Guest Post: Top 7 Reasons To Buy Silver Now

Tyler Durden's picture

Submitted by Jeff Clark via Casey Research,

I remember my first drug high.

No, it wasn’t from a shady deal made with a seedy character in a bad part of town. I was in the hospital, recovering from surgery, and while I wasn’t in a lot of pain, the nurse suggested something to help me sleep better. I didn’t really think I needed it—but within seconds of that needle puncturing my skin, I WAS IN HEAVEN.

The euphoria that struck my brain was indescribable. The fluid coursing through my veins was so powerful I’ve never forgotten it. I can easily see why people get hooked on drugs.

And that’s why I think silver, purchased at current prices, could be a life-changing investment.

The connection? Well, it’s not the metal’s ever-increasing number of industrial uses… or exploding photovoltaic (solar) demand… nor even that the 2014 supply is projected to be stagnant and only reach 2010’s level. No, the connection is…

Financial Heroin

The drugs of choice for governments—money printing, deficit spending, and nonstop debt increases—have proved too addictive for world leaders to break their habits. At this point, the US and other governments around the world have toked, snorted, and mainlined their way into an addictive corner; they are completely hooked. The Fed and their international central-bank peers are the drug pushers, providing the easy money to keep the high going. And despite the Fed’s latest taper of bond purchases, past actions will not be consequence-free.

At first, drug-induced highs feel euphoric, but eventually the body breaks down from the abuse. Similarly, artificial stimuli and sub-rosa manipulations by central banks have delivered their special effects—but addiction always leads to a systemic breakdown.

When government financial heroin addicts are finally forced into cold-turkey withdrawal, the ensuing crisis will spark a rush into precious metals. The situation will be exacerbated when assets perceived as “safe” today—like bonds and the almighty greenback—enter bear markets or crash entirely.

As a result, the rise in silver prices from current levels won’t be 10% or 20%—but a double, triple, or more.

If inflation picks up steam, $100 silver is not a fantasy but a distinct possibility. Gold will benefit, too, of course, but due to silver’s higher volatility, we expect it will hand us a higher percentage return, just as it has many times in the past.

Eventually, all markets correct excesses. The global economy is near a tipping point, and we must prepare our portfolios now, ahead of that chaos, which includes owning a meaningful amount of physical silver along with our gold.

It’s time to build for a big payday.

Why I’m Excited About Silver

When considering the catalysts for silver, let’s first ignore short-term factors such as net short/long positions, fluctuations in weekly ETF holdings, or the latest open interest. Data like these fluctuate regularly and rarely have long-term bearing on the price of silver.

I’m more interested in the big-picture forces that could impact silver over the next several years. The most significant force, of course, is what I stated above: governments’ abuse of “financial heroin” that will inevitably lead to a currency crisis in many countries around the world, pushing silver and gold to record levels.

At no time in history have governments printed this much money.

And not one currency in the world is anchored to gold or any other tangible standard. This unprecedented setup means that whatever fallout results, it will be of historic proportions and affect each of us personally.

Specific to silver itself, here are the data that tell me “something big this way comes”…

1. Inflation-Adjusted Price Has a Long Way to Go

One hint of silver’s potential is its inflation-adjusted price. I asked John Williams of Shadow Stats to calculate the silver price in June 2014 dollars (July data is not yet available).

Shown below is the silver price adjusted for both the CPI-U, as calculated by the Bureau of Labor Statistics, and the price adjusted using ShadowStats data based on the CPI-U formula from 1980 (the formula has since been adjusted multiple times to keep the inflation number as low as possible).

The $48 peak in April 2011 was less than half the inflation-adjusted price of January 1980, based on the current CPI-U calculation. If we use the 1980 formula to measure inflation, silver would need to top $470 to beat that peak.

I’m not counting on silver going that high (at least I hope not, because I think there will be literal blood in the streets if it does), but clearly, the odds are skewed to the upside—and there’s a lot of room to run.

2. Silver Price vs. Production Costs

Producers have been forced to reduce costs in light of last year’s crash in the silver price. Some have done a better job at this than others, but check out how margins have narrowed.

