This page has been archived and commenting is disabled.
Silver and Gold: Why Now?
Posted with permission of Gary Christenson The Deviant Investor - Sprott Money
Examine the graph of the silver to gold ratio over the past 25 years.
- The major lows in silver prices during the past 25 years are marked with red arrows on the graph. They coincide, more or less, with lows in the silver to gold ratio.
- The low in November of last year is indicated by the circled red arrow.
- It seems likely that a lasting low for silver was achieved then.
Examine the graph of silver prices on a log scale for the past 25 years.
- Prices are highly volatile (we all know this).
- Prices are increasing exponentially, which is difficult to see unless you look at long term charts. Many people obsess over the April 2011 peak and the subsequent 70% loss in price, and assume the downtrend will continue forever. It won’t.
- This chart also shows a sequence of lows in silver prices.
Examine the chart of the ratio of silver to S&P prices.
- The ratio was recently at nine year lows.
- The ratio has fallen hard because the S&P has been levitated by QE and silver prices collapsed, especially after the April 2013 meeting in the White House between a group of bankers and the current US President.
- Expect this ratio to move much higher during the remainder of this decade. Given the low readings for the silver to gold ratio and the current low price of silver, we should expect substantially higher silver prices in the next several years.
Examine the 40 year chart of official US national debt on a log scale.
The trend is clearly upward at slightly more than 9% per year. At that rate the official US national debt will exceed $30 Trillion before January 2021, unless our financial system crashes first.
What could go wrong? For intelligent analysis, read:
- Spitznagel: Market Warnings in Plain Sight
- Egon von Greyerz: Current Global Financial System Will Cease to Exist
- Amerman: Wargaming the Greek Crisis.
My very simple perspective is this: In round numbers the US government debt increased by about $1,000,000,000,000 ($1 Trillion) in the single year between October 1, 2013 and October 1, 2014. Government revenue plus borrowed money were spent on the military, social security, Medicare and so much more. But that money is gone and producing NO future revenue, unlike debt that purchases a business which generates income to service the debt.
In simple terms, government took real revenue, spent it, and then added more debt each year. Worse, the US owes compounding interest on the larger debt. Each year the US and many other governments pay interest on the loans (caused by deficit spending) from previous years. The total debt increases rapidly – far too rapidly to be repaid without massive inflation. Hence default via debt repudiation or devaluation of purchasing power is inevitable.
The interest accrues FOREVER since the debt is never paid back, only rolled over. Loaning money to an insolvent government for 30 years makes little sense. It makes even less sense for real investors to loan money at less than 3% per year for 30 years. Hence the Fed buys most of the US debt. The story is much the same globally, except that a portion of the debt in Europe now “pays” negative interest rates. This creates a highly unstable financial system, unless you think that central banks can create more currency each year, loan it to their governments, and prolong the process indefinitely. I think the system becomes more fragile, more dangerous, and more unstable each year.
CONCLUSIONS:
- Silver prices made a multi-year low in November 2014.
- Silver prices have increased exponentially since 1971, just like the national debt, but far more erratically.
- Silver and gold prices will rally much higher for the next several years, unless a deflationary depression (unlikely because central banks can print currencies almost forever) crushes all asset prices. In that unlikely case, I trust silver and gold to hold their purchasing power far better than sovereign debt and most other paper assets.
- Governments will spend more money than they collect in revenue. Deficit spending will accelerate if wars in the Middle-East and Europe expand, which appears likely.
- Central banks will purchase that sovereign debt, because they must, to support the global financial system and prevent the deflationary depression that every central banker and politician fears. Bet on global QE, more inflation, loss of purchasing power, and higher silver and gold prices.
- Unstable systems can “go critical” practically overnight. The big reset might not happen for several more years, or it might occur near Armstrong’s “big bang” point in October of this year.
- Silver and gold, at current prices, are an excellent investment, but more importantly, they are insurance and protection against the probability that our financial system will “go critical” as a consequence of years of Quantitative Easing, Zero Interest Rates, massive fiat money creation, and the deficit spending that has generated about $200 Trillion of global debt.
- Be prepared!
Posted with permission of Gary Christenson The Deviant Investor - Sprott Money
»
- advertisements -
I dream of a world where my neighbors and I will pay for our crap with poker chips.
Our local casino will redeem their chips in gold or silver or whatever the hell anybody wants to pawn.
Neighboring towns will follow suit.
The best casino with the fastest redemption rate will get the bigger crowds and better parties.
No need for central banks. No need for bitcoins. No need for computers.
LOL. Better than the current system CA.
pumping us up for the next dump? https://www.youtube.com/watch?v=-ZJ6z8jGNWY#t=69
I bought Au and Ag back in 08', to the tune of like 70k bennybux! and it's looking like a shit investment today. Fucking stock in Papa John's and Failbook would have done better by me.
The real danger with silver is that it won't be repriced like gold MUST be. Banks need to recap and they do not even pretend to have silver.
