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Thread: 2013 Silver Price Forecast: Silver Will Perform Like Gold on Steroids

  1. #1

    Default 2013 Silver Price Forecast: Silver Will Perform Like Gold on Steroids

    Peter Krauth


    This past March, I asked a highly successful investment advisor what he thought about gold. Since he deals almost exclusively with very high net-worth individuals, his point of view was especially intriguing.

    He confided to me that many of his clients had been asking for gold and gold-related investments over the past few years. I can't say that I was surprised.

    But what he told me next simply shocked me.

    "Gold's much too volatile, it's too risky", he said. "Sure it's up, but I try to discourage my clients from investing in it."

    It simply floored me that he thought gold was too volatile. Gold is only up 580% since it bottomed in 2001, without a single losing year to date.

    That's not something you can say about the stock market or any other type of investment.

    I can hardly imagine what he must think of silver, as silver prices are up by 725% since 2001.

    Today, silver is trading around $34, but our 2013 silver price forecast now has the shiny metal going much, much higher.

    What will power that rise?

    Since it's slaved to its richer cousin, all the fundamentals for higher gold would apply.

    I wrote about them yesterday in my 2013 gold price forecast.

    As history has shown, silver moves almost in sync with gold, but exaggerates its movements, both on the up and down sides. That's why I like to think of silver as "gold on steroids".

    2013 Silver Price Forecast
    For 2013 I think silver, like gold, will set a new all-time nominal price record, likely reaching as high as $54 an ounce.


    Despite silver's dependency on gold, it does have some distinct fundamentals, too.

    In fact, here are my key drivers for silver prices in 2013:
    The Gold/Silver Ratio: Before the financial crisis, the gold/silver ratio was around 50 (meaning an ounce of gold would buy you 50 ounces of silver) and trending downward. In late April last year silver exploded higher, pushing the ratio down below 30.


    That was short-lived, as silver's dramatic rise was unsustainable. I had said so at the time. The ratio recently returned to a high level near 60. In 2013, look for the ratio to head back down again, meaning silver will rise faster than gold.

    On a long-term basis, I think we'll see this ratio move down closer to 20. So right now, silver is looking rather undervalued relative to gold.



    Four More Years of Obama: The President has been very good for silver prices. In fact, he was so good, he helped make silver the best-performing major financial asset during his first term.


    Now that Obama has earned another four years, and Federal Reserve Chairman Ben Bernanke's still in place and relying heavily on the printing press, I'm fully expecting a repeat performance. Thanks, guys, for more of the same.

    More:

    http://www.silverbearcafe.com/privat.../steroids.html



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  3. #2

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    The 2013 forecast high of $54 would be a ratio of 31:1 if gold stayed the same, which it won't. Even with volatility, gold will never again go below $1600--it's a new kind of petrodollar for some, too many global players actively vying for it, and too much activist currency debasement for it to go anything but up.

    20:1 at today's gold price would put silver at $85/oz. - a difference split between that and the project high wouldn't surprise me at all, $60-$65, with $48-$52 the new floor. Very soon.

  4. #3

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    I agree with the general thought.

    2013 is the turning. In EVERY sense.

    A 26,000 year turning....

    Quote Originally Posted by Steven Douglas View Post
    The 2013 forecast high of $54 would be a ratio of 31:1 if gold stayed the same, which it won't. Even with volatility, gold will never again go below $1600--it's a new kind of petrodollar for some, too many global players actively vying for it, and too much activist currency debasement for it to go anything but up.

    20:1 at today's gold price would put silver at $85/oz. - a difference split between that and the project high wouldn't surprise me at all, $60-$65, with $48-$52 the new floor. Very soon.
    "Like an army falling, one by one by one" - Linkin Park

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    Sounds reasonable to me .

  6. #5

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    Can anyone please explain how they arrive at various silver:gold ratios? They aren't really substitutes in industry, they have different demand profiles, and they don't come out of the ground with economics that suggest XX:X ratio.

  7. #6

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    Quote Originally Posted by Jordan View Post
    Can anyone please explain how they arrive at various silver:gold ratios? They aren't really substitutes in industry, they have different demand profiles, and they don't come out of the ground with economics that suggest XX:X ratio.
    There is no one metric for deriving an accurate ratio of anything other than price. How that equates to things like ratios of abundance still in the Earth (not as simple to arrive at as many believe), existing physical above-ground stock of each metal, how each metal is used or consumed, or even how often each are bought and sold on the market, are separate chapters in another story.