Relative to the cost of production, the silver price is at its lowest level since 2005. Keep in mind that cash costs are only a portion of all-in expenses, and the silver price has historically traded well above this figure (all-in costs are just now being widely reported). That margins have tightened so dramatically is not sustainable on a long-term basis without affecting the industry. It also makes it likely that prices have bottomed, since producers can only cut expenses so much.

Although roughly 75% of silver is produced as a by-product, prices are determined at the margin; if a mine can’t operate profitably or a new project won’t earn a profit at low prices, the resulting drop in output would serve as a catalyst for higher prices. Further, much of the current cost-cutting has come from reduced exploration budgets, which will curtail future supply.

3. Low Inventories

Various entities hold inventories of silver bullion, and these levels were high when US coinage contained silver. As all US coins intended for circulation have been minted from base metals for decades, the need for high inventories is thus lower today. But this chart shows how little is available.

You can see how low current inventories are on a historical basis, most of which are held in exchange-traded products. This is important because these investors have been net buyers since 2005 and thus have kept that metal off the market. The remaining amount of inventory is 241 million ounces, only 25% of one year’s supply—whereas in 1990 it represented roughly eight times supply. If demand were to suddenly surge, those needs could not be met by existing inventories. In fact, ETP investors would likely take more metal off the market. (The “implied unreported stocks” refers to private and other unreported depositories around the world, another strikingly smaller number.)

If investment demand were to repeat the surge it saw from 2005 to 2009, this would leave little room for error on the supply side.

4. Conclusion of the Bear Market

This updated snapshot of six decades of bear markets signals that ours is near exhaustion. The black line represents silver’s decline from April 2011 through August 8, 2014.

The historical record suggests that buying silver now is a low-risk investment.

5. Cheap Compared to Other Commodities

Here’s how the silver price compares to other precious metals, along with the most common base metals.


Percent Change From…
  1 Year Ago 5 Years Ago 10 Years
Gold -2% 38% 234% -31%
Silver -6% 35% 239% -60%
Platinum 3% 20% 83% -35%
Palladium 14% 252% 238% -21%
Copper -4% 37% 146% -32%
Nickel 32% 26% 17% -64%
Zinc 26% 49% 128% -47%


Only nickel is further away from its all-time high than silver.

6. Low Mainstream Participation

Another indicator of silver’s potential is how much it represents of global financial wealth, compared to its percentage when silver hit $50 in 1980.

In spite of ongoing strong demand for physical metal, silver currently represents only 0.01% of the world’s financial wealth. This is one-twenty-fifth its 1980 level. Even that big price spike we saw in 2011 pales in comparison.

There’s an enormous amount of room for silver to become a greater part of mainstream investment portfolios.

7. Watch Out for China!

It’s not just gold that is moving from West to East…

Don’t look now, but the SHFE has overtaken the Comex and become the world’s largest futures silver exchange. In fact, the SHFE accounted for 48.6% of all volume last year. The Comex, meanwhile, is in sharp decline, falling from 93.4% market share as recently as 2001 to less than half that amount today.

And all that trading has led to a sharp decrease in silver inventories at the exchange. While most silver (and gold) contracts are settled in cash at the COMEX, the majority of contracts on the Shanghai exchanges are settled in physical metal. Which has led to a huge drain of silver stocks…

Since January 2013, silver inventories at the Shanghai Futures Exchange have fallen a remarkable 84% to a record low 148 tonnes. If this trend continues, the Chinese exchanges will experience a serious supply crunch in the not-too-distant future.

There’s more…

  • Domestic silver supply in China is expected to hit an all-time high and exceed 250 million ounces this year (between mine production, imports, and scrap). By comparison, it was less than 70 million ounces in 2000. However, virtually none of this is exported and is thus unavailable to the world market.
  • Chinese investors are estimated to have purchased 22 million ounces of silver in 2013, the second-largest amount behind India. It was zero in 1999.
  • The biggest percentage growth in silver applications comes from China. Photography, jewelry, silverware, electronics, batteries, solar panels, brazing alloys, and biocides uses are all growing at a faster clip in China than any other country in the world.

