Gold Costs 80oz of Silver, Report 21 Feb, 2016

Monetary Metals's picture

The big news is that the gold-silver ratio closed at 80. This is not only a new high for the move. It’s higher than it has been since 2008.

It’s also exactly what Monetary Metals has been calling for. Last week, we said the gold fundamental was $1,450 and the silver fundamental was $14.90 (i.e. a fundamental value for the ratio over 97 last week). This week, the ratio moved up, and it’s now 1.3 points closer. In other words, silver got cheaper when measured in gold terms.

We had a soggy dollars spotting this week (our term for an article that’s misleading or based on false assumptions). A gold mining executive declared that the people are losing faith in the central banks. The take-away was clear: the gold trade is on again! buy gold now, to make big profit$.

It should be bloody obvious that he just wants you to bid up the price of the product his company sells (i.e. gold). He wants to make money (i.e. dollars).

But that aside, our larger point is that articles like this (and there are plenty of them) are quite ironic. When there is a loss of faith, there will be a great paradigm shift. No longer will people think of gold going up, but of the dollar going down (and finally, collapsing). That is not occurring today. These articles exist just to rationalize a trade. The dollar still enjoys the full faith of everyone—most especially the gold bugs who need a currency in which to measure the worth of their gold, and in which to take their profit$ when they sell.

Read on for the only true picture of the gold and silver supply and demand fundamentals…

But first, here’s the graph of the metals’ prices.

       The Prices of Gold and Silver
prices

We are interested in the changing equilibrium created when some market participants are accumulating hoards and others are dishoarding. Of course, what makes it exciting is that speculators can (temporarily) exaggerate or fight against the trend. The speculators are often acting on rumors, technical analysis, or partial data about flows into or out of one corner of the market. That kind of information can’t tell them whether the globe, on net, is hoarding or dishoarding.

One could point out that gold does not, on net, go into or out of anything. Yes, that is true. But it can come out of hoards and into carry trades. That is what we study. The gold basis tells us about this dynamic.

Conventional techniques for analyzing supply and demand are inapplicable to gold and silver, because the monetary metals have such high inventories. In normal commodities, inventories divided by annual production (stocks to flows) can be measured in months. The world just does not keep much inventory in wheat or oil.

With gold and silver, stocks to flows is measured in decades. Every ounce of those massive stockpiles is potential supply. Everyone on the planet is potential demand. At the right price, and under the right conditions. Looking at incremental changes in mine output or electronic manufacturing is not helpful to predict the future prices of the metals. For an introduction and guide to our concepts and theory, click here.

Next, this is a graph of the gold price measured in silver, otherwise known as the gold to silver ratio. The ratio was up to a new record weekly close. 

The Ratio of the Gold Price to the Silver Price
ratio

For each metal, we will look at a graph of the basis and cobasis overlaid with the price of the dollar in terms of the respective metal. It will make it easier to provide brief commentary. The dollar will be represented in green, the basis in blue and cobasis in red.

Here is the gold graph.

       The Gold Basis and Cobasis and the Dollar Price
gold

The dollar went up a quarter of a milligram (i.e. the price of gold fell nine bucks). And the scarcity of gold (i.e. the cobasis, shown in red) fell a little.

That said, there’s still quite a bit of scarcity in the gold market. Although our fundamental price of gold is down 13 bucks, it’s still over $1,435. And that’s over $200 over the current market price.

Our prediction of a rising gold-to-silver ratio is not based on the common pattern of both metals going down—in dollar terms—with silver going down more.

As we noted in a prior report, it becomes easier to see in gold terms. The dollar and silver are both going down now—in gold terms.

Now let’s look at silver.

The Silver Basis and Cobasis and the Dollar Price
silver

We finally switched from looking at the March silver contract to the May. First Notice Day for March is a week from Monday and the bases are becoming very volatile. That said, and unlike in the past, the silver basis for March is still positive. We coined the term temporary backwardation, because contracts for gold and silver—and silver much more than gold—tended to tip into backwardation as they approached expiry. Not in silver now, at this price.

Unlike the trivial price move in gold, the one in silver was more substantial—40 cents. The silver cobasis (our scarcity indicator) barely budged. It’s still in the basement, rising from -1.55% to -1.51%. For reference, the gold cobasis is -0.32%.

