Silver Dips Below $30

I asked that very question about 3 weeks ago:

https://goccf.com/t/117135

Right now pre-65 uncirculated sets are going for melt. That's all, in most cases, but the market is falling so there is some anticipation factored in. If the market were going up I would expect at least some premium to reflect numismatic value. Uncirculated sets from '68 forward are mostly going for about $10 for both P & D. Traevin remembers 90% sets going for the low 20's when silver was in the $11 range. That would be $13.60 for the junk silver value and close to $10 in numismatic value so numismatic value starts kicking in again somewhere. I expect silver to drop to $20 and maybe even $15, but I'm watching the auctions to see what effect the melt price has on the closing price to see where numismatic value starts kicking in again and time my purchase. I'm not buying silver as an investment, but I need the '59 through '64 sets and I don't want to spend more than I have to. I remember the last silver bubble and this one feels exactly the same. That's why I'm so bearish on PM in general. (Last time I bought a few Krugerrands and a bag of 90% half dollars). I know the pundits will say things are different this time, but that's exactly what they were saying last time! We shall see.

I mean the latter - 1980. Gold and silver both. Silver had a huge temporary spike due to the Hunt Bros trying to corner the market, but all PMs were hot for a while and crashed in dramatic fashion. If you ignore the spike over $30 and just look at the rest of the trend there are some similarities.



The REASONS for PM fever are different, but the result just feels the same. It's like a sense of deja vu. The same kind of radio ads telling me to get into gold - FAST! Forecasts of the end of the economy as we know it. The savvy investors picked up on the market uptick early and made a bundle. When the Wall Street Journal reported that there was gold in them thar hills many investors shifted more heavily into PM. Then the "Sell Your Gold" stores opened. Gold Fever hit the nightly news. Investors then started selling newsletters and investment advice. BUY GOLD. BUY SILVER. (I wonder if any of them were placing sell orders at the time). Then came the fall and a couple of false bottoms before PMs lost their luster for quite some time. I don't expect silver to drop back to $5, but $20 this year and $15 next year is a distinct possibility, in my opinion. But I'm not an analyst. I am merely deciding how to time my purchase of '59 to '64 uncirculated sets and the '71 and '72 Brown Ikes.

I was a bit surprised at the question about how low can "junk silver" prices go. It wasn't but 2 to 3 years ago that most Antique shops had "junk" Silver dimes for about a dollar apiece. Or to see "junk" Morgan and Peace dollars for under ten dollars. I in fact still have a few in their 2x2s with prices anywhere from $7.95 to $12. And this was from 08-09. I think Red Book prices from 07 would be a good indicator of the value of "junk" silver.

Having said that......if it happened, it would not happen overnight. There are a lot of dealers that bought high and will hold their inventory as long as they can...hoping that the prices come back. A year and a half ago you could buy common Morgan and Peace dollars, all day and all night ( in UNC) for $20. I notice most dealers want $40 for them now, and the average online price is about $35. Considering that they have...around $20 in silver in them right now...they are grossly overpriced; but a good indicator of Market Creep ( read greed! ).

Which btw I think has contributed to the softening of prices. I read an article on Kitco ( or was directed to one on their page) that made the interesting point that the average Indian Goldsmith needs to work seven(7) months to buy 10 grams of gold right now. And that is 7 months of total wages; without buying things like...oh...say...food.

When this started you could not find any Gold in any shop around here. It sold as fast as it came in. Now I see trays of it...and it is NOT selling..at least not here in Central Ohio. The same with Silver. "Scrap" silver dollars sold as fast at they came in..but not now. Now the same silver dollars sit in the same tray as they have been for weeks...at $30 each ( these are scrap/junk/slick..these are NOT the common 22 Peace in Unc that you would see selling for $20 18 months ago). And they are being bought at 16 times right now.

I see most 90 percent going for about 24 times right now...and being bought at 16 times. Hey, profit is profit, but I think you are starting to see some serious demand destruction right now. Just as Oil has kept the prices artificially high...as demand as gone down every year since it $4/gal in 08.

I also read an article where it was finally admitted that there has been a surplus of Silver on the market for the last 3 years. Classic supply and demand are NOT what drive this market. Speculation is. Once the speculators cut and run, the price will plumment like a rock.

with what BH1964 said.

Neither silver nor gold are anywhere near being in a bubble. There is only one bubble out there at the moment and it is a HUGE one. It is the government spending bubble and it is THE mother of ALL bubbles. Europe is drowning in it as we speak. It is likely that the USA will follow after.

Using the government's own pre-1995 calculation methods for inflation and unemployment, we see that inflation is about 9% and unemployment is about 16%. The US, Europe, and Japan central banks have the printing presses running full time and are creating WAY too much paper money. This will cause inflation to increase more than it already has. The Fed may well be very creative in their naming of QE but it is all just printing money. More paper money in the face of stagnant or falling production equals inflation. The US has exported a lot of that inflation to our trading partners and they are not happy about it. This is why so many of them are working towards non-dollar trading methods.

