The Gold and Silver Thread

[william the wie]

Commodoties, pm's, food, gas, are heading big time north now. We're accruing interest debt at an astounding rate that I've never seen before. It's phenomenal and scary.

All I can figure is that Wall St. is moving into precious metals in anticipation of a May rather than a June collapse of the indices.

 

[Gadawg73]

Commodoties, pm's, food, gas, are heading big time north now. We're accruing interest debt at an astounding rate that I've never seen before. It's phenomenal and scary.

All I can figure is that Wall St. is moving into precious metals in anticipation of a May rather than a June collapse of the indices.

Commodities are used up, all of them except metals. We burn oil, eat the food and make products out the others.
The same gold that was sold 1000 years ago to the present is still around and every ounce mined adds to the supply. With little industrial use and the jewler market dry because of the high prices there is one way to go when demand goes a little slow.

 

[Toro]

I think you may be overoptimistic on gold. Given silver's industrial uses and low substitutability I am more optimistic about that but with the debt ceiling and budget battles ahead I will be headed for the sidelines soon.

I don't buy the industrial argument. Most of the incremental demand is coming from investment. The industrial argument is IMHO an argument people use to justify paying higher and higher prices, like they did in the housing bubble when people said "They aren't making any more land," or during the tech bubble when people said "The Internet is going to be huge." It's merely a rationalization IMO.

Having said that, the supply/demand dynamics are and have been very favourable, much more so than gold. Silver outstanding is a fraction of gold in the world, so the mania takes silver much higher than gold.

 

[Toro]

The same gold that was sold 1000 years ago to the present is still around and every ounce mined adds to the supply.

That's one reason why gold is so desirable as a currency.

 

[Gadawg73]

I think you may be overoptimistic on gold. Given silver's industrial uses and low substitutability I am more optimistic about that but with the debt ceiling and budget battles ahead I will be headed for the sidelines soon.

I don't buy the industrial argument. Most of the incremental demand is coming from investment. The industrial argument is IMHO an argument people use to justify paying higher and higher prices, like they did in the housing bubble when people said "They aren't making any more land," or during the tech bubble when people said "The Internet is going to be huge." It's merely a rationalization IMO.

Having said that, the supply/demand dynamics are and have been very favourable, much more so than gold. Silver outstanding is a fraction of gold in the world, so the mania takes silver much higher than gold.

You are right about the land argument almost all the time.
But even in this market if you follow the 3 most important factors when buying land you will still make very good $$$ long term.
LOCATION, LOCATION AND LOCATION. And mine is in a great location.

 

[Toro]

You are right about the land argument almost all the time.
But even in this market if you follow the 3 most important factors when buying land you will still make very good $$$ long term.
LOCATION, LOCATION AND LOCATION. And mine is in a great location.

Oh, I agree. Unfortunately, people were using that as an excuse to buy any real estate.

Tokyo property prices in 1991 equaled the value of real estate in all of Canada. They weren't making any more land in Japan either. That didn't stop home prices in Tokyo from falling 60% over the next two decades.

 

[uscitizen]

Brother if those facts do not wake you up to the reality of gold as strictly a speculative market as of NOW then nothing will. Get out now. Gold will be at 800, if that, within 20 months, most likely much sooner.

I thought tech was crazy in 1996. I thought housing was nuts in 2003.

One thing I've learned in investing is that things can go farther for longer than anyone could initially imagine.

I've invested and traded in the gold and silver markets since 2002 and I'm out right now because it's getting frothy out there. So I'm expecting a near-term top soon. However, bubbles usually end when monetary policy is tight. The tech bubble ended when the Fed raised the funds target to 6.5%. The housing bubble ended when the Fed raised it to 5.25%. Right now the rate is 0%, and they are still easing with QE2. Bubbles usually don't end at these levels, though maybe it is different this time, I don't know. Usually they end when the Fed has been hiking rates many times and years after the interest rate cycle bottomed. The last time gold topped in 1980, yields on the long bond went from 8% to 11% while gold quadrupled.

My guess - and I emphasize the word "guess" - is that sometime within the next month or two, we are going to have a violent correction, followed by an acceleration into new highs in the spring. But like I said, I'm just guessing.

