Silver & Gold Splitting Off?

[Scottishmoney]

Lately it seems like gold prices are static, up and down, but silver seems to be rising consistently, this morning whilst gold is at $549 - down $3, silver is actually up again at $10.47.

 

Wonder why they are trending differently lately?

[Burks]

Wonder why they are trending differently lately?

 

Good question. Maybe the sight of silver going from $7 to $9 triggered a buying spree. It's much easier to get a lot of silver than it is for gold. More product for your money I guess.

 

Even at $10.50 I think silver is still under what it should be. Ten years from now we'll all be saying "Why didn't I buy those 1lb bars when silver was SOOOO cheap?"

[gxseries]

It's hard to say what is going on exactly. It seems right now that there is some sort of scare that S. Africa is not able to produce enough gold for the world, but fortuately enough Australia right now is able to meet the demands.

 

As for the silver prices going up, I am not too sure why, but I guess people are hoarding it at the moment.

[Guest Stujoe]

There was an article (CoinWorld?) recently that talked about what silver 'should' be at in relation to gold based. The conclusion was that, at current gold prices, silver should be, I think it was, around $50 an ounce.

[Dockwalliper]

I think this is the reason..

 

http://today.reuters.com/investing/finance...HIGH-URGENT.XML

[Dockwalliper]

Here's more..

 

http://www.thestreet.com/_tsclsii/etf/etf/10274857.html

[jtryka]

The silver ETF is one reason for the rise, but I think fundamentally we have been pushing the envelope on the silver:gold ratio. Historically, the ratio had been 16:1, which from what I've read roughly matches the ratio of the amount of silver to gold in the earth. The price even at $10.50 is 52:1, so for the ratio to decline to 30:1 which is still almost double the historical average, silver would have to move to $18.30, and to reach 16:1, silver would have to be $34.31 with gold held constant at $549. Now some would argue that the 16:1 ratio was arbitrary and artificial, yet it held true. Now we have a much higher ratio meaning that gold is held in greater value than silver, despite the fact that most of the gold mined in all of history remains above ground, while significant quantities of silver are destroyed each year in industrial uses. If anything the historical ratio should be contracting even more! Bottom line, silver is still cheap relative to gold (though both are cheap relative to fed paper).

[Dockwalliper]

BGI is applying to list 13 million shares backed by 129 million ounces of silver. Since 129 million ounces equates to roughly 16% of the world's annual silver production and 21% of the known above-ground inventories of silver, according to investment bank Salman Partners, the ETF potentially could drive up silver prices more than it has already, perhaps even squeezing the market.

 

Sounds to me like there gonna be buyin up some silver.

[jtryka]

BGI is applying to list 13 million shares backed by 129 million ounces of silver. Since 129 million ounces equates to roughly 16% of the world's annual silver production and 21% of the known above-ground inventories of silver, according to investment bank Salman Partners, the ETF potentially could drive up silver prices more than it has already, perhaps even squeezing the market.

 

 

Excellent Smithers, Excellent.

[Guest Stujoe]

<Snip>

 

Bottom line, silver is still cheap relative to gold

<{POST_SNAPBACK}>

 

A lot of that is what was talked about in the article I remember. It made a lot of sense.

[Burks]

This weekend I'm going to an antique shop that has low/mid grade silver coins for decent prices. If I remember correctly what my dad said, he sells WLH's for $3 each (VG/F) and Mercury Dimes $1 each (same as WLH's). I may try and see how low he can go on them if I buy a good amount.

 

Small profit possbility but some is better than none. Doubt silver will take a huge drop in the next few years. Highly doubt it in fact.

[jlueke]

The silver ETF is one reason for the rise, but I think fundamentally we have been pushing the envelope on the silver:gold ratio.  Historically, the ratio had been 16:1, which from what I've read roughly matches the ratio of the amount of silver to gold in the earth.  The price even at $10.50 is 52:1, so for the ratio to decline to 30:1 which is still almost double the historical average, silver would have to move to $18.30, and to reach 16:1, silver would have to be $34.31 with gold held constant at $549.  Now some would argue that the 16:1 ratio was arbitrary and artificial, yet it held true.  Now we have a much higher ratio meaning that gold is held in greater value than silver, despite the fact that most of the gold mined in all of history remains above ground, while significant quantities of silver are destroyed each year in industrial uses.  If anything the historical ratio should be contracting even more!  Bottom line, silver is still cheap relative to gold (though both are cheap relative to fed paper).