The markets are very distorted these days and it is government and central bank policies that are creating the distortions. Because of this, traditional methods of valuing paper assets, such as stocks, bonds, currencies, etc. have become of much less importance than what the gov and the Fed are doing or will do in the near future.

Gold and silver are both alternative currencies and commodities. Their prices, as measured in dollars, euros, yen, or whatever fiat currency you choose will fluctuate. Sometimes, this fluctuation is considerable. It is always unpredictable but maybe that is one of the things that keeps owning these things interesting. When it occurs we must question whether it is the value of the underlying asset that is changing or the currency itself. Personally, I prefer gold and silver as the true measuring sticks of value and not fiat currencies, so when gold "goes down", I tend to see it as the dollar or euro rising in value... and vice versa.

The current pull-back in gold and silver look to me like a gift to everyone who collects coins and bullion. Dollar cost averaging into a price dip looks like a pretty good way to increase our collections at reasonable prices. For gold and silver to really fall in price would mean that the political system was buying into Ron Paul's honest money philosophy and I don't see that happening any time soon.

No argument there. The last go 'round in 1980 (if you ignore everything above $25 as the Hunt Bros spike) silver bounced between $15 and $25 for a little over a year. It took two years to "crash" to $5 which is more like a "slide". Six months later it's back to $15 only to "slide" back to $5 over the course of 3-4 years. Then an almost immediate blip to $11 before sliding back to $5 over the course of two years. It was like aftershocks, and if I'm right there may be some money to be made on the wild swings after a crash. Then silver stabilized for almost FIFTEEN YEARS! Why? The speculators were elsewhere! Bigger fish to fry in the derivatives markets.

There is a "natural" price for silver based on supply and demand, and an "emotional" premium based on fear. In that sense this bubble is EXACTLY like the 1980 bubble.

It's hard to tell from the chart what the "natural" price for silver is, but my read of the chart is about $15 before the run-up. I would not be surprised by anything between $10 and $20. Hard to tell. The upward spikes are steeper than the slides, so that's why I think we may see $20 this year, but if the bottom is $15 we are unlikely to see that until next year.

The best time to buy 90% silver with SOME numismatic value (e.g. pre-1965 mint sets) is what I'm trying to figure out right now.

P.S. If you seriously look at the historical chart I provided above and DON'T see a bubble, da Nile is not just a river in Egypt!

Lars,

IMHO, here's an issue that might torpedo your theory. As much as I would like silver in the teens to come to pass, remember when Reagan came into office and the US began raising interest rates in order to escape 1970's stagflation? CD's were 10% back then and my little passbook savings account (I was only 11) was drawing around 5%. What's the current interest rate on CD's? Very low, right? So basically the dollar gained strength during that period, IIRC. Anytime the dollar strengthens, silver tends to move in an inverse fashion, right? The US actually had monetary restraint throughout that time period. We have exactly the opposite occurring today, with QE1,2,3,4,5,6 etc. The dollar needs to strengthen somehow, or the stock market needs to take a major tumble, to push down silver, which would more than likely cause the international community to run for the T-Bills, as they did in the fall of 2008. Also, oil needs to come way down again, IMO, since it's another PM driver, again moving silver in an inverse manner.

Traevin,

With all due respect, I wasn't 11 back then. I was a newly minted Engineer at a defense contractor and the buzz back then wasn't about "stagflation". It was us vs. the "Evil Empire" (Soviet Union). The Soviets had just invaded Afghanistan (where the heck was THAT?!?) because they "claimed" that some "terrorist" cells had launched attacks against Russia from there. How preposterous! This was obviously just a land grab! We boycotted the Olympics in Moscow as a result. At that time I was responsible for filling overseas orders for military aircraft RADAR systems. One order was abruptly cancelled in mid production: Upgrades to the Air Force of Iran. After the Shah was overthrown and Radical Muslim Clerics took over, it looked like the world was going to heck in a handbasket. Islamic militants captured our embassy in Tehran and OPEC cut production. Panic was in the air. Gold and silver skyrocketed!

Your assertion that "the US began raising interest rates in order to escape 1970's stagflation" is naive, at best. The Fed can set rates to the banks that influence rates, but the market will always win. After working for 4 years as an Engineer at a defense contractor in Dallas, Texas, I was "lucky" to close a mortgage at 12.5% interest. Interest rates on mortgages got up to 15% before they came back down.

This was the end of the world as we knew it. Oil embargos. Embassies held hostage. High gas prices. Insane mortgage rates. Reagan's "Star Wars" program bankrupting the country and sending us to a nuclear showdown with the "Evil Empire".

I know the particulars are different today, but I've danced this dance before. Just my humble opinion.