We have been observing a pattern for several weeks. We wrote about this phenomenon a while back. I am talking about “icicles” on the price chart. They occur in the spot price, but not futures. Here is a picture of most of the trading day (times are Arizona time).

silver icicles

Notice the visual difference between the two. Spot has these dripping lines, where the price temporarily fell but then recovered before the close of the time period. These happen to be 15-minute candles, but the same thing occurs with other periods. If you watch it in real time, you see the price drop, then drop, then drop, then snap back. Repeatedly. This has been going on for weeks.

On the futures chart, the drooping lines are much less frequent, and appear more balanced with lines above (like what one would expect with normal market price fluctuations during any 15-minute block on any actively traded security).

What does it mean?

We think it shows in the price chart what we see in the basis. The silver basis is showing weak demand. For the May contract, the basis is 78 bps. This is the yield (quoted as an annualized percentage) that you can earn by carrying silver—buying metal and selling a future against it. It’s a spread, with no price risk, for a 3-month position. For reference, 3-month LIBOR is about 60 bps. The silver carry trade is attractive right now. Certainly, it’s much more attractive than carrying April gold, which yields 13 bps (annualized).

We think that what’s happening is that the price of silver metal is selling down, and every time the carry rises to a threshold, arbitrageurs are buying spot to sell futures and pocket that spread. If they wait for opportune moments, we’re sure they can make over 1%.

The marginal demand for silver is to go into carry trades, into the warehouse (we do not mean necessarily to be stored in a COMEX approved depository and this has nothing to do with those persistent rumors that the COMEX depositories are running out of metal, that they’ve sold the metal 100 times over, etc.) We are looking at marginal supply and marginal demand here.

The risk is that today’s marginal demand—namely the warehouse—can turn off abruptly. And it can become tomorrow’s supply.

Silver in the futures market—silver paper, you will—has more robust demand than silver metal in the spot market.

Metal, of course, is often bought unleveraged by hoarders. Paper is often bought by speculators, who could be using 10:1 leverage. We realize that this is not the Narrative that circulates in the silver bug community. Yet these icicles on the price chart offers another look, using a different data set than what Monetary Metals normally focuses on.

The fundamental price of silver fell a few pennies more than the market price this week. It’s about 80 cents below market.

The fundamental price of the ratio rose even more.

 

© 2016 Monetary Metals

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Setarcos's picture

I care not how many down arrows I get, because it is a fact that gold is not money, a currency, a medium of exchange for anything, unless minted as coinage with a stamped face value, which may or may not represent the cost of mining and refining, i.e. the assigned 'value' is fiat, but necessary in order to purchase goods and services.

It is impossible to use a small bullion bar (let alone a large one) because the vendor would have to go through a fairly complex process WAY beyond the capabilities of a sales assistant, to determine the going price of gold.

So one is stuck with a coin, with a one ounce piece currently stamped at, say, $1,100 and fairly useless for everyday shopping ... and who would want to be paid for a weeks work with an easily lost or stolen coin?

Back in 19th Century Britain Gold Sovereigns were in circulation, but rarely if ever used by some 90% of the population for the above reason. so most people used silver and copper coins, but when inflation got going (for reasons I'll leave aside) during the 20th Century even silver and copper became cumbersome.

When wages could be as low as 5 shillings a week it was practical to carry a mix of silver and copper coins of various denominations, but when wages had risen to 5 pounds a week (around the 1930s say) it made no sense to carry 100 shillings, so paper notes, with a mix of coinage was far more practical ... I know because I lived around that time (actually the 1940s) when things hadn't changed greatly and my first (junior) wage was just under 2 pounds.

There is nothing wrong with paper money/currency/legal tender in principle, but I posit that things went seriously wrong with the advent of digital 'money', combined with creeping financialism, banking deregulation, credit/debt expansion etc. which cut loose the monetary system from any form of physical restraint.

The rest is history, as 'tis said, and now nominal global GDP is in trillions of dollars with NO physical restraint from either bank notes, or PMs, or even oil now (the failing petro-dollar).  Add to this trillions of electronic "dollars' in derivatives and an alphabet soup of exotic finanancial 'instruments', but let's just stick with nominal GDP measured in electronic 'dollars' ... NO central bank has been actually PRINTING anything, if they had been then the predicted hyper-inflation would have happened ... unlike the Weimar experience of wheelbarrows of bank notes, one cannot transport electronic computer entries obviously.  There is almost literally nothing there and so no "trickle down".