These are my top reasons for buying silver now.

Based on this review of big-picture data, what conclusion would you draw? If you’re like me, you’re forced to acknowledge that the next few years could be a very exciting time for silver investors.

Just like gold, our stash of silver will help us maintain our standard of living—but may be even more practical to use for small purchases. And in a high-inflation/decaying-dollar scenario, the silver price is likely to exceed consumer price inflation, giving us further purchasing power protection.

The bottom line is that the current silver price should be seen as a long-term buying opportunity. This may or may not be our last chance to buy at these levels for this cycle, but if you like bargains, silver’s neon “Sale!” sign is flashing like a disco ball.

What am I buying? The silver bullion that’s offered at a discount in the current issue of BIG GOLD. You can even earn a free ounce of silver at another recommended dealer by signing up for their auto accumulation program, an easy way to build your portfolio while prices are low. Check out the low-cost, no-risk BIG GOLD to capitalize on this opportune time in silver.

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Ol Man's picture

My number one reason is that the historical ratio of silver to gold is 15:1.

We are a long way away from that and reversion to the mean is the "law"...

r00t61's picture

The last Jeff Clark article that I saved:

It predicted gold at $2,300 / oz by 1/2014.

J Pancreas's picture

Thank you for referencing another failed call by one of these yahoos. With any type of investment, use sense and perform due diligence. I vowed to never get burned again after my life's fortune was squandered searching flyover country for the rarest of Ty Beanie Babies. After that I learned to play it safe with surefire winners such as ANGI, LNKD, TWTR, ZNGA and a huge stash of highly barter-able and in season Banana Republic men's skinny capris.

whotookmyalias's picture

Pretty sure you can barter those capris for some tungsten and a stack of Obama campaign bumper stickers.

Handyman's picture

It's ALWAYS a good time to buy silver.

TeamDepends's picture

Financial heroin, the richest kind.

Elvis the Pelvis's picture

For the love of God, stay away from silver and gold.  They've peaked--along with the DOW.  Go long on the dollar.  Bitchez.

TeamDepends's picture

Oh man, thanks for the good belly laugh Elvis. The dollar has never looked stronger!

MalteseFalcon's picture

The only thing that matters is the Silver Pricing Committee.  When they say 'up' silver moves 'up'.  When they say 'down', silver moves down.

chumbawamba's picture

blah blah blah blah blah blah blah hyperbole blah blah blah blah blah blah blah blah blah blah blah blah blah blah charts blah blah blah blah blah blah blah statistics blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah unrealistic expectations blah blah blah blah blah blah blah blah blah blah blah blah blah blah smoke blowing blah blah blah blah blah blah blah blah blah blah blah blah blah blah fantasy correlations blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah blah nonsense blah blah blah blah blah blah blah blah blah blah blah blah blah blah wishful thinking blah blah blah blah blah blah blah.

I am Chumbawamba.

TheRedScourge's picture

If there's anything that can be determined from those charts, its that the one that starts in 1980 is deliberately made to be misleading, given the massive spike in the 80s, and that it appears that there's going to need to be yet another year or two in silver capitulation before it becomes a true bargain.

BeanusCountus's picture

Well, i doubt anything that has fallen 50% or so is "peaking". That said, I remember the article/free report when I signed up with these folks titled something like "gold and silver stocks you can buy for your grandma". Sorry grandma, your portfolio is down a ton. Oh well, you're probably dead by now.

orez65's picture

"Go long on the dollar.  Bitchez."

Please show us by example.

You go long on the dollar.

CHX's picture

If you think on a long enough time-frame and in ounces, not in fiat terms, for ease of mind and system transit.

spieslikeus's picture

.....and maybe a nice pair of mom jeans

Moustache Rides's picture

Thank you.. your post made my day .. lol

Larry Dallas's picture

This author s a great copywriter.

Compelling story at the beginning.

