increasingly, silver's antimicrobial and antibacterial qualities are seeing it being used in all sorts of medical applications and this looks set to become a very significant source of demand in the coming years.
Silver: Increasing Investment Demand
Investment demand for silver has risen in recent years as investors concerned about the value and safety of property, equities and deposits allocated funds to the finite commodities and currencies of silver and gold. More recently, there are increasing concerns about the value of paper currencies themselves (voiced by many including Alan Greenspan, John Paulson and George Soros) which is leading to further diversification into hard assets and precious metals.
U.S. Mint Silver Eagle
There has been a marked increase in investment demand for silver in recent years.
Last year, there was a shortage and rationing of both American Silver Eagles from the U.S. Mint as well as so called junk silver -90% and 40& silver bullion bags, pre-1965 U.S. dimes, quarters, and half dollars. There is no shortage this year, but robust demand continues from so called ‘silver stackers’. Silver stackers remain the prudent and smart money.
Investors in silver bullion coins and bars are hedging themselves against the monetary risks. They are protecting themselves against rising inflation, possible currency devaluations and still very prevalent geopolitical and macroeconomic risks.
Silver Undervalued Versus Gold
Silver is undervalued versus gold with the gold silver ratio at 62:1 ($1,330oz/$21.40/oz).
This is particularly the case on a long term historical basis. The long term historical average gold to silver ratio is 15:1 and this is because it is estimated that geologically there are some 15 parts of silver in the ground for every one part of gold.
Gold Silver Ratio, 20 Years (Thomson Reuters)
In 1980 the ratio nearly reached 15 ($850oz/$50oz=17) and the average in the 20th century has been around 40:1.
At silver’s intermediate price peak in April 2011, the gold silver ratio fell to nearly 30 to 1.
We believe that silver's ratio to gold will revert to its mean average in the latter half of the 20th century below 40:1 as it did in 1998 and again in 2011.
Conclusion
Silver is unique in terms of being both an industrial metal and an investment and store of value.
Silver is priced at less than $22/oz today. The average nominal price of silver more than 34 year ago, in 1979 and 1980, was $21.80/oz and $16.39/oz respectively.
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.
Given the very strong demand and supply fundamentals, we believe silver will be valued at well over $50/oz in the coming years and should rise above the real high from 1980 at $140/oz.
Silver remains one of the most attractive investment opportunities today and those who own physical coins and bars in an allocated manner, will protect and grow their wealth in the coming years. Avoid digital gold and unsegregated gold where you partially own allocated but unsegregated gold bars.
We are now offering a silver price match guarantee and will match prices offered by bullion dealers internationally >> Bullion Coin And Bar Price Match Guarantee
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Gold and silver tend to move in the same direction, ever heard of 'poor man's gold' you total fucking idiot? Go fuck yourself you fucking moron.
Ever heard of "GOLD BITCHES!!"?
Yeah, didn't think so.
Go away, amateur.
I am Chumbawamba.
Almost everyone knows that a contract for silver is even better than real siver. You can buy it on margin with leverage, you don't have to store it and you can do this over and over....the best part is that they never run out of these contracts...Americans love paper silver...and there is pleanty to be had.
I have zero doubt that the ramp in silver will soon be quelled by the supply of paper silver...they have an unlimited supply and TPTB do not want to see metals looking like too good a thing.
It will go on like this until TPTB run out of acceptable currency to keep these contracts coming. In fact they will be writing these contracts even as the walls are caving in and the roof is falling....even moreso for gold.
Actually it sounds like they will run out of silver first. Stock is depleting rapidly AND demand is still going up. What will Foxconn pay for silver when there isn't enough to go around?
When the engineered collapse of the Federal Reserve Note happens silver will still be worth something.
Likely gold will hold value better ... likely lead even better ... likely toilet paper even better.
Yeah yeah yeah.
They dusted off the 2011 sales pitch after a couple of good weeks. Wake me up when price goes over the pile of 31 dollar eagles laying on the.bottom of the reservoir. To the moooooon!
I think a lot of you dumb motherfuckers should buy some citigroup or GM. Those are rock sold investments guaranteed to go to ZERO over time. Remember the Ditech Mortgage ads, "It's easier than ordering a pizza!"
Maybe you Goldcore morons should read the sources and uses section of the annual Silver Institute report. If you did, then you might have a clue.
