What is next for Gold & Silver? (obsolute prices now removed)

No idea but it affected all precious metals and oil took a dive too.

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Holy crap! We have lift off!

 

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Inflation adjusted Silver, and the G/S ratio.

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To pinwheel:
Thanks for the very interesting and informative graph. I had no idea Silver was ever more than $800 per oz (in 1998 dollars). I bet the rapid drop in its price shown in your graph starting about 1980 is due to the invention of (or wide spread understanding that) digital photographs would replace film photograph.

Technology could, but probably will not, drive silver price up too. For example some new medical use of silver (there are several already) or new better silver based battery or a way for it to replace palladium as catalysts etc.

 

I read that there is more gold than silver - which makes me wonder WHY is silver so cheap? Wouldn't the supply and demand paradgm mean it's worth MORE than gold?

 

In 1980 the Hunt brothers realized they had enough money (with what they could borrow) to buy up all the existing silver, and tried to do so. They rapidly drove the price to $68/ per oz. I think they also had bought a silver mine and were happy to see silver’s price soar, but others could also deliver freshly mined silver so they could not maintain that high price. The price of silver fell in a couple of years to less than the current price and hit an all time low of only $4.73 / oz, 12 years later in part because they had to dump much of the silver they bought into an already falling market to pay off their loans. I.e. instead of making a fortune, they were ruined financially. None the less the Commodity and Futures Trading Commission (CTFC) was shocked into action by the more than order of magnitude speculative based price fluxuation. I think the CTFC now has a rule than the total silver delivered in any month by all firms holding silver cannot exceed 7.5 million ounces, but that does not apply to silver miners.

Silver producers do often sell silver before they have mined it to lock in current price (to cover their current expenses, etc) that is called “hedging.” Others can also sell silver they don’t have and this “paper supply” helps depress the price. AFAIK, there is no limit on how large a short position investment firms like JP Morgan can take. Many believe JP Moran may be in serious trouble with its short position in silver. I.e. they were caught by the rapid rise in price so sold even more silver they did not physically have to stem the price rise. There is a thread and national group trying to break JPMorang on this – I.e. a movement to buy silver, taking physical delivery, and bankrupt JP Morgn (and probably several others) but the CTFC’s limits on physical delivery may save them and allow them to continue to manulipate the price of silver lower than it should be. See that thread’s OP here: http://www.sciforums.com/showpost.php?p=2651447&postcount=1

No one really knows how much non-existent silver (“paper silver”) has been sold, but some estimates think that 99% of all silver now being sold (and bought) does not actually exist. One reason why this huge “naked short” position can exist in silver and not in gold is that taking delivery of 27 million dollars of silver is taking a million physical ounces, at current prices – few want to do that.

In general, the US government does not want the bigger financial firms to go bankrupt so is trying to make it hard for any one like the Hunt Brothers to corner the market, and collapse the very large short sellers:
From: Congressional staff recommendation of 16 Dec2010:
"...A primary mission of the CFTC is to foster fair, open and efficient functioning of the commodity derivatives markets. Congress has declared that sudden or unreasonable price fluctuations attributable to “excessive speculation” creates an “undue and unnecessary burden” on interstate commerce and directed that the Commission shall establish limits on the amounts of positions which may be held as it finds necessary to “diminish, eliminate, or prevent” such burden. As the plain reading of the statutory text indicates, the prevention of sudden or unreasonable changes in price attributable to large speculative positions, even without manipulative intent, is a congressionally-endorsed regulatory objective of the Commission. ..." Read more at: http://www.cftc.gov/pressroom/speechestestimony/fekratstatement121610.html

How this will all work out in the end, I don’t know, but think that silver will climb in price more rapidly than gold, but perhaps slowly enough to not soon bankrupt the large short sellers; however if the price of silver climbs enough, then taking physical delivery of a million dollars worth will not be so large a volume as to be unattractive, especially when on realizes the cumulative effect of many doing so will rapidly force the price even higher as the short seller try to cover the oversold positions by buying silver for delivery. I.e. at some point it can all turn unstable, with silver soaring to even $500 /oz.

As they say: “He who sells what is'nt hisn, must buy it back or go to prison.” And it is almost certain that there simply is not existing enough silver to buy back all that has been sold.

Also worth noting is China is encouraging its population to buy (take physical delivery) of silver. This helps control their inflation by removing money from circulation, and China can always require them to turn it in to the government at less than market price as the US did with citizens holding gold. China can certainly destroy JP Morgan and others oversold in silver if it wants to. See more, including the packaged bar they are selling at: http://www.sciforums.com/showpost.php?p=2643758&postcount=115

 

Oh my.

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haha... I love that little moon

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But, the problem is, isn't silver easily manipulated?