I think you may be overoptimistic on gold. Given silver's industrial uses and low substitutability I am more optimistic about that but with the debt ceiling and budget battles ahead I will be headed for the sidelines soon.

since I bought eagles at a bit over $500 I do not see how I can lose.

 

[Mad Scientist]

This isn't a bubble. It isn't like the real estate bubble, it isn't like the dot com bubble which was pure speculation. This isn't the Hunt brothers trying to corner the silver market.

It's the dollar devaluing.

I'm not buying gold and silver as an investment. I'm buying gold and silver so that my savings isn't destroyed by QE I, II, and soon to be III.

China, Russia, India, Brazil and many other emerging markets are moving away from the dollar. Soon (maybe it is already) the dollar will not be the worlds reserve currency. That will cause everyone's standard of living to fall in this country, and the value of the dollar to drop with it.

If the plane you're flying on catches fire, you're gonna' bail out right?

 

[editec]

I think you may be overoptimistic on gold. Given silver's industrial uses and low substitutability I am more optimistic about that but with the debt ceiling and budget battles ahead I will be headed for the sidelines soon.

I don't buy the industrial argument. Most of the incremental demand is coming from investment. The industrial argument is IMHO an argument people use to justify paying higher and higher prices, like they did in the housing bubble when people said "They aren't making any more land," or during the tech bubble when people said "The Internet is going to be huge." It's merely a rationalization IMO.

Having said that, the supply/demand dynamics are and have been very favourable, much more so than gold. Silver outstanding is a fraction of gold in the world, so the mania takes silver much higher than gold.

I suspect that commodities generally are going up because confidence in the dollar and other EURO currencies is going down.

But as to silver?

I think by comparison to toehr precious it is somewhat overpriced.

Why?

Because John Q Public (world wide, I might add) is frightened and they can afford to put a little something into silver but not into gold and platinum, palladium etc.

On the event of something approaching hyper inflation, silver becomes the medium of exchange for daily purchasing (which is what the working classes have to concern themselvesw with) while GOLD becomes the specie for investment and major purchases.

This is, I suspect, the reason that silver is rising even faster than most other metals.

It can be a end of the economic world specie that many more people can afford to purchase than gold, and one with a value that suits day-to-day purchasing needs, too.

You know what is next in line for people to start buying up?

COPPER PENNIES.

Again for that same reason...the copper penny (not the news ones the old ones) actually have som REAL intrinsic worth.

They could easily become one of the units of exchange that people trust when their trust for the greenback erodes.

 

[Gadawg73]

This isn't a bubble. It isn't like the real estate bubble, it isn't like the dot com bubble which was pure speculation. This isn't the Hunt brothers trying to corner the silver market.

It's the dollar devaluing.

I'm not buying gold and silver as an investment. I'm buying gold and silver so that my savings isn't destroyed by QE I, II, and soon to be III.

China, Russia, India, Brazil and many other emerging markets are moving away from the dollar. Soon (maybe it is already) the dollar will not be the worlds reserve currency. That will cause everyone's standard of living to fall in this country, and the value of the dollar to drop with it.

If the plane you're flying on catches fire, you're gonna' bail out right?

Everyone buying gold is paying for it in DOLLARS.

 

[Mad Scientist]

This isn't a bubble. It isn't like the real estate bubble, it isn't like the dot com bubble which was pure speculation. This isn't the Hunt brothers trying to corner the silver market.

It's the dollar devaluing.

I'm not buying gold and silver as an investment. I'm buying gold and silver so that my savings isn't destroyed by QE I, II, and soon to be III.

China, Russia, India, Brazil and many other emerging markets are moving away from the dollar. Soon (maybe it is already) the dollar will not be the worlds reserve currency. That will cause everyone's standard of living to fall in this country, and the value of the dollar to drop with it.

If the plane you're flying on catches fire, you're gonna' bail out right?

Everyone buying gold is paying for it in DOLLARS.

Well yeah, because those dollars will soon be worthless. Best to get something of value for them now.

 

[Toro]

Gadawg

Gold is higher in all currencies, at least over the past few years. Silver is at all time highs in every currency right now.

IMO the bet on gold isn't so much an anti-dollar play as it is an anti-fiat currency play. Because the dollar underpins the global monetary system, if it falls it drags all other fiat currencies down with it.

