Silver: From $30/oz to over $500 by 2020

[PeacePlan]

Silver: From $30/oz to over $500 by 2020

(And from $500 to $5000 by 2030!)

Silver Stock Report

by Jason Hommel, January 12th, 2011


Silver: From $30/oz. to over $500 by 2020. In under a minute, I can tell you why that price must happen, and likely when. It seems to me that the public will one day wake up and start buying silver to protect from inflation. Thus, long before, say 10-20% of people buy silver, at least 1% of the American public will buy silver. We can calculate what might happen to the silver price when that happens.


The amount of money in US Banks is about $18 trillion. 1% of that is $180 billion.
Very little silver is left; it's mostly all been consumed, so most of what is available to buy is the annual new mine supply which is 700 million ounces.


$180 billion is $180,000 million. Divide that by 700 million, and we get an implied price of $257 per ounce. Do the math yourself. I'll wait.


But that price would mean that there is no newly mined silver left over for any industrial use, and that nobody else outside of the USA could buy any of the world's newly mined silver. Clearly that can't happen; those two groups would continue to buy silver, competing to buy, and driving up the price even more.


Thus, silver is very likely to be about $500/oz., by about the time that 1% of the American public wakes up and starts to buy silver. That will be the very beginning of the bull market in silver, when measured by "popular demand" -- and at that price, silver would still be very unpopular.


Just remember these key facts, and don't let anyone, or even yourself, trick you out of this developing bull market in silver. Don't try to time the peaks, don't wait for dips, just buy and hold real silver, not any kind of paper silver promise.

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[Original_Intent]

The only flaw is if the American public is struggling to feed itself, and investing or doing anything else with silver is way down their list of priorities. Even in that scenario, silver will be valuable, and I definitely am not intending to discourage anybody from getting as much silver as they can right now. It is just that silver may be valued for what it will buy. An ounce of silver will buy a bit more than a 50 lb. bag of wheat. It will be interesting to see if that relationship changes much.

[PeacePlan]

The only flaw is if the American public is struggling to feed itself, and investing or doing anything else with silver is way down their list of priorities. Even in that scenario, silver will be valuable, and I definitely am not intending to discourage anybody from getting as much silver as they can right now. It is just that silver may be valued for what it will buy. An ounce of silver will buy a bit more than a 50 lb. bag of wheat. It will be interesting to see if that relationship changes much.

I think what he is saying is that a lot of people will be seeing that it takes 100 dollars to buy that 50 lb bag of wheat and you can still just use 1 oz silver to get it. So people who do have any savings will take it out of banks and get silver just so their savings does not lose value.

[Seraphim]

This.

Food and energy prices are soaring, and silver/gold are being re-monetized at a similar pace (in relation to paper). All else is deflating or in a bubble set to pop.

I think what he is saying is that a lot of people will be seeing that it takes 100 dollars to buy that 50 lb bag of wheat and you can still just use 1 oz silver to get it. So people who do have any savings will take it out of banks and get silver just so their savings does not lose value.

[psi2941]

"to over $500 by 2020"

ur kidding right more like by 2013

[cubical]

predicting 10 or 20 years down the road in this political environment is nonsense imo. It could happen or it might not.

[PeacePlan]

predicting 10 or 20 years down the road in this political environment is nonsense imo. It could happen or it might not.

Predicting price or time is a fools game and by 2020 we may no longer be dealing in dollars as a price point?

[Bern]

... The amount of money in US Banks is about $18 trillion. 1% of that is $180 billion.
Very little silver is left; it's mostly all been consumed, so most of what is available to buy is the annual new mine supply which is 700 million ounces.


$180 billion is $180,000 million. Divide that by 700 million, and we get an implied price of $257 per ounce. Do the math yourself. ...

Uh... His price formula calculates a price for silver assuming that every available dollar in US banks "wants" to buy silver and that's not very realistic.

[Seraphim]

No, he states 1%.

Uh... His price formula calculates a price for silver assuming that every available dollar in US banks "wants" to buy silver and that's not very realistic.

[Bern]

D'oh! Total and complete reading comprehension fail on my part.

So, much like with swallows and coconuts, it's a simple matter of weight ratios. Assume 0.1% investment and you get a price action pretty close to where we are today. The question then, what percent is reasonable? I would posit that as faith in the dollar erodes, the percent will rise.

[Jeez]

why would people buy Silver as an asset/ investment when it has never been used as such? Currently most Silver that has consumed is for industrial purpose not for jewelry or bullion and demand for silver has actually gone down in last couple years where as production has risen.

[Travlyr]

why would people buy Silver as an asset/ investment when it has never been used as such? Currently most Silver that has consumed is for industrial purpose not for jewelry or bullion and demand for silver has actually gone down in last couple years where as production has risen.

Never been used as such? It only costs me $2 to fill my gas tank. 2 Silver Dollars. I saved them from 1960's.

[cbc58]

you bartered with the station owner to take 2 silver dollars to fill your tank?

[Travlyr]

you bartered with the station owner to take 2 silver dollars to fill your tank?

I wish it would work that way and maybe someday it will. I first have to take my silver dollars to the local coin shop, sell my coins, cash their check, then fill-up.

[puppetmaster]

Never been used as such? It only costs me $2 to fill my gas tank. 2 Silver Dollars. I saved them from 1960's.

most people still don't understand this.....