I know 3 people who have survived hyperinflation (4 if you count FERFAL who I have not met yet.) Not one of them experienced wide spread barter. The shitty currency was used right up to the point it officially died. It is a romantic notion but my mpney goes to gold.
Sooo if we can't tell which will catch up with the other, we should be short gold and long silver?
Don't trade paper contracts, buy and take possession of the physical metal. The COMEX contracts will not be worth the paper they are printed on when COMEX defaults one of these days.
This is a good place to start averaging in. I think it is a good place to back up the truck and get a full load.
silver to gold ratio: meaningless most of the time though a deal trading one for the other is possible. Probably smarter to buy both for cash at lower prices & simply hold both instead of risking one to get the other. Paper doesn't count.
Actual mathematical relationship: 285 to 305 = gold / silver1/2
A decently good projection for gold vs time & thus using the above equation, silver vs time: http://flic.kr/p/oDXhhd , http://flic.kr/p/oBXbBw
Okay folks, lets call paper what it really is,...well it's just that,....paper or digits on a computer screen.
Paper gold, paper silver, paper t-notes, paper bonds, paper futures, paper stocks, paper money, paper everywhere!
All left brain abstracts, socially constructed to serve you better!..(irony).
My point: Paper/fiat money ain't nothing but a "place holder", a believe system everyone agrees on, for now!
Money created out of thin air" (i.e. a computer entry) by Govt's Central Banksters is/was never intended to be "paid back", since it's fantasized invention (money) never exisited in the first place,... pay it back to who?
The dirty little secret: Govt debt do not matter!
Hence, always plenty of "funds" for war and black ops etc.
Govt's and the mafia banksters want to keep it secret so that, you, I and everyone else continues to make payments to the,....banksters.
Can't wrap your head around it (yet) ?....for good reading;
John R Searle "The Construction of Social Reallity".
ps: Yes Virginia, the black box is not black,...its painted bright orange!
https://www.youtube.com/results?search_query=ratm+wake+up+lyrics
I love these charts ... they all point to my stacking success
Ratio of silver to USD fell from .45 Sept 2012 to .175 today
These charts make a lot of sense, but there is then the Manipulation via paper contracts.
However, BTFD when it happens with what you can afford.
my line in the sand has been 20 $..[deliverd]
figure what would i rather have
a 20 $ bill, which buys little or nothing these days
or an oz of silver that goes "clunk" when you drop it on the table
long the 'clunk'
You got it, man. I never thought I'd see the day again, when I could buy silver eagles with a damn credit card for a hair over $20, delivered.
Doubt I'll ever get tired of that deal.
Too much thinking for me.
I reckon I go for the one I can keep in a safe hiding place. So, I ask:
Which one would you trust to swallow and have to pinch out your ass the next day? wash it off, swallow and pinch out again until somebody notices you have it concealed on your naked body while you are hobbling through the camp?
a piece of paper? or a precious metal?
I can not imagine a piece of paper surviving.
<<long the 'clunk'>>
Agreed.
Go to a Antique coin auction, and just look around at the kind of people paying cash for Gold and Silver.. they look like some pretty shrewd & Smart People..
Old, gray and very wise
Comex Gold Open Interest Numbers Show Massive Manipulated Gold Hit In Progress
TND Guest Contributor: Fund Manager Dave Kranzler
The Comex is a complete fraud. It’s one of the biggest Ponzi schemes in history.
http://thenewsdoctors.com/?p=285432
Charting is worthless in a rigged market, but I like silver anytime I can get it delivered at $17/oz
My DCA for Silver is over $26 for the past five years, which sux, but a good portion are eagles that carry a $2 premium over spot. Needless to say I'm disappointed but I've read stories of people that bought monster boxes back when silver was $40/oz.
I don't need the cash now but it is still disheartening that I'm so backward on my investment.
Some people say, "think of it as insurance". which makes sense.
I pay home, life and car insurance every month and I am certainly "backward" on that, and I hope I never have to collect on it.
:Rant off:
Yeah, unfortunately I don't have 25 years.
Ah, you were hoping to realize some gain from your 'investments' within your lifetime? How selfish! Didn't you know stackers stack so that their children (and grandchildren) can have a larger stack to start stacking their own stacks on? You're never, ever supposed to sell your silver or gold!
Hey Zero Fucking Brains,
GOLD IS BACK UNDER $1200/OZ. HEADING LOWER. YOU STUPID FOOLS.
YOU SHOULD HAVE LISTENED TO ME. MORONS.
Yeah, so whatever you do, don't "buy low". Wait 5 years for it to explode thru $3,000, THEN buy!
Gold back over $1200.
Oopsie.
hey cool - we're back to break even for the 1000th time?
my wife is like dump that shit - and for the first time - I'm considering it.
I am a big fan of silver, but I am very confused. We see all the big import numbers from China, India, etc, yet there is no shortages of physical. APMEX is loaded and selling 1 oz Bars at .99 over spot. Half of all silver mined is used up in industrial. China and India import the other half, why are there no shortages.???