In any case - and here's where I'll get a myriad down arrows, if not already - it is impossible to correct all this by "going back to the gold standard".

Greg Hunter did an interesting interview a few months back and it came up that in order for gold to back global GDP it would have to be 'valued' at about $250,000 per ounce, based on available above ground gold estimates.

Whoopee, that means that even small stackers would be at least millionaires more or less overnight, but unless miniscule gold coins were minted, gold would be useless as a medium of exchange. And the jewellery trade would be finished, along with any other usage of gold.

I am not arguing against acquiring gold - especially governments like Russia and China which can basically dump dollars that way - but even if gold got to only $25,000 per ounce, it would be rendered useless as a "monetary metal" and too risky to transfer in bulk.

When and if sanity returns to economic systems, gold might again have some marginal utility as a means of exchange, but it never was very widely used and the rot set in centuries ago when goldsmiths (early banksters) stored clients gold and issued negotiable receipts, then realized that they could leverage because few clients wanted to collect their gold.

Nothing has fundamentally changed, the banksters just got more corrupt, devious and eventually so adept at inventing opaque schemes that even most of them did not understand.

I don't pretend to have an answer, especially when adding in the fact that we cannot have infinite growth on a finite planet, but I suspect that the "answer" is total collapse and some future generation figuring out a sustainable existence (assuming some crazy bunch of psychopaths in Washington don't go "Samson Option" and unleash nuclear extinction).

I'll end by reiterating that gold-per-se is NOT money/currency/legal tender/a medium of exchange unless minted as coinage with a stamped face value, which is at least partly fiat, because the price of the commodity/metal itself fluctuates, whether or not manipulated, e.g. a century or more ago when nuggets could be found on the surface and mines were shallow, the cost of production could be as little as a pick, a shovel, a pan, food water and housing (paid for with something other than gold, e.g. notes, silver and copper coins.  But as scarcity set in costs rose and, obviously, the stamped 'value' of a gold coin of the era became out-dated, but an irony is that if, today, you went into a shop with an old Sovereign (say) the shop-keeper need only accept face value of one pound (about $2) and you'd have to haggle that its really 'worth' about $1,200 ... or go to a coin dealer.

Maybe I am over-stating things a bit, but it is a fact that gold-per-se is NOT money, though it may well be a store of wealth in some future, as yet unkown situation.  Currently there is not enough of the stuff - at a sensible price - to back even real global GDP/trade, as I argued above.

I'll wear the consequences of having trampled on ZH sacred territory ... at least I've been around here for about four years and value ZH a lot in general.

 

IPA's picture

To see the counter argument, look at the gold price in terms of failing currencies. The usd is doing fairly well. Gold may not go infinite, but when an economy falters, a couple grand will go along ways. I think most people on here don't buy gold to make a buck. They are buying it because gold will still be worth something, even when bucks are worth nothing.

adanata's picture

chickmagnet  +1000

chicmagnet's picture

I don't buy it. In nature te silver gold ratio is around 16 to 1 and much of the silver used for industrial purposes is non recoverable. A very small portion of gold is used for industrial purposes, therefore the inventory raelly doesn't change. When the shit hits the fan, the masses will be looking to get there hands on silver because gold will be far out of reach. I also agree with Honestann when it comes to the potential for gold to be oulawed but probalbly not silver.

Oldwood's picture

We can keep bitching about manipulation in PMs but the whole world is being manipulated. Gold, silver, cigarettes, CO2 can all be taxed or regulated in some form or another, so to try and anticipate those moves seems to be but another "herding" by the manipulators. None of what we have seen has been unpredictable, even though those mechanizing it claim to have never seen it coming. Valuations and government "allowed" trades will only happen if ordained by those at the top who profit from it. It is we, the masses, who fund all of this. How much silver was bought at $40 and who profited from it? Same with gold. We might as well stash kilos of cocaine under our beds....rich beyond belief if we could only sell it and survive.