Of course if gold has three times the demand of silver then the 52:1 ratio is pretty much on target

[Guest Stujoe]

I wonder even if the relative demand stays constant, if silver will continue to rise faster than gold anyway because silver is continuously being depleted while gold is a fairly fixed quantity. The supply side of the equation is probably not fixed at a certain ratio but is rather widening.

[Blackhawk]

They've already sold more silver on paper than is available physically. If it weren't for forces manipulating the market, it's price would be mulitples of what it is today.

[jlueke]

You have figure that the ancients who came up with ratios between 10:1 and 20:1 were basing that on what came out of their mines so the assumption that the worldwide supply is fixed at that ratio is not a bad one.

 

So why did silver plummet in the first place?

[Blackhawk]

Do a Google search for "COMEX silver manipulation" and read some of the stuff that's been going on in the last 10 years or so. If they had to price silver by supply and demand, our fiat monetary system would suffer some stress.

[bill]

I've got to wonder what we learned from the Hunt era when silver prices went crazy. I remember the lines of people bringing in wonderful silver, almost all of which went to the smelters. The impact on common date silver was incredible. Photography, however, has been the largest consumer of silver. I have to wonder what the long term impact of digital photography means for silver prices.

[Sir Sisu]

...Photography, however, has been the largest consumer of silver. I have to wonder what the long term impact of digital photography means for silver prices.

 

 

Good point. However, I think new uses for silver will make up for that. Example

[jtryka]

I've got to wonder what we learned from the Hunt era when silver prices went crazy. I remember the lines of people bringing in wonderful silver, almost all of which went to the smelters. The impact on common date silver was incredible. Photography, however, has been the largest consumer of silver. I have to wonder what the long term impact of digital photography means for silver prices.

 

People often point to the demand side of photography, which is a good point, however they almost always overlook the supply side of photography as it is one of the biggest sources of recycled silver. So the demise of traditional photograpy takes away almost as much recycled supply as it does demand!

[Scottishmoney]

Silver continues marching on, this morning at $10.67 / oz.

[jtryka]

Yes, but gold is up $6.70!

[Scottishmoney]

[28Plain]

The silver ETF is one reason for the rise, but I think fundamentally we have been pushing the envelope on the silver:gold ratio.  Historically, the ratio had been 16:1, which from what I've read roughly matches the ratio of the amount of silver to gold in the earth.  The price even at $10.50 is 52:1, so for the ratio to decline to 30:1 which is still almost double the historical average, silver would have to move to $18.30, and to reach 16:1, silver would have to be $34.31 with gold held constant at $549.  Now some would argue that the 16:1 ratio was arbitrary and artificial, yet it held true.  Now we have a much higher ratio meaning that gold is held in greater value than silver, despite the fact that most of the gold mined in all of history remains above ground, while significant quantities of silver are destroyed each year in industrial uses.  If anything the historical ratio should be contracting even more!  Bottom line, silver is still cheap relative to gold (though both are cheap relative to fed paper).

 

My take is that the 16:1 ratio was based on the use of both metals for money. Silver's value fell sharply once it was demonitized worldwide and its most common use was for traditional jewelry and tableware. The ratio of 50:1 or thereabouts has been fairly stable for awhile. I wouldn't be one to argue that the 16:1 ratio was arbitrary, but it was based on conditions which were relatively constant while both silver and gold coinage circulated.

 

Gary North wrote a good piece on this last week, the point of which was that gold has never lost its status as hard money while silver has. I stopped buying silver for hoarding and have started buying .900 fine gold coins. The steady rise in precious metals tell me that currency devaluation is the main force driving the increases.

[jlueke]

Gary North wrote a good piece on this last week, the point of which was that gold has never lost its status as hard money while silver has.  I stopped buying silver for hoarding and have started buying .900 fine gold coins.  The steady rise in precious metals tell me that currency devaluation is the main force driving the increases.

 

I wonder if that is due to increased demand from places like India where the currency has lost 50% of it's value gainst the $ but many more people are now able to buy things like gold.

[Burks]

At current silver prices I have officially MADE money on my ASE purchases.......a whole 10 cents!