Average life fiat - about 40 years
How long have Ag and Au been consdered money?
Just a thought.
Because > 800 million ounces of it are mined every year. In fact, production of it has been increasing year on year for at least a decade. Meanwhile, its use in photography has fallen off a cliff.
PM prices are mainly propped up by investors looking for safe havens. Will this continue? Hopefully. Is it a dead cert? No.
Wash trading 1.5 billion ounces a week?...volume is the tell, even if it is paper.
Recession, less demand, less silver needed.
How much physical silver is out there? How much paper silver is out there? How much silver has been mined since we started counting? Why, if you believe in the simple and antiquated notion of "supply and demand", does the price remain so very low when a mine in Colorado (that produces 25% of all Silver) COLLAPSED last year, but you can't lay hands on physical?
Next. Do the math on how much physical gold is out there and how much has been mined since whenever. Now figure out how much paper gold is out there.
Something doesn't add up. And the reason it doesn't add up is because of manipulation plain and simple.
AND NOW FOR THE QUESTION WE'VE ALL BEEN READING ZH FOR 7 (YES SEVEN YEARS) FOR, WHEN WILL THE MANIPULATION END?
because I'm getting the sense it can continue forever. for my entire life, at least.
Why, if you believe in the simple and antiquated notion of "supply and demand", does the price remain so very low when a mine in Colorado (that produces 25% of all Silver) COLLAPSED last year, but you can't lay hands on physical?
Fuck off, huckster. 25% of ALL silver? Lulz. You can't lay hands of physical? Double Lulz.
PMs may - or may not be - a decent medium to long term investment. Are the prices manipulated? Hell yes. Is there a severe shortage of physical, as hucksters have been proclaiming for at least 6 years? Hell no.
It's the Chinese new year. Anyone that's been watching for a while knows what happens this time every year.
Patience and heavy drinking are the order of the day. It's too bad we still foot the bill for our useless regulators, isn't it?
Let's decommission the CFTC, they are counter-productive.
twats
I love China. They have lots of little holidays and drinking is mandatory...
And they have a year of the sheep. Baaaaaa....
Silver, feared by wearwolves, vampires, central bankers and zombie bankers everywhere .
Now the most common currency in Greece.
having a wide selection of paper products on hand is worth its bulk in shine or anything else you might have to trade.
All commodities but especially gold and silver are inflation indicators and thus must be 'mamaged'. I see little benefit to trying to predict near term value. TA was predicting a rise but today we have another dip.
Hold physical and if you must (for your state of mind or because you might have to sell some before reset) use hedging to prevent loss in fiat terms.
I use DGLD but there are many other vehicles too. Some leveraged like DGLD others unleveraged.
I'm not big on silver as I believe the central banks wwill use gold for their revaluation (and they own no silver) and I refuse to fight the central banks.
I do believe golman sucks has a shitload of silver they stole when the price was monkey hamered last year
THE END IS NEAR, BUY SILVER AND GOLD TO PROTECT YOURSELF!
Blah freaking Blah, the same verbage as Howard Ruff in his 1975 book " How to Prosper During the Coming Bad Years" Forget metals and buy food and the means to stay sheltered and warm/cool for a few years. A basement full of whiskey is a better barter good than shiny, overhyped, metal shit sold by hucksters.
Howard Ruff would have been correct had interest rates not risen as high as they did. 20% is what it took to restore public confidence in paper. Crashing the Comex silver price did not hurt the paper pushers either.
I wonder how a replay of that would work...? If 5% of participants in the financial sector choose to stand aside, everything "financial" won't be working so well. Gold will be one of the preferred vehicles for making a getaway from the financial sector.
THE END IS NEAR, BUY SILVER AND GOLD TO PROTECT YOURSELF!
Blah freaking Blah, the same verbage as Howard Ruff in his 1975 book " How to Prosper During the Coming Bad Years" Forget metals and buy food and the means to stay sheltered and warm/cool for a few years. A basement full of whiskey is a better barter good than shiny, overhyped, metal shit sold by hucksters.
But for real quiet(d)ude, why not have both...
Two years ago your comment would have generated about 90% downvotes. So we're about halfway to the bottom, time-wise. By the end of 2016 the low will be in. Just about the time you see 90% upvotes on a comment like yours.
Hmmm...
I need to transport my stores to another location.
I have whisky, I need a truck.
I have shiny, I need a knap sack.
I have truck and knapsack...
As a finance related site, articles posted on the fundo's of real money do not get old. When people do not know what to do to protect themselves in these uncertain times, holding physical gold and silver in your possession is just common sense. As for whiskey, that's liquid gold, as a Canuck, I'll make mine Rye.
My friend, whiskey and gold go together like peanut butter and jelly. Your assumption that they are mutually exclusive is the highest of follies.
greatest.username.evar.