    What the economics suggest is a distortion, since the quantity of derivatives for each is never equal to the presumed underlying physical, and the variance between the derivatives and the physical is different for each metal. Likewise the trading velocity of each type of derivative, as well as the trading velocity of physical-only. Thus, the real scarcity of each (physical only) is completely distorted by the derivatives to which their prices are coupled.

    What most people are trying to guess (and that's all it is, or can be at this point), is what the ratio of gold to silver might be in the event of a full decoupling from derivatives. That could come about from a domino effect of MF Globals (where glass walls are demolished and allocated physical holdings are even STOLEN, with titles made a part of the counter-party claims insanity. If that happens, and a global rats nest of inflated counter-party claims implodes, the majority who THOUGHT they were owners of physical could find themselves without any chair of their own when the music stops. At that point, paper derivatives and other counter-party claims would no longer be trusted. Panic hits, paper gets dumped, more people demand physical with delivery only, until the physical finally decouples completely from the paper, which is driven out of the market.

    It's only at that point that another ratio emerges -- one that is far less distorted, and closer to [physical] reality. That's the ratio--the underlying PHYSICAL fundamental--that everyone is guessing at.

  8. #7

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    Quote Originally Posted by Jordan View Post
    Can anyone please explain how they arrive at various silver:gold ratios? ...
    It's a simple matter of weight ratios. /jk

    I compiled a "brief" history of events since October 2008 that are defining the global currency war and the role that gold is playing:

    Tin Foil Hats, Economic Reality and the Total Perspective Vortex

    Also, have you contacted your Congressional Rep and asked them co-sponsor Ron Paul's Rep. Paul Broun Jr.'s HR 1098 77: Free Competition in Currencies Act?

  9. #8

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    Quote Originally Posted by Bern View Post
    It's a simple matter of weight ratios. /jk

    Weight ratios? No, good sir, 'tis a question of.... velocity!!



    And it depends upon whether we're talking about European silver or African silver, of course!


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    Silver should already be +$50 an ounce. The only, only reason it isn't, is because of criminal manipulation of futures by JPM and their criminal co-conspirators. The catalyst that forces theses assholes to cover their positions, that will be what drives silver prices higher....lot of possibilities...

  11. #10

  12. #11

    Default Silver gains favor as an investment asset

    Silver’s popularity as an investment grows.

    SAN FRANCISCO (MarketWatch) — Silver’s more popular and volatile than ever, ready to finish the year with gains more than double those of gold, as the industrial staple wins more favor as an investment asset.

    “The evidence is clear that investment, not industrial demand, is what is driving silver prices higher,” said Mark Thomas, chief investment strategist and author of SilverPriceAdvisor.com.

    Last month, Thomson Reuters GFMS said investment demand will likely be the prime driver of the silver price this year.

    http://articles.marketwatch.com/2012...s-silver-trust

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    “The evidence is clear that investment, not industrial demand, is what is driving silver prices higher,” said Mark Thomas, chief investment strategist and author of SilverPriceAdvisor.com.
    which would mean that if investors tire of it as they move to other investments, it will drop in price.
    I am Zippy and I approve of this message. But you don't have to.

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    But it is so pretty Zip

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    On a serious note , at a local level I have seen nothing but demand for the past five years , at least, I stop by my guys place , usually once a week , he is retired and only open three days per week.Things move out of there ridiculously fast.

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    Quote Originally Posted by Zippyjuan View Post
    which would mean that if investors tire of it as they move to other investments, it will drop in price.
    After 5000 years it would seem they would already be tired of it. Maybe they'll tire of the dollar first.

  17. #16

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    Quote Originally Posted by Zippyjuan View Post
    which would mean that if investors tire of it as they move to other investments, it will drop in price.
    We are nowhere near the bubble/mania phase yet.
    I compiled a "brief" history of events since October 2008 that are defining the global currency war and the role that gold is playing:

    Tin Foil Hats, Economic Reality and the Total Perspective Vortex

    Also, have you contacted your Congressional Rep and asked them co-sponsor Ron Paul's Rep. Paul Broun Jr.'s HR 1098 77: Free Competition in Currencies Act?