 

“… Silver will climb as high as $36 an ounce this year, from $29.2025 now, and gold will reach $1,620 an ounce, from $1,347.40, according to the Bloomberg survey of analysts. Investors in exchange-traded products backed by gold own 2,028 metric tons, worth $88 billion, …{and} accounted for 21 percent of investment demand last year ... Silver-backed ETPs fell 4.4 percent to 14,511 tons worth about $14 billion since December.
{Since 3Q09.} Palladium rose threefold, silver more than doubled and platinum jumped 57 percent, compared with gold’s 46 percent gain. … The London Metal Exchange index of industrial metals from aluminum to zinc jumped 86 percent.
Industrial demand for silver, excluding photography, will rise 18 percent to 478 million ounces this year, according to UBS, Switzerland’s biggest bank. Investors will buy 450 tons of gold through ETPs this year, the Zurich-based bank forecasts. …”

Quote from: http://noir.bloomberg.com/apps/news?pid=20601087&sid=alhh75LUqogw&pos=1

Some Billy T comments and analysis:
Price ratio here and now is 1347.4 / 29.2025 = 46.14, safely confirming my prediction that it will NEVER go about 50 again, even though it was over 70 about a year ago. Their predicted ratio is 1620 / 36 = 45 (or less if silver goes above $36 as they hint.) So glad I went out on a limb with about 3% safety margin when predicting.

For convenience, let’s assume their predicted prices and apply them to the predicted industrial demand for silver and investor demand for gold held by ET funds that actually (so they say) buy gold and hold it for your account, but I will up the silver demand 478 to 480 as a crude estimate of the net new silver needed for X-ray films. (As X-rays are centralized the recycling of their silver is near perfect, but every year more are stored, until they become obsolete and get recycled.)
Thus in 2011, industrial funds buying for use silver will be at least 480E6 x 36 = 1.728E9 dollars and investors buying gold via the ETPs will be 450E6 x 1620 = 7.29E11 dollars.

Currently the ratio of dollars in silver ETPs to dollars in gold ETPs is 14 / 88 = 0.1591 and let’s assume investors continue to favor putting money in gold over silver by that same ratio. Thus if they put 7.29E11 dollars into gold, they can be expected to put 0.1591 x 7.29E11 = 1.56E11 dollars into silver ETPs or nearly 100 times the industrial demand for silver.

CONCLUSION: Although silver is often spoken of as an industrial metal too, its demand in dollars for investment / speculation / may in fact be a higher percentage of total demand than gold has. A great and growing demand for gold jewelry exists in India, several percent of the total demand, I think. I.e. silver has a more pure investment demand than gold has and its demand is growing more rapidly, now, than gold’s is (as the declining gold to silver price ratio shows)! I say “now” as this may rapidly change. Central banks are now, and for two prior years, buying gold in increasing volumes. If the dollar slide accelerates then central banks, especially dollar rich China’s, will begin buying much greater volumes of gold. That could make my “NEVER” prediction fail and Bloomberg’s predicted gold/silver ratio in 2011 as 45 quite wrong. Perhaps Bloomberg will need to reverse their digits – make it 54 before the end of 2011?

 

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I am not strong on charts, but note current dip does not get down to the trend line.

If a "top tend line" were drawn, it would indicate gold at about 1500/oz before begining a corrective dip back down to the graph's lower trend line.

 

Silver seems high now, but i'm gonna buy as much as I can if it hurts JPMORGAN!

 

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Gold / silver ratio at COB Friday was 45.36

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Post 150 hints gold to rise and ratio is dropping, so post 151's plan to be profitable, I think, but not for JP Morgan, if many do as they are with naked short position, as I understand it; however , to acutally expose /hurt / JPM one needs to take delivery. Otherwise they (or others you buy from) can just print some more paper telling that you own some silver they are holding for you.

 

*Gets on the phone to 'Hoodless Brennan`*


Peace.

 

The Demand for 9mm ware-wolf Rounds?, do you trade any precious metals?.


peace.

 

"... BEIJING - The investment demand for gold in China increased by 70 percent year-on-year in 2010 due to domestic inflationary pressure and limited investment alternatives. According to a report released by the World Gold Council (WGC) on Thursday, China was the strongest market for gold investment growth with demand for small bars and coins totaling 179.9 tons last year, which was worth at around $7 billion. ...

According to the report, gold investment in China more than doubled year-on-year to 17 billion yuan ($2.6 billion) in the last quarter of 2010. The gold investment for the full year totaled 48 billion yuan, up 113 percent year-on-year. "China's continued inflation pressure and the government's policies to rein in the property market are main motivators for the booming gold investment demand," - Wang Lixin also said, "Gold bars are always out of stock in China in recent months," Wang Lixin, {is} general manager at WGC China. ..."{ a large department store chain, Billy T thinks.}

From: http://www.chinadaily.com.cn/bizchina/2011-02/18/content_12037881.htm Where you can see photo of gold bars (every thing from tiny ones to a 50Kg bar) on display in Wang's store, I think.