 

[LordBrownTrout]

I would much rather prefer the economy to be steamrolling, unemployment at 4,5 percent, gold at 300, silver at 4 bucks. The pace at which the dollar is being destroyed is unsettling. I find it hard to cheer as silver goes into the stratosphere.

 

[william the wie]

I would much rather prefer the economy to be steamrolling, unemployment at 4,5 percent, gold at 300, silver at 4 bucks. The pace at which the dollar is being destroyed is unsettling. I find it hard to cheer as silver goes into the stratosphere.

Relative silver supply vs. relative gold supply vs. expected price ratios between the two metals is all out of whack. Once prices go parabolic they will crash.

 

[Toro]

Not to put a damper on the party or anything but don't be surprised if the COMEX increases margins on silver contracts soon. They do that periodically when they think speculation is getting out of hand. As a reference, when margins were hiked on sugar last year, sugar fell from $33 to $25 in two days. It recovered but a frothy environment can create such downdrafts.

 

[Toro]

The other thing I'd point out is that even though silver has gone nuts, silver stocks have not. The purest silver company is Silver Wheaton, which is a royalty company and has no operational exposure. It's stock has languished. The silver miners ETF, ticker SIL, is still below it's highs.

 

[liebuster]

The other thing I'd point out is that even though silver has gone nuts, silver stocks have not. The purest silver company is Silver Wheaton, which is a royalty company and has no operational exposure. It's stock has languished. The silver miners ETF, ticker SIN, is still below it's highs.

Could that be because investors are buying actual silver instead of paper silver???? If there no demand for silver stocks then the price will lag the physical silver price. Right???

 

[KissMy]

The other thing I'd point out is that even though silver has gone nuts, silver stocks have not. The purest silver company is Silver Wheaton, which is a royalty company and has no operational exposure. It's stock has languished. The silver miners ETF, ticker SIN, is still below it's highs.

Could that be because investors are buying actual silver instead of paper silver???? If there no demand for silver stocks then the price will lag the physical silver price. Right???

I talked with Monex, Kitco & All American Gold last evening to buy my brother & I more physical Gold & Silver coins.

There are NO Silver American Eagles to be had. I ended Up having to buy 100 1ozt Silver Canadian Maple Leafs from Canada at $5,039.00 delivered almost a month from now. That is $50.39ozt. The SLV ETFs are not keeping pace with the market & lags by 10%. Germany has some Silver Vienna Philharmonics for sale.

Also bought 30 Gold American Buffalos at $47,649.00 delivered almost 3 weeks from now. The GLD ETFs are also not keeping pace with the market & lags by 8.25%.

They all said that hedge funds were there largest physical Silver customers right now. The average citizen are not the ones buying Silver. JP Morgan has been major short Silver since $32ozt. & not lending money on Silver collateral. Wow that has gotta hurt. JP Morgan is long Gold & lending money on Gold collateral.

 

[Toro]

The other thing I'd point out is that even though silver has gone nuts, silver stocks have not. The purest silver company is Silver Wheaton, which is a royalty company and has no operational exposure. It's stock has languished. The silver miners ETF, ticker SIN, is still below it's highs.

Could that be because investors are buying actual silver instead of paper silver???? If there no demand for silver stocks then the price will lag the physical silver price. Right???

Generally when the stocks lag the commodity, it is a sign of an unsustainable move in the commodity. That doesn't mean silver can't go higher. Also, the silver stocks may eventually follow. The SIL - not the SIN I referenced earlier -has an intriguing chart pattern and may be on the verge of new highs. And gold is hitting new highs but not in the same manic manner. So this tells me there is a mania in silver right now. Silver tends to peak in April or May but then I am expecting a parabolic one day move of say $5-$7, and then a reversal signaling the top, at least for the near term.

 

[Toro]

Re: stocks are paper.

I'd be careful with this argument. Companies like SLW buy royalty streams to take possession of physical silver. The "paper" is merely an ownership stake in a company with rights to buy physical silver from miners. Other miners such as PAAS pull the stuff out of the ground. So for the market to believe that these moves are permanent, the stocks of the miners must move higher.

FTR there isn't a lot of silver in circulation but there is a lot of silver in the earth's crust. Silver producers increased production 13% last year, I believe, which I think was the largest increase in many years. Also, I believe, miners have stopped dehedging and are starting to hedge again.