[Travlyr]

And I would be happy to work for $10 per day, pay my own health, disability & liability insurances, waive unemployment benefits, save and invest for my own happiness and retirement ... if only ... if only "they" would let me.

[hazek]

http://www.dailypaul.com/node/154027

[fj45lvr]

why would people buy Silver as an asset/ investment when it has never been used as such? Currently most Silver that has consumed is for industrial purpose not for jewelry or bullion and demand for silver has actually gone down in last couple years where as production has risen.

dude...it was used as such by the gov. until 1964? and it has been continually used as such by certain individuals since then.

[youngbuck]

I love how "Barnanke" is pronounce 'Ber-naynk' in these things, and his title is 'The'.

[Jeez]

dude...it was used as such by the gov. until 1964? and it has been continually used as such by certain individuals since then.

But as i said before most of silver consumed is for industrial purpose, if silver prices do raise the amount of silver used in jewelry and bullion decline significantly as people switch platinum or even gold which are easier to maintain (does not tarnish) and harder to fake.

http://www.silverinstitute.org/supply_demand.php

[Bern]

Jeez - I don't think rising silver prices are going to cause investors holding the metal to switch to other investments. If anything, it will likely fuel more demand.

[Seraphim]

Prepare for the silver paper implosion and the explosion of value for PHYSICAL.

Now that silver is STARTING to go mainstream, along with the JP Morgan lawsuits and manipulation games etc we're going to start seeing MASSIVE ETF sell offs and calls on delivery.

This is going to likely mean a BIG drop in the "official" spot price with a simultaneous launch in price for all physical orders.

Do not be surprised if 2011 is the year of 15$ spot and 50$ physical.
Do not be surprised if 2012 is the official collapse of paper silver markets, comex defaults and nothing but physical as the "official" price.

Mark my words- there will be a HUGE decoupling in the price of silver. The transition will appear quick and merciless to the untrained eye. To the ones who see it all unfolding, it will appear to be slow, painful and rewarding so long as you stick to your guns.

If silver's offical spot price is 24, 25, 26$ and dealers are asking for 35$ per physical ounce, it will be the beggining of the end for the PM manipulation via paper ponzi schemes. This is the time that speculators will be mercilessly shaken out (morons) and the long term investors in physical are rewarded for their cohones.

[Jeez]

Jeez - I don't think rising silver prices are going to cause investors holding the metal to switch to other investments. If anything, it will likely fuel more demand.

Once again my question is what will cause Silver price to raise when most of Silver's demand is for industrial use? Unlike Gold for example. If anything China slows down demand for Silver will plunge couple that with raising Silver production (where as Gold production has declined in last 5 years).

[Seraphim]

It's remonetization.

Once again my question is what will cause Silver price to raise when most of Silver's demand is for industrial use? Unlike Gold for example. If anything China slows down demand for Silver will plunge couple that with raising Silver production (where as Gold production has declined in last 5 years).

[Jeez]

It's remonetization.

But even if Silver demand double or thriples for coins it will still won't be half as much as Silver consumed for industrial purpose. You already seeing automotive suppliers reduce the silver content will only increase as price gets higher. My point is Silver price is not as easy to predict as Gold due to the fact it is industrial metal. Any rise in price due to monetization will be offset by decline in industrial usage.

Added: Also if Silver gets to 100/oz and about 1-12 to ratio with Gold why would you countries go for Silver over Gold or even Platinum? Only reason Silver coins where issued was because of price of Gold but once that advantage diminishes it does not make sense to stick with the former.

[Cowlesy]

If silver is going from $30 to $500 in ten years, you'd need annualized appreciation of about 36.5% per year and that's buying more silver with the appreciation each year. Good luck with that.

[thrillhouse]

You'd also have to consider the fact that as the price of silver goes higher mining companies will ramp up extraction/production. So long as the cost of energy/labor to extract silver doesn't rise at a faster rate...

[Seraphim]

We use floating value currencies as is...why is it all of a sudden a problem to have floating value coinage made from precious metals/commodities?

I'm not sure I am fully understanding you concern,

If/when silver remonetizes (with gold), demand in that aspect will go up way more than 2-3 time...

But even if Silver demand double or thriples for coins it will still won't be half as much as Silver consumed for industrial purpose. You already seeing automotive suppliers reduce the silver content will only increase as price gets higher. My point is Silver price is not as easy to predict as Gold due to the fact it is industrial metal. Any rise in price due to monetization will be offset by decline in industrial usage.

Added: Also if Silver gets to 100/oz and about 1-12 to ratio with Gold why would you countries go for Silver over Gold or even Platinum? Only reason Silver coins where issued was because of price of Gold but once that advantage diminishes it does not make sense to stick with the former.

[Jeez]

We use floating value currencies as is...why is it all of a sudden a problem to have floating value coinage made from precious metals/commodities?

I'm not sure I am fully understanding you concern,

If/when silver remonetizes (with gold), demand in that aspect will go up way more than 2-3 time...

My point is if you saying the price will go up because of monetization, Gold will go up more than Silver since the latter is industrial play so you better off with Gold, Platinum etc than Silver. Diversification among PM is key.

[Seraphim]

While I agree that diversification is good and that silver is more volatile, as this remonetization process continues, silver may very well outperform gold by a lot. The industrial uses strip supply and leaves monetary silver more scarce. You can do the rest.

My point is if you saying the price will go up because of monetization, Gold will go up more than Silver since the latter is industrial play so you better off with Gold, Platinum etc than Silver. Diversification among PM is key.