Herdee's picture

Iraq,Libya,Ukraine,just who has their Gold after the big boys stole it?And why the big secret?

pakled's picture

For those voting down this article... honestly, you may want to give it a re-read. Some of the conclusions commentors are attributing to the piece are not necessarily what MM is saying. Take your time, as these guys are some of the few analysts thinking outside the norm. I think their POV could possibly be articulated better, but this does not strike me as an anti-silver piece. Especially for the longer term. (Keith, am I right here?)

 

You might want to take a look at this post from Clive Maund over at Safe haven. Clive is constructing an argument for a significant drop in silver price in the short to medium term, due to extreme short interest. This certainly does not mean Clive is anti-silver. History tells us that once silver became an industrial metal it stopped being price influenced in strictly a monetary sense as is gold. BUT, once faith in paper is shaken silver will catch up to gold. It takes a while. People like BigJim may do well to hold all the silver he can... for the time when, like gold, it will certainly be worth more than paper.

http://www.safehaven.com/article/40526/silver-market-update

And for flavor here is a piece arguing, with charts, that the GSR is touching resistance and is due to break.

http://www.ino.com/blog/2016/02/goldsilver-ratio-gold-loses-its-shine/#....

 

 

 

dot.dot's picture

There is absolutely no reasonng with these silver guys.  They keep saying the GSR should be 16, yada, yada.  They've been saying this since the GSR was half what it is now citing its relative scarcity to gold.  THey fail to realize silver lacks the 'focal point' which gold has.

If scarcity were the key metric Rhodium would be the goto investment.  It is VERY scarce much more so than even platinum which is much rarer than gold.  However, gold is what everybody considers the 'gold standard' and hoards.

When you mention the Sherman Silver Act and how it was the easy money crowd who pushed it they want to tell you it is meaningless in today's world, but the fact the Romans used silver in their coins is very germain.  Silver bugs don't want to hear anything which puts a crimp in their hopes of being silver millionaires one day.

bilbert's picture

Thanks for the charts - it is a good thing that the price of physical commodities can't be manipulated, and that there is no such thing as "painting the tape", that could bamboozle Technical Analysis investors.

BTW - I just made up the term "Painting the Tape", and those SPY 3:30 ramps sure don't look suspicious............feel free to use the term.

pakled's picture

Sarcasm noted. Links are there to stimulate thinking. Maund is not a perma-whatever. Just trying to look around the corner, as I am, quite aware of market shenanigans.

 

Years ago I sort of bought into the claim that silver behaves like a monetary metal in times of financial chaos. So, I have stacked accordingly.

 

And, I feel it's worth investigating why the ratio is as extended as it is now. Whatever the reason may be.

Cheers

 

 

honestann's picture

The predators-that-be can manipulate silver downward MUCH easier, which tends to move gold downward in sympathy.  They get more bank for their buck, but does move silver down more.

Yes, gold is a good buy now, but silver is much better.  BTW, it really isn't that difficult or expensive to move a large quantity of silver overseas, and is still "worth it".  But if you will need to move your precious metals across an ocean (not in your car or truck), silver does lose a bit of its current advantage.

Obviously the "flip side" is... the chances the predators-that-be will attempt to prohibit silver ownership is much smaller than gold.

bilbert's picture

That's an easy problem (moving across an ocean) - simply convert your Ag to Au before you leave, then reverse the phyz transaction when you get to your destination.

As far as the GSR goes, I believe we are in the very early stages of a PM rally, that literally could ignite overnight (see ZH article on Home Safe buying in Japan).

 

I would be very interested in the current state of the PM space in Japan this week, and if I were a betting man............Oh Wait!.......I'd bet we see a 40/1 GSR before we see a 100/1.

Gold will go to $2K for sure, and let's say I need a tank of gas - anybody got change for a Buffalo?

Both will have their place at the table.

 

45North1's picture

Fort Knox will probably prove itself as being better at keeping secrets safer than gold.

Bastiat's picture

Some day you'll tell your disbelieving grandchildren that you didn't buy more silver because it was too heavy and bulky. 

83_vf_1100_c's picture

insert ROFLMAO emoticon here.

Hope Copy's picture

It is not as transportable..  got to be something like that .  With  a bit over 67K ozt to the million you need a big tuck like a Ford F450 to move a metric equivilant (2.087t)..  Thus to move $10M worth takes a semi-tractor trailer and you can get more bang for the Buck with cigarettes.   That is depressing..  A thief would steal the Marlboro's before the stack of sliver.