  18. #17

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    Physical holders of silver are amongst the most steadfast and informed investors in the world.

    "Strong hands" is an understatement when it comes to most physical silver savers.

    Quote Originally Posted by Zippyjuan View Post
    which would mean that if investors tire of it as they move to other investments, it will drop in price.
    "Like an army falling, one by one by one" - Linkin Park

  19. #18

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    The gold silver ratio is hermetically based, how much silver it takes to alchemically turn to gold - the highest evolution of metal. Ask Hermes. Re. Yeshuah.

  20. #19

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    Or it may be based on the ratio of that silver coin in the sky to that great gold coin

  21. #20

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    does anyone on here not own silver? I do not currently and am still kicking myself for not buying at $15. Is there any reason not to jump in right now with both feet.
    "It takes a revolution, to make a solution. Too much confusion, so much frustration" Bob Marley

  22. #21

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    The ratio is based around the abundance of silver to gold in the crust.

    There's 16X more silver than gold despite the fact there's actually more gold to invest in now than silver.

    Historically silver traded at 16-1 with gold as well.


    which would mean that if investors tire of it as they move to other investments, it will drop in price.
    After what's happened the last 5 years with silver.... anyone who is still holding it isn't selling anytime soon.

    Greed didn't push these people to sell when it hit 50$ and fear didn't push them to sell when it hit 27$ this past summer.

    That should tell you something about silver stackers... we aren't going anywhere. A good lot of us (myself included) remain convinced the paper price of silver is a fucking joke and we instead use it to our advantage to stack on dips.

    1% of the population stacks physical metals.... that's no where near a bubble. If tomorrow that number turned to 2% what would happen? What would happen if it hit 3%? 10%? 25%? 50% 100%?

    That's when those of us who haven't sold yet, out of fear or greed, would be running to sell our stacks.
    It's just an opinion... man...

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    Quote Originally Posted by NoOneButPaul View Post
    The ratio is based around the abundance of silver to gold in the crust.

    There's 16X more silver than gold despite the fact there's actually more gold to invest in now than silver.

    Historically silver traded at 16-1 with gold as well.




    After what's happened the last 5 years with silver.... anyone who is still holding it isn't selling anytime soon.

    Greed didn't push these people to sell when it hit 50$ and fear didn't push them to sell when it hit 27$ this past summer.

    That should tell you something about silver stackers... we aren't going anywhere. A good lot of us (myself included) remain convinced the paper price of silver is a fucking joke and we instead use it to our advantage to stack on dips.

    1% of the population stacks physical metals.... that's no where near a bubble. If tomorrow that number turned to 2% what would happen? What would happen if it hit 3%? 10%? 25%? 50% 100%?

    That's when those of us who haven't sold yet, out of fear or greed, would be running to sell our stacks.
    Hmm Let's see. Abundance of elements in Earth's crust: http://en.wikipedia.org/wiki/Abundan...th's_crust

    Parts per million:
    Silver (Ag): 0.075
    Gold (Au): 0.004

    That would make silver about 19 times more abundant than gold. But abundance in the Earth is not always a measure of relative values. Platinum is slightly more abundant than gold (0.005 ppm) yet it is usually more expensive. Ease (costs) of extraction and demand will impact it.

    Now if the abundance ratio DID hold for pricing, with gold currently about $1700 an ounce, silver should be about $90. A large percentage of gold mined is stored in vaults (20% of everything ever mined) not being used for anything which artificially reduces the supply. Silver is not held in reserve in such amounts.

    20 year Historical gold/ silver ratio chart:


    http://goldprice.org/gold-silver-ratio.html

    Looks like it has been closer to 60 times than 16. A 60 ratio with gold at $1700 would put silver at $28 an ounce.

