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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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You are so fucking stupid it's laughable, ever heard the term 'precious metals'? Go google it you fucktard.
How does that equate to silver shooting to $150 as the author of this tripe suggests? It doesn't, and you don't even know what you're arguing about anymore. You just want silver to be at $150/ozt so you can get your sex change operation or whatever.
If you weren't blinded by your own greed and maybe read some articles circa 2010-2011 predicting verbatim the same sudden meteoric rise in silver then you would see the folly of your fantasy.
I am Chumbawamba.
It is a safe bet they didn't know why, but silver was preferred for utensils and baby cups because of it's anti-microbial properties.
It's also a safe bet that Chumba does not know that either.
Nope. Totally ignorant of it. I put that silver ounce in the bottom of my 55 gallon water storage tank back in 2011 for good luck. Had no idea it would provide anti-microbial protection. I had no idea that colloidal silver was a terrific antibiotic when I began using it back in 2010. I thought it was a vitamin or some shit.
Ya see, I's ign'ant.
I's Chumbawamba.
we few, we happy few, we band of silver holders . . .
(We band of buggered.)
C'mon, don't be cynical. Be hopeful! If I owned silver, I'd hang in there...
I plan to buy a little when the price hits 14.50, and A LOT when it gets near 8.40 - think that's a solid price floor (pivot level from '03 to '08).
And after that: to the moon baby!
Paper silver may be 'deliverable' at those prices......
Patience until silver does its thing.
It is so volatile, I could see it going to $50 or even $100, then back to $25.
http://www.worldcomplex.blogspot.ca/2014/07/what-will-happen-with-silver...
There will be a lot of resistance in the low 30's where quite a bit of physical silver was bought before the crash was induced. It will take some type of black swan or real economic crisis to punch through that level, but after resting for a while I could see silver near $50 again.
Silver will do very well in the years ahead but this story makes it sound as though it will explode in price next week.
Currently retail demand for silver in Europe and North America is quite dismall. Almost any dealer or distributor you talk to will report laclustre sales as well as a fair amount of selling from the public. Just check ebay (or any internet dealer) premiums to confirm.
The problem for silver is the huge overhang of stale longs that regret not cashing out in the $40 range back in 2011. The manipulators understand this and use it to their benefit. For example, in May of 2011 nearly every North American refinery was flooded with larger bars and several were even refusing to buy silver. This situation made it easy for the shorts to run rampant and not be too concerned with delivery issues. Those who want to contain the price know that the public will buy smaller units such as one ounce coins while selling larger bars as the price rises. Blyhe Masters could explain this to you.
Currently the US and Canadian mints are going flat out producing one ounce coins. Retail demand for those same coins is well off the highs. Where are the coins going? Some automatically assume it's Red China or other Asian markets. Fact is very few of those coins go to Red China as there are no distributors for either there. When you go to the shops in China to buy silver coins, the vast majority of imported product is from Australia. The few North American coins you see have been imported from North American retailers or distributors.
Ted Butler thinks the coins are being bought by financials on spec as the premiums are currently rock bottom. They hope to capitalize on higher premiums when public demand picks up. To me it seems a lot of work considering that such a transaction cannot be leveraged and the the silver component must be fully hedged. I would hazard a guess that surplus production is being put into some "continuity of gov't" stockpile. I can't say much beyond my guess being a very educated one.
We always hear about the great silver melt of the late seventies and early eighties. People lined up for blocks to sell the "family" silver. What is rarely mentioned is the public buying. Demand was so high then that refineries were opening up like dandelions in the spring to turn coins and flatware into bars to meet public demand. There are still considerable hoards in older hands that won't hesitate the next time we see silver make a move higher. I suppose they are about as stale longs as you can get.
Point is that silver will see some dramatic price increases as well as "gut wrenching" declines in the future. It will indeed have its day but it will be one heck of a roller coaster ride. I suspect we will see pices over $100 but when that happens, expect corrections in excess of $60.
Don't take this post as an excuse to not hold silver. It will be very important in the years ahead as will any liquid asset that is held outside the financial system. The monetary metals will be the premium assets.
maybe could be might be is possible......
I give silver away to people I like.. I just gave a silver ring away to an Asian girl who was visiting
with her boyfriend.
Right now is the best of times to add to me holdings and quite frankly, I am. And yes, I really don't give a damn if you know it or not, 'cause you don't wanna know what I'll do to you in order to protect it.
Go ahead punk, make my day...
" It will take some type of black swan or real economic crisis to punch through that level, but after resting for a while I could see silver near $50 again."
40% US stock market correction to historical P/E averages.
Last Iraqi soldier standing trades his rifle to ISIS for options on 72 brown-eyed virgins, and 3M barrels/day of oil production go offline with US gas prices at $4/gal.
One of the 500,000 illegal immigrants/yr crossing over the US southern border presses his cheeks against a 737 window after boarding with his official US 'request to appear' notice in the name of his choice documenting his identity/nationality, and blows 3lbs of semtex and intestines through the cabin/wing/fuel tanks, launching the next $1 trillion US spending binge on airport anal explosive detectors.
Germany tells the Greeks to pound sand or whatever else floats their boat next time the Greeks try to extort some German savings to hire more Greek civil servants.
Republicans, seething, wait until the election passes....THEN replace the Oompa-Loompa as house speaker. Impeachment articles are sent to the (newly) republican controlled senate, charges to include pulling 70% of border patrol agents off border patrol to wipe asses of illegal immigrants brought into the US to effect the political balance in swing states, as well as trivialities such as the prohibition of a natural born Kenyan from holding the US presidency.
What could possibly go wrong......
I can't believe we ( me included) sit by and watch this shit.
That being said, I try my best to prepare, as I'm sure most of you do.
But watching this in real time, I just wonder, just what the fuck will be the straw that breaks this camel's back?
We are kept " just comfortable enough". But something's gotta give.
Obviously a pitch by silver peddlers, but it's all absolutely true.
Silver and gold look underpriced to me right now.
Past performance is no guaranty of future return.*
* Don't you fuckers ever read the fine print?
I am Chumbawamba.
We've heard all this sliver hype before,
many, many, many times.
Put up or shut up.
Tired of hearing the same old crap.
Crisismode We've heard all this sliver hype before,
many, many, many times.
Put up or shut up.
Tired of hearing the same old crap.
---
I agree. It is amazing with such a shortage that you can get 1 free gram silver bar from Lear Capital.
http://www.learsilvergram.com/
If things are as Lear Capital and others suggests, wouldn't Lear profit more by holding on to their silver? Wow, you can even get a certificate for $500 worth of sivler or gold. All they want is your business and, oddly enough, eventually your CASH.