83_vf_1100_c's picture

The GSR may be partly my fault. I've been buying 100 AG for every 1 AU. Approximately. Sorry.

Bryan Roland's picture

 

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TeaClipper's picture

A yahoo email address? lol, dont you fucking clowns even bother to try these days?

swmnguy's picture

So, you're selling debt?  Awesome.  The shortage of debt has been killing us.  You're a godsend.

Actually, come to think of it, I may need a loan.  There's this Prince in Nigeria, see, and he's got all this money, but he can't get it out of Nigeria to split it with me unless I provide some working capital.  Of course, I have a 2-digit credit rating, so nobody will lend me a burnt-out match, much less the $100,000 the Prince says he needs.  Can we work something out?  Or maybe you could just go direct to the Prince?

raeb's picture

I get a lot of those in my junk mail box.  It is very annoying, but you at least made me laugh for the first time today,  Thanks.

 

BTW, I do not know how many hacks there are per day, but it must be in the thousands if not more, what are the odds that your bank account will be hacked.  If we go to a cashless society, the odds must be very low that you will have any money left in your account after one year.

Thoreau's picture

Gold is moving higher in ratio due to the 1% & Central Bankers pouring money into PM's - gold obviously being more attractive than silver as it's a helluva lot easier to store and transport per unit of cost.

Silver is the blue-collar gold. Blue-collar as in the other 99%. This faction has been largely untapped, as of yet, as least in the U.S. When this wave hits, whilst gold becomes even more unreachable for the masses, watch out. Momentum could easily bring this back to 10:1. I can buy either, but I'm sticking with silver.

Hope Copy's picture

When it was minted it was mined at 1 to 16 and minted at 1 to 20.  I'd ne happy with 1 to 25 or even 1 to 30.

SumTing Wong's picture

I don't have a great deal of gold...and all my silver is at the bottom of that lake. But I'm seriously considering trading the little gold I have for silver at 80:1. Anybody interested?

ramgold2206's picture

excellent point.... gold is almost out of reach of the masses... but not completely - we have a solution.. and its as good as anyone is likely to find.

www.teamramgold.com/about-us to discover how to get gold into the hands of the masses and make money doing so

12357111317's picture

Iraq, Libya, and Ukraine wised many governments up to gold.  Now they are buying gold.  But silver takes extra work to store.  So governments aren't buying so much silver.  But if governments want a new currency, it might be helpful if their citizens had as much of  that currency as possible.  So, since silver is easier for citizens to use for small daily household purchases, silver might help.

HamFistedIdiot's picture

I believe that TPTB want a wireless, cashless system, that MIGHT be backed by gold, but will ikely be some kind of fiat IMF SDR. Anyone who seriously challenges that, or is not able to access the digital credit system, can die, for all they care. Acccording to TPTB (e.g., Huxley and Gates), this is the rise of the technocracy and the final revolution that the masses (i.e., wireless users and EBT/Welfare recipients) through their consumption and dependency are bringing forth.

JamaicaJim's picture

"When there is a loss of faith, there will be a great paradigm shift. No longer will people think of gold going up, but of the dollar going down (and finally, collapsing). That is not occurring today."

HORSE SHIT!

Even my not-so-swift clients all are wondering when the dollar is going to collapse....now....

"paradigm shift"....it's shifting/shifted Shifty....

I always ask them "AGAINST WHAT???" (and I add) - "ANOTHER CURRENCY?.....

Gold

Silver

Food

Water

Protection

Lead

Shelter

THAT'S what the fucking greenbackedbynothing has been going down against since 1913.....

Conax's picture

MM, GFY!

Sellouts. Explain why the bullion banks are shuffling around a million oz a day in a non-active delivery month.

 

cpnscarlet's picture

IF AG COMES OUT OF THE GROUND AT 10:1, HOW CAN ANYTHING CALLED A "FUNDAMENTAL PRICE" YIELD A GSR NEAR 100???

Answer that for me, you MM shills!

BigJim's picture

 IF AG COMES OUT OF THE GROUND AT 10:1, HOW CAN ANYTHING CALLED A "FUNDAMENTAL PRICE" YIELD A GSR NEAR 100???

Sigh. Because you're only looking at half the equation: supply.