Makes a point.

Easy for retail folks to understand.

Not sure if any of this will function in a vacuum we have as market.

Mr. Ed's picture

Yeah... but silver has spent most of it's time lollygagging between $19 and $22 for more than a year now and if this article (everything but the kitchen sink) doesn't get it moving --- then I don't know what will.

On the other hand, I don't give a crap because trading spot PM's w/leverage was outlawed a few years ago!

r00t61's picture

I like PMs as much as the next guy, but with the paper market dwarfing the physical market by something like 5 orders of magnitude, I think it's absurd to talk about price movements based on fundamentals or charts or technical indicators.

Rentier88's picture

As long as there is a paper market for silver the price can be manipulated down and controlled...price isn't going anywhere unless they want it to.

Stanley Kubrick's picture


You don't own silver if you don't have the phyisical silver.....and the lead to keep it.

Implied Violins's picture

I've got a 15:1 ratio. 7.62 x 39's are a bargain at $.30 apiece...

Dennisen's picture

Preaching. To. The. Choir.

Hugh_Jass's picture

Back up the truck!

orangegeek's picture

This chart shows silver on its way to 19 - was 20.90 at time of issue


Silver is now 19.80-ish and heading lower - wait for some sign of bottoming - key support near 18

whotookmyalias's picture

Within the next 2 weeks I will walk into my local PM dealer with a wad of cash and buy 20-25 OZ (depending on if I have to get a tube of Eagles or if they have Maple Leaf's in stock) and walk out, whether it's 20.90, 19.80, or 18.  I will then put it in the back of my safe and forget about it.  Silver is like the lead I stack, the day I actually need it will be a very bad day indeed.

Recognizer's picture

Biggest discount is on the Austiran Philharmonic coins.  Not sure why.

BrosephStiglitz's picture

Hint: Insolvent government liquidating physical assets at firesale prices in attempt to keep the status quo.

I do not know about this article, but I suspect that the demand is still there, though it might not be accelerating.  A glut of supply from central bank vaults has arisen, most likely.

Funny thing about high levels of debt and interest repayments.. the most liquid assets get shunted off first.

Bendromeda Strain's picture

Tell it brutha - don't care what the so-called "price" is, it is still on sale to me. I have been taking advantage of the Phils lately. Some folks don't appreciate the design but I think they are works of art.

Greenskeeper_Carl's picture

just curious, but why is everyone determined to buy eagles/maples? I have some of both, but i still like the lowest premiums, which are generic rounds and bars. When your goal is accumulation of physical silver, is it really worth the extra money to have something particular stamped on it? Where i go, I pay another 8-9% for those vs generics. Wouldnt you rather have 110 buffalos instead of 100 eagles?

orez65's picture

"... why is everyone determined to buy eagles/maples? "

Because they are more liquid than generic rounds and bars.

If you try to trade generic rounds or bars there is more suspicion of counterfeiting.

Calmyourself's picture

Wrong, no one counterfeits $5 dollar bills or paint by numbers canvases, think again gentlemen..  However they still maintain their $5 value ( in a world wi/o CB's) and or utility if grandma painted it..

RockyRacoon's picture

Yo, Carl.  The comment by orez65 is correct.  In a pinch I'd take an Eagle any day. Too many "generic" silver rounds, ingots and all that to have to keep track of for authenticity.

Note:  The premium you are agonizing over does not go away.  It's not like a new car that depreciates when you drive it off the lot.  You get to keep the premium.  And, with any appreciation in the price of silver the premium advances as well.  Great leverage on that relatively small premium.

That's why.

N2OJoe's picture

I have more faith in a private mint to not "inflate" their coinage with base metal than any .gov mint.

At least the private mint has the consequence of going out of business if they get caught.

As for independant counterfitters, there ARE fake eagles out there already

Stanley Kubrick's picture

This topic's been replayed as much as an I Love Lucy re-run anyways....the 'back-up-the-truck' strategy's been out of vogue for awhile, it's now simply a long-term stacking process...