    Historic chart for silver- looks like until recently it was pretty flat.

    http://www.kitco.com/scripts/hist_ch...rly_graphs.plx

    Gold- historic prices:
    http://www.kitco.com/scripts/hist_ch...rly_graphs.plx


    Silver being "gold on steroids" doesn't seem to match up with the graphs. The price of gold seems to vary a lot more than the price of silver does.
    Last edited by Zippyjuan; 12-11-2012 at 06:06 PM.
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    Quote Originally Posted by Zippyjuan View Post
    Hmm Let's see. Abundance of elements in Earth's crust: http://en.wikipedia.org/wiki/Abundan...th's_crust

    Parts per million:
    Silver (Ag): 0.075
    Gold (Au): 0.004

    That would make silver about 19 times more abundant than gold. But abundance in the Earth is not always a measure of relative values. Platinum is slightly more abundant than gold (0.005 ppm) yet it is usually more expensive. Ease (costs) of extraction and demand will impact it.
    Big trouble looking only at abundances found in the crust, since that does nothing whatsoever to influence price. The fact is, we don't know where all deposits are, or what the real abundance is in terms that are related to what we can discover and actually get to. There could be fifty thousand tonnes of gold sitting in a near-surface plot somewhere close to some antarctic shelf, and it would skew everything. Extraction costs are always in the present, but they affect FUTURE abundance, and FUTURE production. But even with extraction costs and demand factored in, a key fundamental for physical and its scarcity as it affects price is ABOVE GROUND ABUNDANCE. And for that we have actual production numbers, where there is a known ratio of what is coming out of the ground RIGHT NOW.

    From that same wiki link, the far left column of the chart shows production for 2011.

    2011 GOLD: 2,700 tonnes
    2011 SILVER: 23,800 tonnes

    CURRENT SILVER/GOLD ANNUAL PRODUCTION RATIO FOR 2011: 8.8:1
    Last edited by Steven Douglas; 12-11-2012 at 06:25 PM.

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    Quote Originally Posted by Steven Douglas View Post
    Big trouble looking only at abundances found in the crust, since that does nothing whatsoever to influence price. The fact is, we don't know where all deposits are, or what the real abundance is in terms that are related to what we can discover and actually get to. There could be fifty tonnes of gold sitting in a near-surface plot somewhere close to some antarctic shelf, and it would skew everything. Extraction costs are always in the present, but they affect FUTURE abundance, and FUTURE production. But even with extraction costs and demand factored in, a key fundamental for physical and its scarcity as it affects price is ABOVE GROUND ABUNDANCE. And for that we have actual production numbers, where there is a known ratio of what is coming out of the ground RIGHT NOW.

    From that same wiki link, the far left column of the chart shows production for 2011.

    2011 GOLD: 2,700 tonnes
    2011 SILVER: 23,800 tonnes

    CURRENT SILVER/GOLD ANNUAL PRODUCTION RATIO FOR 2011: 8.8:1
    You are correct on all of that. And you are also right that even the extraction rates do not necessarily mean that the prices should be in that ratio either.
    Ease (costs) of extraction and demand will impact it.
    Now if that 8.8 extraction ratio was to be the "proper" price ratio, with silver at $33 an ounce then that would make gold $290 or with gold at $1700 then silver should rise to $193- but that is nowhere near the historic relative prices.
    I am Zippy and I approve of this message. But you don't have to.

  26. #25

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    Quote Originally Posted by NoOneButPaul View Post
    The ratio is based around the abundance of silver to gold in the crust.

    There's 16X more silver than gold despite the fact there's actually more gold to invest in now than silver.

    Historically silver traded at 16-1 with gold as well.




    After what's happened the last 5 years with silver.... anyone who is still holding it isn't selling anytime soon.

    Greed didn't push these people to sell when it hit 50$ and fear didn't push them to sell when it hit 27$ this past summer.

    That should tell you something about silver stackers... we aren't going anywhere. A good lot of us (myself included) remain convinced the paper price of silver is a fucking joke and we instead use it to our advantage to stack on dips.

    1% of the population stacks physical metals.... that's no where near a bubble. If tomorrow that number turned to 2% what would happen? What would happen if it hit 3%? 10%? 25%? 50% 100%?

    That's when those of us who haven't sold yet, out of fear or greed, would be running to sell our stacks.
    I'm pretty convinced that Ron Paul fans will probably own collectively most of the silver that's mined each year from here on out. Good on you guys. With like 700 million ounces mined each year, you guys probably account for a good majority of investment demand. Keep on buying! Sky's the limit as long as you keep on buying.