The (smoothed) GSR has been steadily rising since governments demonetised silver, starting back in the mid 19th century. Gold is still quasi-monetised, thanks to central banks hoarding the stuff. There's absolutely no reason to believe silver will ever be valued at the ratio it exists vs gold, because the bulk of the demand for both is now fundamentally different.

HamFistedIdiot's picture

Then I guess my best hope is that the solar industry will take off, thereby raising the silver price considerably. But how long have we been waiting for the great solar lift off? And if there is a cheaper alternative energy source held back by TPTB until the opportune time, that could be hugely deflationary to PMs. Maybe we'll just die with our stacks. :)

Argenta's picture

Indeed.  Then add to that silver is consumed, so much so there's less of it above ground than there is gold.  Then try to tell anyone with half a braini this makes sense.  Good luck with that.

-Argenta

SuperRay's picture

how much silver is consumed in an economic downturn, when manufacturing falls off the charts?

adanata's picture

"how much silver is consumed in an economic downturn, when manufacturing falls off the charts?"

PLENTY...however, the greatest demand will be for silver as MONEY; there simply isn't enough physical silver to ever meet that demand. But don't underestimate the industrial demand either as there is only a finite amount of silver available and industry MUST have it; the medical demand for silver is huge and will only increase along with the newest Chinese solar panel production goals. The fall off in manufacturing here will not be as severe in other parts of the world; you know... where the manufacturing has gone to.

HamFistedIdiot's picture

Still, I am concerned that Central Banks hoard gold but not silver. As the depression grinds on, and as industrial demand dwindles while the people's purchasing power weakens, the printing presses of the CBs will reign supreme (for a time), thus continuing to prop up artificial valuations in whatever market they touch, including the monetary metals. If the CBs decide, through political diktat, to set gold at $5000 per ounce, I could see silver at $50 per ounce (or thereabouts), widening the GSR to 100 and staying there. Of course, this doesn't make financial or mining sense, but it might make political sense (to those in power). BTW, I am an 8 year silver bug, but have recently begun diversifying into gold just in case the financial repression - political management - of our financial reality continues for the next several years.

adanata's picture

Hey HamFI... while we cannot accurately determine exactly what will happen when, you're probably making a big mistake. Because gold is used for international settlement of debt [the Big Boyz don't take worthless paper IOUs] and will be the backing for new currency, it will be tightly controlled and possibly confiscated from the public. The silver market is too tiny for them to worry about; although they may declare it illegal to hold at some point if they can get away with it. Silver bullion will outperform gold as it always does, and it's irreplaceable for industrial use. There are literally thousands of applications including tremendous demand for solar panels and medicine. The demand for silver is just warming up but the stock piles are gone. However, as the public realizes the worthlessness of fiat; and they will as the current dollar will be replaced for a devalued note of some kind since the Chinese have demanded it, they will be desperately trying to buy silver. This will ultimately lead us into hyperinflation. You will want plenty of silver bullion on hand as this process unfolds and gold will become too valuable and dangerous to use and possibly be confiscated. Tread carefully my friend...

LawsofPhysics's picture

Go to any mall in 'merica, you will have a hard time giving away silver rounds to the average zombie.

SoilMyselfRotten's picture

Unless they have a chocolate center

cpnscarlet's picture

Monetary Metals - Insulating the intelligence of miners and gold investors, our supposed audience, everyday in order to give central banks some cover...for a price, of course.

KansasCrude's picture

I'm  with you scarlet!  Been reading these chaps for a few months and me smells the proverbial wolf in sheep's clothing.  There "FUNDAMENTAL PRICE" calculation is a joke.  The often besmirched BRON SUCHEKI a  well known PM mis-information agent from the Perth Mint just joined them.  Don't trust their motives they stink of Cartel Fiat

LawsofPhysics's picture

Yes, of course in the absence of true price discovery no one, especially the bankers/financiers, will know what that "price" really is until the guillotines start taking heads.

It would appear humanity hasn't really evolved after all.

cpnscarlet's picture

But MM is a bunch of BOZOS that think true price discovery is happening (or pretending it is).

cpnscarlet's picture

But MM is a bunch of BOZOS that think true price discovery is happening (or pretending it is).