Here are other facts from another source:
"... Chinese gold demand nearly tripled in the last 10 years to around 600 metric tons - and that it may double again in less than a decade. ... India was still the biggest market for gold during 2010, with total demand rising by 66% to 963 tons ... Investment demand for gold in China was especially hot in the fourth quarter of 2010, rising 84% ... "The main motivation behind this demand has been concern over domestic inflation pressure and poor performance of alternative investments, combined with expectations of further gold price gains," the WGC's report said.

The significant increase in demand seen in China, India and around the planet is reflective of the uncertainty facing consumers as people buy gold to protect themselves from macroeconomic risk and rising inflation. ..."

From: http://moneymorning.com/2011/02/22/...global-phenomenon-of-demand-for-yellow-metal/

Billy T comment: Gold demand gets most of the press, but silver demand and price gain is growing faster as evidenced by the still falling gold/silver price ratio. IMHO, this is in large part due to China encouraging its population to buy and hoard silver. See: http://www.sciforums.com/showpost.php?p=2643758&postcount=115 Also even if the population were encouraged to buy gold, fact that for at least three years China has been the world's largest gold producer would moderate the amount of gold that China had to import.

 

Gold at 1388.60 & silver at 32.296 /oz on Bloomberg’s commodities future index at Friday’ close.
The gold/ silver ratio is 42.996 a modern low, I think. Certainly my prediction made when it was above 48 that it would NEVER go above 50 again (was >70 a little more than a year ago) is “looking good.”

By edit on early AM (in NYC) on 21 Feb 11:
Trouble in Mid East, especially in oil producer Libyia, sent gold up 1% to $1402.90 but silver climbed even more, up 3.5% to 33.445 /oz, which dropped the ratio down to less than 41.95

 

If question is directed to me, I only own the miners, not the metal. I still have the shares of the nine listed at end of post here:
http://www.sciforums.com/showpost.php?p=2639375&postcount=112

 

With Brent crude at 114.62/ brl & gold at 1415.80/oz this ratio is now 12.35 so the current troubles in the Mid East & N. Africa are boosting oil more than gold. The curve is well back into the lower pink zone now, but not as low as in 2008 when oil demand of the stagnate economies collapsed.

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Condensed from Atlantic Capital Management Feb 24, 2011 report:

If there really is a shortage of the physical {silver} metal for delivery under contracts, then the spot price has to rise to entice/force holders of the actual metal to release it to the market. If the shortage is acute, so there is too little metal available even for leasing then the price rise can be rapid. {Billy T explains “leasing”: If a silver miner has sold silver for current delivery not yet taken from the ground, he normally can borrow to deliver it. Then later return the silver to the lender, who gains both form the lease rent and later from any price rise as he continuously owns the silver.} The spot price of silver has shot up almost 27% since January 28, 2011. {This tends to support the idea that silver for March delivery is in very short supply.}

“In terms of price action, the {current} imbalance seems to be attracting enough attention that it will grow at each delivery month. If enough contract buyers deposit money for delivery at each notice date, then it stands to reason that in a shortage predicament they might have a lot of leverage over a potential cash settlement price. And if they are successful in gaining large premiums on top of very favorable price action, they will continue to do it and bring more and more friends. …” - a quote, not compressed by BT.

{Billy T explains: Normally most of those with “in the money” contracts don’t actually take physical delivery. They settle for a cash profit paid by the seller who takes a loss; however, if it looks like there will be an ongoing net deficit for delivery, silver probably will soar in value and buying new delivery calls (future contracts) will be more costly. – So it may be better just to take and hold the silver.} I.e. silver prices can really soar (more than double? in less than a month) to a level that enough owners want to take their profits and return the metal to the market in volume enough to wipe out the delivery deficit. This is a “short squeeze” which can also stress the silver exchanges. Like banks cannot pay off ALL depositors at once. They normally cannot deliver on all the calls because many sellers of calls don’t own any of the silver in their vaults and normally those on the "long side" of the contract would rather have a cash profit than the physical silver (jewelry makers, etc. excepted, o course).

To reduce this risk, the COMEX {silver exchange} increased margin requirements again by 50% on February 18. This makes it more expensive to buy calls on future delivery – I.e. you must tie up funds that could by outright 1 oz to get right to buy two ounces later and still must add a dollar of “margin call” for each two dollars the price of silver increase. This tends to lock out the weaker buyers, so that the exchange does not itself get stuck with the need to delivery more silver than it has.

Based on the 27% rise in less than a month, we may be close to this instability, short squeeze, point. I think the next delivery date is September - All hell could brake loose if call owners put up the money to take delivery then.

Read full article at: http://www.minyanville.com/business...-price-gold-price-precious/2/24/2011/id/32989

Gold is 1410.00 and silver 33.575 / oz currently for a ratio of 42.00

 

Silver moved up to 32.20

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(Oopps fixed!) {edit by Billy T: no the gold/silver is about 42; silver is only about 33.6/oz, but climbing faster today than yesterday's rise.}

Robert Kiyosaki (I think it was him?) said there's more gold above ground than silver, at least back in December, and that silver has a high industrial demand. So, if markets are functioning correctly, silver should be more valuable than gold - right?