Or is it your intent to lie and thereby create a market that has no reason to exist so that you can personally benefit.
I believe that is called fraud.
Silver Institute is a gov't scam. Put in place for disinformation. Silver Inst isn't worth shit when it comes to truth and honesty.
yer,like the world gold council. Every statement they utter sucks the genitals of the merchant & central banks and disempowers gold mining companies
still, its the gold miners fault for not creating a new alternative organisation that actually looks after their interests and supports policy that keeps the price of gold comfortably above the $1200 / ounce average it takes to produce the stuff
As long as rehypothecation continues it doesn't matter how much physical is not around.
Sure, until there isn't enough silver to make all the years igadgets and such. You can't print silver and make anything but a fire from it.
Will a silver PLATED bullet kill a vampire, or does it have to be solid? I searched the net, but it looks like .gov scrubbed this valuable piece of data from the system .
Let me check with Sammy and Dean,,,
;-D
QTips are go to $1000 in the coming months!
ZH has to stop posting so many wishful thinking bullshit articles about the metals.
With all we know that is bad and the metals still have not skyrocketed, are we missing something?
Scarcity cures manipulation.
You are missing patience. Remember, the real market runs on supply and demand. We are approaching the day when demand outstrips supply. When that happens the price has to go up. You can help make it happen a few seconds faster when you buy an ounce.
No one really knows....demand from Asia could be huge going forward....people can afford silver and if the Chinese start buying it then look out! At the end of the day all resources are becoming increasingly scarce..the whole paper market will collapse as people will insist on owning the real thing and then prices will skyrocket. All imho.
I think this article is correct but it may be your heirs that benefit from it. They will be happy their crazy ancester bought silver (and gold) at incredibly low prices. I just had a kid so I am still stacking.
blah blah blah, except paper covers rock. And... paper silver will cover the precious metal. For silver to levitate again, paper would have to settle in physical. It doesn't. It settles in other paper.
Plus what teslaberry said. :-)
True, but silver can be hammered into scissors and cut paper. Haha! That's when SLVR dies and the COMEX finally fails.
Plus teslaberry is a douchebag zionist.
-Chumbz.
And you're a fucking idiot.
lol
A moron calling me an idiot.
How is Foxconn going to turn paper into igadgets?
Oh... $50 some day.. not tomorrow. $150 some day, not for quit awhile.
yer, like it was in 1980
tell me dude, of any other commodity today that is less at 40% of its price 35 years ago
if you dont see any room for 'catch up' then good luck with whatever investment strategy your family is enduring
silver is no longer stockpiled by central banks for money , gold is.
silver is mined EVERYWHERE AND SEPARATED FROM GENERIC ORES.
silver, relative to gold , is highly abundant. silver is an industrial metal. liek iron. iron is 100 a mettric ton. gold is 100 dollars for 2 grams, ahalf a million times cheapaer than iron
one may argue that all metals are underpriced, but the hisotircal moneyness of silver is not what it used to be. the dollar was thaller in germany a silver coin.
there are no nations that bank silver as a reserve asset . the possibe need to coin silver for money could change that. but that truly is an international political decisions.
will china begin coining silver as money in a meaningful fashion? no.
central governments across the world do not want to be constrained. they don't want the limits of production of any mmined ore to have any constratin on their behavior.
gold is an exception to this obsious rule, becasue by using gold, and constraining their own behavior , nations can seek to constrain other nations in the currency war battles. more importantly people who are looking to hide their assets in offshore safehavens and hidden banks in switzerland USE GOLD NOT SILVER BECAUSE SILVER IS SIMPLY TO HEAVY.
CONSIDER SILVER PRICED AT 100 DOLLARS AN OUNCE VERSUS GOLDS 1300. YOU NEED TO CARRY 13 TIMES THE WEIGHT. AND BECAUSE SILVER IS SUBSTANIALLY LESS DENSE THAN GOLD, THE VOLUME IS EVEN GREATER. 80% greater. .
so 1 million dollars of gold is approximately 23 kilograms at todays price and 1.5 liter worth of volume,
1 million of silver at todays 20 dollar price ...is over 4700 liters. thats AND it weighs not 20 kilograms but about 1400 kilograms.