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    Check out this chart for gold price history I finally found. What would people forecast it will do over the next ten years if you saw this (and how does it look compared to today's gold prices)? Add the caveat that history does NOT have a habit of repeating everything. Yellow line is gold. 1972- 1980. (article was comparing Treasury yields on the blue line to the price of gold- Treasury interest rates run inversely to prices- falling prices means rising rates of returns but it was the gold price I wanted to show). Looks good- huh? Want to get in on the rising prices?


    http://www.zerohedge.com/news/messag...time-different


    The answer is that during the next year, it doubled but for the next 20 years after that it declined. Who would have thought? The chart ends in 1980 with gold at $415 an ounce. Later the next year it peaked at $850 and the next two gold charts from the same link:
    1980- 1986:


    1986- 2002:


    2002 is the same price it was in 1979. Again, "past performance is no guarantee of future returns" as they say in financial reports.
    Last edited by Zippyjuan; 12-11-2012 at 07:11 PM.
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  28. #27

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    Paul Saur at rapidtrends.com wrote a pretty good article on this back when silver was at $12-$13/oz., called "The “Optimum” Gold / Silver Ratio"


    Excerpt

    So, global silver/gold production ratios have drifted somewhere between 8:1 and 11:1. About 2500 years ago, the silver/gold price ratio started off near 10:1 (which makes sense), and slowly edged up to about 16:1 by the 1860’s, where it was currently fixed by the US Government. However, the gold/silver ratio destabilized in the mid 1860’s, triggered by fiat currency creation used to finance the American Civil War, and the ratio has since been all over the map in the last 140 years, ranging as high as 100:1.

    ....

    Yet, at current silver prices of $12-13 an ounce, the market value of annual global silver production is only about 8 billion dollars. For a precious metal that is also indispensible to society, this kind of pricing is ridiculous. Since silver is literally more important than gold, yet gold retains the sentimental favorite crown, watch for the “optimum gold/silver ratio” to eventually come to its new resting place around 5:1, with the potential for parity.
    I don't ever foresee a time of parity between gold and silver, but I do agree with Saur about the underlying fundamentals, and think his reasoning is otherwise sound in terms of the direction silver is ultimately headed. But what do I know, I'm a silverbug with glazed over eyes! Conventional wisdom even among many PMbugs is to prefer gold over silver, a big reason for which is that it's the monetary playthings of governments and likely to return as money in one form or another. And while I do stack gold, I don't see it that way at all. In my eyes, and only because of silver's VASTLY superior utility, and future demand that has little to do with monetary demand, I believe that silver is destined to hit some middle ground between its present price and gold.

    Also, I think we may be in for some more surprises re: other commodities, not conventionally and historically used as money. Technology has come a long way since UNSOUND monetary policies began their temporary global reign. Monetary policies as market solutions with sound currencies have never been tested, and have yet to evolve using all the new technology that is now in place. Legal tender laws notwithstanding, we have reached a point where virtually any commodity can be used as backing for money. It all gets stored anyway. And it all weighs the same on paper, or contained within a magnetic stripe. Gold and silver are great, don't get me wrong, but give me a system with market assured 1:1 backing (including what I'm designing now), and I don't care if the currency is 100% backed by bailments in lead, or salt. Anything that is hard to game, and the more variety and diversity the merrier.
    Last edited by Steven Douglas; 12-11-2012 at 07:12 PM.

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    I bought copper @1.33, silver @ $9, I actually have some 12k gold I bought for $3.45 a gram, I have silver war nickels , I pd 5 or 6 cents for. I am, though , an old guy.

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    I think what makes silver and gold so difficult to project is that we can't possibly know the true cost of every mine in real terms. For example, some company might bring up 30% copper and 70% gold (just throwing stuff out there) and then allocate most of the cost to copper and report a $100/oz mining price for gold. So any data you get will still be unreliable and difficult to sort. That's why I don't understand the idea of ratio comparisons, when there isn't anything really suggesting the logical thesis for the price ratios.

    I think of silver and gold as the ultimate test of a greater fool theory. You can make money with them so long as someone else is willing to pay more for it than you. So, as long as investment demand makes up a significant part of all silver and gold demanded, then silver and gold are going to do fantastic.