Harlequin001's picture

What a load of shite. The basis for silver is that it is still far too cheap in terms of gold, and the basis for gold is that it still takes a 400 tonne short sale to drive the price down through long term support.

Note to self: Don't read any more shite from monetary metals. The Beano is more useful...

BigJim's picture

I hate to say this, kids, but since 2011 this guy has been more on the money than the "to the moon!" PM enthusiasts.

The sad fact is that 1/2 a BILLION ounces of silver are hoarded every year; that mining supply has not been dropping off; and that - if, like me, you thought siver was a good way to preserve capital - you may well continue to lose purchasing power over 2016, 2017... who knows? by buying this stuff.

The only problem is... I have no idea what's better to buy at the moment. Government bonds showing NIRP? Stocks at nosebleed P/E? lulz.

About the only things that look attractive to me at this point are stocks in oil companies. One false move in MENA and BOOM! Up they go...

adanata's picture

Sorry Big Jim.... He is not at all "on the money". These charts are a hoot. All he's talking about is how phony numbers on phony charts look to those who are completely unfamiliar with PM fundamentals. It's easy to say gold/silver will go "down" in dollar value when they are being hammered by the Boyz at the banks with their fake PAPER gold/silver. The demand for phyzz has never been higher and you don't have to be a "bug" to understand it. Silver supplies are particulary precarious right now and silver will absolutely outperform gold. Timing is everything. No one can predict exactly when the dam will break, but break it will and if you listen to this clown, you won't be prepared. Dedollarization is well underway throughout the world but under the radar to prevent panic et al. Gold trade platforms are either ready to go or under construction. Fiat is going down and, as people realize how worthless it is, the result will be inevitable; they will suddenly remember or learn what real money is. Whenever fiat goes bust the bankers must return to real money for a generation or two until they can lull the Sheeple back to sleep. Banning cash, IMO will not fly because you would actually need to be brain dead to agree to it. The Brits are already hoarding cash as a result of public statements regarding the proposed elimination of cash. The 'mericans may be economically illiterate but they will never go for all digital all the time. Nope.  ;-)

 

It's good to be old.....

Harlequin001's picture

You must be joking. There is nothing you can do about people manipulating the price of an asset except buy it whilst it is on offer and wait. This is the criminal part of price fixing. If we live in an era of central planning then we also live in an era of central pricing, like it or not, which means that someone somewhere knows where the price is going and its not you.

This guy is either a manipulator or he works for them, because if someone else is central planning then the only way you can be right for any period of time is to have an inside view, and this view is wrong. It simply makes excuses for what is happening as if there is some technical basis for it, which is bullshit.

The whole world is being suckered into bonds, equities and property, which is still bonds, or should we say 'bank credit', but bank credit does not exist, and when that stark reality comes home to the many people who currently think they're making money, which it will when someone decides its time to stop the lending then all of this shit has to fit back in money, and it is the people who are currently manipulating markets and prices that know when that is. And only those people. Till then they can print all the money in the world to short metals and then print even more to buy it from you cheap when you sell. They win all the time. It's the reason why they are fabulously rich and we aren't.

There is nowhere else to go, including oil, which can only rise now as an inflation play anyway. You want to buy oil? Good luck with that, I think you're going to need it.

I always thought '"to the moon!" PM enthusiasts' were more 'through the floor US dollars...

BigJim's picture

The problem with the "the price is manipulated" claim is that it doesn't really help make investment decisions. There's an assumption that ~$14 an ounce is way too low. But what is this based on? There's no sign of silver shortages, which is what we should expect to see if the price is too "low".

I'm aware that silver spot price is set by the paper market, where massive naked shorts get dumped to take down the price... but even so, 500 million ounces of the stuff are hoarded every YEAR. And mining supply is not (yet) showing signs of trailing off, either.

Roughly half of all mined silver is used in industry. If there's another downturn, physical silver demand will go down with it.

I bought into the "silver is a great buy" story back in 2007. I've been buying it ever since, and my cost average is probably something like $20 an ounce. Not such a great preserver of capital as the PM enthusiasts predicted.

Yes, its price may rise again, maybe even outstrip inflation. But when? If you have sufficient income to cover your expenses until you die, and will be happily passing your PM stacks to your children, fine. But I'm less sanguine: I hope to turn my PMs into food, electricity, the occasional holiday before I shuffle off my mortal coil.