Look at the slope of your gold chart. You're showing a fairly narrow slice of history. Let's look at the broader picture:
Gold was around $200 an ounce before the 1980 bubble and settled at $400 afterwards. Where will it settle after this bubble? $600? $800? Knowing the answer could make you very wealthy indeed!
I expect silver to do the same thing. My prediction is $20 by Christmas and high teens next year with a VERY volatile market in the meantime, especially with the elections coming up.
I'm not just jumping on the bandwagon here. April 21, one of my first posts was about my prediction that silver would drop to $15.
Before prosperity, however, there would be a bit more pain. Through most of the first two years of Reagan's first term, Americans already battered by the stagflation of the 1970s had to endure the sharpest recession in decades. The severity of the downturn was largely a consequence of Federal Reserve Chairman Paul Volcker's determination to end the devastating inflationary trends of the 1970s by any means necessary. Following the monetarist teachings of influential University of Chicago economist Milton Friedman, Volcker resolved to "slay the inflationary dragon" by sharply curtailing the growth of the money supply. That monetary contraction, imposed starting in 1980, succeeded in its primary objective; the inflation rate fell from a devastating high of 13.5% in 1980 to just 3.2% by 1983.
Quote: Look at the slope of your gold chart. You're showing a fairly narrow slice of history.
I know, that was the point. I was illustrating that large price drops are not uncommon in bull markets. I had to focus on a relatively small time frame to demonstrate it.
Thats when the Fed also went from the economic policy of "full employment" to the "partial employment" model. Which lead to wage destruction and the rapid increase in the Credit sector....need I go on? Minimum wage in 1980 adjusted for official inflation would now be in the neighborhood of $12/hour. And thats the official rate. Shadow stats put it at $44/hour. And the percentage of Americans earning minimum wage has gone way up. From a starting wage for kids, it has now become the basic wage for most service and factory workers.
I agree that price drops are common in a bull market and spikes are common in a bear market. The article you linked to was very interesting, and if you mean we are in a long term bull market, that may indeed be true. Using the terminology of that article I believe we are in a "vertical collapse". After that collapse the slope may gently climb indicating a bull market. The background is different today than it was in 1980, but the same factors are at work: 1) Supply and demand, 2) Speculation, 3) Emotion. I contend that the fairly steady line from 1989 to 1996 at $400 per ounce represents the supply and demand part of the price of gold. Factors like use of PMs in consumer electronics, demand from India, etc. are all part of the equation. Even folks that want to hold on to hard currency are part of the natural demand if they hoard 90% silver or .999 silver all the time. The stock market provides better long term returns than PMs, but when gold and silver become volatile, the ride gets very bumpy. That's because speculators jump in to try and make a quick buck. Every piece of news is scrutinized - the Rupee is down so demand for gold in India will soften - that was front page news in the Wall Street Journal yesterday! Then emotions kick in and people who never were in PMs before think they "need" some for protection. The fever builds until the bubble bursts. Then gold and silver bounce around for a while looking for their new natural supply/demand price. A market stressor caused the turmoil in the first place so the new "normal" may be quite different. Silver returned to $5 an ounce, but gold stabilized at $400 - double what it was before - when the 1980 bubble burst.
If the world economy collapses or some other catastrophic event occurs, all bets are off, but otherwise I would expect the PM markets to stabilize at some point in the near future. I'm not saying prices are flat - it could be a "secular bull" - but much of the volatility leaves the market because speculators can't make much and the emotional players leave. I'm guessing silver will stabilize around $15. Gold may be in the $1000 to $1200 range. I think we are in the correction now, but that's just one opinion.
I'm waiting for 27 and may buy a little. If you wait for the 15 it may or may not come. I thought below 30 wasn't going to be here for a while after staying in the low 30s so long. Wish we had those crystal balls!
I believe until this election year is over that there will continue to be a slow decline until I think around $22-25, the uncertainty of what the new/current president will do and how much money they are willing to print will be more prevelant after they are in office and secure with their job. And that is not only in the US either. Once everything gets back into full swing within world economies I believe the "relief" from printing more money will gradually bring silver back into mid $30's by this time next year.
I think you might be about right, spinx. But if the ECU has a major meltdown soon, expect a steep drop in PMs across the board. We could be in the high teen or low $20's in a matter of days due to contagion in the financial sector.
Maybe I'll wait till low $20 to start purchasing... I'm going to try and spend X amount of dollars bi-weekly regardless of price. So if the price continues to fall it will just lower my cost per oz (maybe even do some double purchases at specific prices).
My thinking is this no matter what anyone does the USA is 16 trillion in the hole we will never pay this back. The US dollar is so inflated and becomes more so with each passing minute.
Inflation has to go up to me silver and gold area supply and demand game take the silver and gold stock and forget them these people do not have anything but a paper in their hands.
Anyway I can see nothing but increasing demand for both gold and silver as the years go on people around the world will want more real money as they have for thousands of years gold and silver.
So in the long run I feel it can only go UP in the long run and I am banking on that as the banks do not hold any of my money anymore.
Brucec- I completely agree and besides my paycheck and bills coming in/out of bank account. My money is also elsewhere, not home of course, but elsewhere and I would say I am about 50% in PM's, 30% in stocks (safer less volatile stocks), and 20% currently still currency. And that 20% currency may very well turn into pm's if I see sub $20 silver
There are many possible outcomes to the Euro situation, but they all seem to point to lower prices on PMs.
1) Weaker euro -> relatively stronger dollar -> lower PM prices 2) Greek default -> higher interest rates -> lower PM prices 3) End of the austerity suicide pact -> return to economic growth -> lower PM prices 4) JP Morgan stupidity -> stronger Volker rule -> safer banking -> lower PM prices 5) The Mayans were right -> world ends -> gold is free in Heaven -> lower PM prices
My "buy" price is $10/ozt for silver. If it ever goes above $30 again, I'm unloading every last scrap that I'm not keeping for numismatic reasons. Good for me that it's almost all roll-hunting finds.
Quote: If you wait for the 15 it may or may not come.
Very true!
I'm not buying junk silver or bullion. I'm buying pre-65 mint sets so there is a numismatic factor involved. Even if I expect silver to hit $15 I will probably buy the mint sets at $20 or so. The ratio was 23:1 for junk silver with silver at $31.66 when I started looking at mint sets about 3 weeks ago. With a $1.70 FV for the 90% silver in the P&D sets, that's $39.10 melt. And they were going for as low as $41, including shipping! At $20 the ratio would be 15:1 ($25.50 melt) and at $15 the ratio would be 11:1 ($18.70 melt). Traevin, in another thread, told us that pre-65 P&D sets were going for the low $20s back when silver was at $9 to $13. That tells me the numismatic value starts kicking in somewhere. My guess would be around $20 so even if I think it's heading to $15, I'm not going to save that much more by waiting.
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Posted 05/15/2012 01:06 am