THINK ABOUT 1 MILLION DOLLARS OF NETWORTH FOR A PERSON WITH A SMALL FORTUNE MOVING AROUND LIQUID ---TRANSPORTABLE ASSETS. THE COST TO MOVE SILVER IS ASTOUNDING AND REQUIRES CUSTOM TRANSPORTATION SOLUTIONS. THE COST TO MOVE GOLD IS MINIMAL.
SILVER'S VALUE AS MONEY IS THE POOR MAN'S GOLD. MORE AND MORE SO EVERY CENTURY AS OTHER TRANSPORTABLE ASSETS BECOME VALUABLE. DIAMONDS, GEMS, COPPER....
I heard Bitcoin crosses borders like they aren't even there, is weightless in any amounts, and can be sent to any location on earth in an hour for practically zero fees.
until the internet goes down
True that. However, when was the last time that happened? And while the internet is up, you and I both know you are exchanging USD, not bullion.
haven't you heard? they now have thumb drive (ssd) sniffing dogs at the barriers. cornhole your bitcoins in a thumbdrive...get a free prostate exam.
Carry your thumbdrive openly in your shirt pocket. If anybody asks tell them it contains encrypted photos of your wife (you get lonely on business trips :) Either that or store the $millions worth of coins in your brain.
I'm offering $125 per short ton for all of your iron. Sell to me.
To see where the monetary ssystem look at the ECB balance sheet. They plan a new use for gold that does NOT constrain money creation. They have gold on the balance MARKED TO MARKET....think on that long and hard. It means if a country prrints too much paper then gold will cost more in that currency to buy it. If the USA or EZ need to increase the money supply and they do not want to cause a change in the exchange rate they could just buy gold on the open market.
This will only be meaningful however when the gold derivative market is gone... ie paper gold dies.
Until then buy gold in anticipation of a huge upward repricing. Thuis will happen because it must.
Do some research on diamonds.
Oo oh my aching back!
I understand your pessamisism. But silver is in no way common relative to gold. Not even close.
Ratio Gold:Silver on earth is around 1:16 maybe 1:15.
the latest geological estimate is 1:17.5
I'm somewhat skeptical for a few reasons (note I own plenty of silver avg purchase price $28, I even purchased 15oz right at the top, got 10kg at $35 on a leg down)
- If the economy gets crushed there will be far less demand for silver
- Annual production is about 20,000 tonnes every year it's massive
- As someone pointed out people who purchased at $35+ will probably be looking to get out or reduce their holding
- Silver and Gold are traded 10:1 or 100:1 so there is lots of paper that can be pushed around to absorb demand
I have little sympathy for people who went all in at or near the top, silver, housing or any other market. I also recall one video where someone was cashing in some silver coins to buy groceries or pay a bill. Seriously? You should have a cash float for at least a few months expenses.
LOL I remember "pastor Lindsay Willams" talking silver up to $75 by September.
I used to read Harvey Organs blog on Gold Silver just got too repetitive with the same thing "tomorrow or next week it's going up"
Eric Janzen and iTulip had a great article that I wish I had paid more attention to where he was predicting silver at $27 when it was up above $40 I remember punching the number into my spreadsheet thinking can I handle that mentally. The answer was yes $19 was really hard but whatever you suck it in and move on. I wish I had more of a trader mentality.
Don't beat yourself up about it too much. It's hard to make an honest profit when a bunch of douchebags with no ethics get to control the market for their own benefit. Even having a trader mentality didn't work out all the time.
-Chumbz.
Ah, I see why you're so pissed, you bought silver when it was 48 bucks an ounce and now you're pissed off. Ah well, sorry you took that bath buddy!
Oh, shut the fuck up already you dumn, stupid cunt.
LOL a gay faggot zionist that lost his shirt in silver calling me a stupid cunt!
Whats the "IN God we TRUST" all about? is that still true?
Where "God" = "GOD" = "G.O.D." = "Government Obligated Debts", then yes, it's true.
See my above comment re: 14th Amendment and your duty to pay your tithe to G.O.D.
THOU SHALT NOT QUESTION THY G.O.D.
-Chumbz.
Not since the enlightenment.
blah, blah to da moon bs. As long as there is a silver paper market the powers that be can manipulate it down and keep it down because they can create or take away just by adding or removing 'paper'.
Hmm, I can walk into any coin shop in the land and physical silver is available at the "paper" price. If your consipiracy theory is true, it disproves the law of Supply & Demand. And this has been going on for how long now?