My truck seems to always be stuck in reverse. I'll have to get my transmission checked. 

The Navigator's picture

One of these days...

Stacking will pay off, and silver's my baby. Been buying right after the Hunt Bro's crashed it in the early 80's at below $5.

Don't ask me when - my crystal ball been broken since forever and has served me well in most shitty buys of stocks and other prognostications.

Still, consider the the fundamentals, and when you take in the points above, silver (and gold) are a great insurance policy against the 'herion-addicted-central banks' and the monopoly-money-fiat that's in your wallet 

One of these days, real money will be worth a lot more than you paid for it today.

If money and currency are not clear, Mike Maloney has some great vids at

Mr. Ed's picture

What would you do if TPTB held an armageddon and refused to ration scarce supplies (that they previously stocked up on like MRE's, gasoline, and other emergency items) for anything other than fiat and PM's at a rate of exchange imposed by THEM ?  You know, something "fair" like $4/oz for silver and $60/oz for gold...?

Or, if TPTB got a stranglehold on some critical (read inescapable) transaction, and uses their power to IMPOSE rates of exchange...

Just curious.

N2OJoe's picture

Easy, I won't run myself bankrupt by destroying my safety cushion of cash and dumping every last penny I have into PM's. Use the fiat you earn or the cushion for those gov purchases and PM's for anything else.

mayhem_korner's picture



Silver is good to own.  Period.  So the time to acquire is not "now", it's continuously.

sixsigma cygnusatratus's picture

Exactly, PMs are part of long-term financial planning.  If one uses short term money for long term purposes (or vice versa), they will get screwed.

mayhem_korner's picture



And if you try to time the "market" on something you simply should accumulate physically, you are playing a fool's game.  If a day comes that you really need silver, what you paid for it will matter little; how much of it you possess will matter much.

Theosebes Goodfellow's picture

I'm fond of the adage that says that a Mercury dime will always buy a loaf of bread, all things being the same, (availability of wheat, etc.). A silver quarter has historically always bought a pound of butter. Very lately butter is through the roof locally. Is this a sign silver is going to explode upward?

The price of a pound of butter in So. Cal. yesterday was on average $4.50-$5.50. It had been until very recently about $3.50 a pond. A silver quarter is currently $3.58 melt value. For it to re-correlate to butter, (and I don't believe they can't not correlate for long), then silver would have to climb to somewhere between $24.90 to $30.45 in the near future, (from yesterday's price of $19.82).

I'd be curious if the local price for butter is a fluke or are folks out there in the rest of the country seeing butter spike as well. I do though a agree with Mayhem. The day you need to spend your silver, (for that aforementioned loaf of bread), you won't remember or care what you paid for it with "paper money".

One last thought: If you become a baker of bread when the only money is silver, you will do very nicely too. And wheat berries store well for a really, really long time. All you would need, apart from the whole wheat is a flour mill, (about $400), and an oven. (The yeast, if done right, is self-replicating, just like in the old days.) And water falls from the sky.


RichardParker's picture

Price of butter has been stable in the south, northeast, and midwest at $2.00/lb for at least the past 3 years at discount supermarkets such as Aldi and Save-A-Lot.  I've lived in all three of those areas for work and shopped at both stores.

The Navigator's picture


Your pricing is about right.

Pre-65 dimes and quarters are a great way to have small denominations of 'spendable' silver. AND these are verifiable units of silver - as far as I know, there have never been any fake dimes or quarters made (as opposed to some fake $1 Moragns being made in China).

My strategy in silver has been, own everything - bars, junk silver (pre '65 coins), bars, collectibles, ASE, Canadians, Aussies (Perth Mints - beauties).... diversity is key, when one version isn't acceptable by a seller, another version may be. And that seller (of whatever) may be your key to getting "off the island" or "out on the last plane" or "through the border".

The only down side to silver is, after you've accumulated all the beauties, they start to weigh more then your ammo, and then it's a choice of which do you take - and thus the advantage of gold.

Hard choices, but you have to consider all.

Just my 2 (copper, with a lot of zinc) cents.