    Here are two charts I pulled from Google:






    If you can skillfully determine when investment demand will peak, you'll make bank. Much easier said than done, though - and I'm sure someone could make the case that silver investment demand will never peak because it's a currency or whatever.

    Basically, by now there has probably been a full year of silver/gold production bought as an investment in just the past 5-10 years. If someone starts liquidating, that could be ugly.

    I would be much more bullish on silver/gold if industrial demand made up a larger part of total demand. That would make me feel better about silver/gold being used up or effectively sequestered so that the cost of it can keep going higher.
    Last edited by Jordan; 12-12-2012 at 03:40 PM.

  31. #30

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    Quote Originally Posted by Jordan View Post
    I think what makes silver and gold so difficult to project is that we can't possibly know the true cost of every mine in real terms. For example, some company might bring up 30% copper and 70% gold (just throwing stuff out there) and then allocate most of the cost to copper and report a $100/oz mining price for gold. So any data you get will still be unreliable and difficult to sort. That's why I don't understand the idea of ratio comparisons, when there isn't anything really suggesting the logical thesis for the price ratios.

    I think of silver and gold as the ultimate test of a greater fool theory. You can make money with them so long as someone else is willing to pay more for it than you. So, as long as investment demand makes up a significant part of all silver and gold demanded, then silver and gold are going to do fantastic.
    I'm going to agree with you on the greater fool theory to the extent that it applies to gold and silver as investments and pure speculation.

    Housing and Dotcom speculation and malinvestment bubbles were perfect examples of the greater fool theory in action. In the case of dotcoms, it was more like fiat currency, with the illusion of wealth created out of little more than vapor, followed by a well-deserved crash, and inexorable return to vapor, since no underlying fundamentals existed to give it a floor.

    Real estate, on the other hand, has underlying assets of real value and real demand, quite outside any speculative fevers that might exist. So while the greater fool theory still applied, it was applied ON TOP OF something that had a real value floor to it. Unlike imaginary dotcom wealth, physical assets like land and property didn't vanish into nothing when the bubble collapsed. So not ALL of the market activity was based on the greater fool theory -- or you wouldn't be invested in that market. The idea is not that a greater fool (of a speculator class only) "is willing to pay more", in your case, so much as the average person, who is thinking in terms of real needs and demand only, and not rent-seeking investment, "is always willing to pay something".

    What you seem to be suggesting is that gold and silver are more like dotcoms than land and real estate -- that somehow the exchange value and market prices that do exist are all based on ethereal dotcom-like vapor. I would submit most of the derivatives are precisely that -- VAPOR, as well as a perfect example of the greater fool theory. But the underlying physical that those derivative continuously (mis)represent are anything but vapor. If the derivatives are destroyed, and the illusion of wealth FOR MOST people is wiped out, the physical itself is not only NOT wiped out, but skyrockets in price. If that happened, nobody would be saying, "Ah, well, the paper is worthless, I guess that means the physical must be worthless too. The fundamentals of physical PM's has NOTHING to do with a greater fool theory, and everything to do with solid fundamentals, and a very real demand for the physical that has always existed, and always will. Just like land and real estate. Saying "it's all just based on belief anyway" is how the greatest fools of all are created, in all cases, from those who lack the capacity to differentiate between what is real and what is an illusory counterfeit of something that is real.

    If you can skillfully determine when investment demand will peak, you'll make bank. Much easier said than done, though - and I'm sure someone could make the case that silver investment demand will never peak because it's a currency or whatever.

    Basically, by now there has probably been a full year of silver/gold production bought as an investment in just the past 5-10 years. If someone starts liquidating, that could be ugly.

    I would be much more bullish on silver/gold if industrial demand made up a larger part of total demand. That would make me feel better about silver/gold being used up or effectively sequestered so that the cost of it can keep going higher.
    Every single bit of the above is in the context of short term speculation and investment, in a regime that is papered over in "vapor" derivatives and counter-party claims that could eventually all go up in smoke, the production and "aggregate stock" ratio fundamentals of which have limited effect on prices that are coupled to and determined by the quantities of both paper and physical. In that limited context only, the ratios really aren't that important or meaningful at all. Absent all the ultimately worthless paper, however, suddenly those ratios become highly significant.

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