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 Replies: 743 / Views: 51,895 |
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Pillar of the Community
United States
1590 Posts |
Reading the opinions of various experts on the direction of silver has been...interesting. It seems the Investor/Seller/Paid Analyst are predicting a Q4 price of Silver at about $33/oz. While the hedge funds and those Analyst involved in actual supply/demand analysis are predicting a drop to the $20/oz range.
The former are using emotion based arguments, and are obviously trying to make money on an emotionally manipulated bull market; as has been common in the last few years.
The latter are saying that the wild volatility of the market has shaken the casual investor from the market; and that the long term investors are looking at "real world" supply and demand. There also seems to be an undercurrent that says that the emotion based arguments are become passe. That the wait for a drastic shortage ( or indeed ANY shortage) of silver for the last four years is starting to wear thin. Especially since there has never been a shortage of silver in the last ten years; at least.
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Pillar of the Community
 United States
1454 Posts |
Quote:
The latter are saying that the wild volatility of the market has shaken the casual investor from the market Since May, I don't feel like there really has been much in the way of price volatility. Actually, one can go all the way back to Jan. and the price has only fluctuated between about $26-33, but remained mainly in the high $20's, if memory serves. |
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Pillar of the Community
United States
4008 Posts |
When analyzing the price of silver, it can be useful to also analyze the cost of silver production. Mining uses a lot of very heavy duty diesel-powered diggers, crushers, and haulers. The price of diesel fuel is critical to their ability to produce and sell silver at a profit. If diesel fuel increases in price by 25%, for example, they either have to have enough additional profit to cover that expense, earn less for their efforts, or shutter the mines until prices rise from lack of supply. Unless diesel fuel gets a lot cheaper, I don't see how the price of silver can drop much below about $22 an oz. At around $22 per oz., the miners can make a small profit but not much of one. Diesel rising 50% in price would be a real game changer in the mining business.
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Pillar of the Community
United States
1590 Posts |
Thats a good point Ed, but remember that in 08 when the price per barrel reached a high around $160/bbl and the pump price was ten cents higher per gallon than it is now; that silver was still about $15/oz.
So obviously if it was profitable then at $15/oz then it should be even more profitable now at $20/oz.
Also silver is a byproduct of Copper and Gold mining; typically.
As to the volatility they talk about both the 4 year trend and the short term trends when Silver can go up and/or down by over a dollar an ounce....sometimes in as little as 20 minutes. Historically Silver used to move in terms of pennies a day.
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Pillar of the Community
United States
4008 Posts |
Those are good points too, JMK. Unfortunately, price is not the only story here. There have been times in the PM markets when prices were really low but no one was selling at those prices. Yes, the price was great but with no supply, it was just an empty number of no real significance.
There are analyses of mining costs that can be found on-line. The last one I saw was in the area of $21 per oz. of silver produced. If that is accurate, then they cannot sell it for $15 these days unless they have a terrific need for immediate cash and are doing this just to get through some temporary difficulty.
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Pillar of the Community
United States
1590 Posts |
Well, I just spent a couple of hours looking at various pages and it is just as confusing as the real world.
Half say Silver cost four to five dollars to mine and the other half says it cost fifteen to seventeen dollars to mine.
The ones at the higher end point out that silver mining has decreased with the lower prices, which would seem to indicate some truth to those who tout the upper end arguments.
That is until you see the stats that show a glut of silver on the market; lower demand from the major users; and the huge supply increase from recycling. If recyclers/smelters are limiting orders because of a decrease in demand it is probable that Mine owners are as well.
And Ed, I hear you, but I have been buying Silver since the 70s and have rarely paid more than a small premium over spot. The only time that was not true was in the last couple of years when the price fell drastically and those that held silver did not want to sell at a loss......till they realized that the price was not going back up anytime soon. Then they grudingly cost averaged.
Joe
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Pillar of the Community
United States
4008 Posts |
JMK... I am wondering about those different costs for mining silver. Is it possible that they are talking about two completely different mining scenarios? The cheap case would be for getting silver as a by-product from a base metal mine while the expensive case could be for mining silver directly. I know that most silver comes as a by-product, so maybe that number is what determines the generally accepted cost? Hard to say. I use the Silver Institute web site for most of the info I have on matters of this kind. Will check that again to see if their is more recent info on this. Also, there is a discussion on Silver Doctors about this but I am not sure that I follow their logic in the way that they calculate their silver company profits. You can take a look at this here: http://www.silverdoctors.com/2011-c...ning-silver/ |
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Pillar of the Community
United States
1454 Posts |
Silver's at its highest point in quite some time. I believe it was in the steady $27's just last week. I wonder what triggered such a rapid ascent?
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Valued Member
United States
223 Posts |
Don't know why the sudden jump but I think I'm going to stop tonight and buy a few ozs. Another day like this and we will top $30. Haven't bought any in over a week so I'm due.
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Pillar of the Community
United States
4008 Posts |
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Haven't bought any in over a week so I'm due. An entire week without a silver buy? EEK!  I'm wondering if this isn't some sort of price chain reaction going on here. Platinum prices are up substantially in just the past week or so. After some good moves there, the price of gold started moving up too. Now, we have the silver price rising. I don't recall what palladium is doing but it's probably moving up too. Could all this be related to a confluence of mitigating factors, such as European problems, the US election, commodity prices in general moving higher, US fiscal cliff, mid-west drought, etc.? I'm also not liking the US stock market very much about now. This is what I call a "stinky" market. Yes, it is moving higher but there is absolutely no fundamental reason for it to do so. Wages and salaries are 50% below their April highs. The last time this happened was in the fall of 2007 and we all know what happened to the stock market in early 2008. Anyway, I have pulled in my financial horns and gone to about 75% cash with the rest in a couple of select stocks, 2 prime mutual funds, and my PM hoard. Once we get some clarity on all the issues confronting the market, it will either be time to buy back in OR get even more defensive via adding more PMs. By then, it is likely to be late Jan or early Feb 2013. Depending on how it goes, I likely will either have missed a 1,000 or so point rally or a 3,000 or so point loss. I can live with that.  |
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Valued Member
United States
223 Posts |
Are you laughing at me? I like to buy in small increments and dollar cost average. It is really just the joy of the new buy.
It is kind of like if I go more than a couple of months without buying a new gun, I get an itch. Tonight's buy was a dozen multiple years of Kooks. My LCS made me a good price and I couldn't pass.
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Pillar of the Community
United States
808 Posts |
The recent uptick in price also spurred me to go pick up a few ounces of Ag from my LCS. I too am a fan of DCA when it comes to adding to my stack. And yes, I do try to buy a little on a weekly. And you know what? I really do miss it if I skip my weekly buy!  |
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Pillar of the Community
United States
1374 Posts |
And an economist looks at inflation, failing currencies and debt defaults.
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Pillar of the Community
United States
1590 Posts |
I was wondering why the price run up as well. It seems the most of the articles I have read on the net ( Kitco, et al) are all saying that there is more than moderate expectation of QE3, and that Bernake will announce it at Jackson hole.
Interestingly many of the articles I have read on the price run up are deriding the concept of QE3 as being a positive for the US. In fact one author stated it was like putting a gun to the head of the USD, and pulling the trigger.
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Pillar of the Community
United States
1590 Posts |
I was reading some past articles on Kitco, concerning QE3.
Paraphrasing them ( to avoid copyright issues)
..Investors are expecting the Announcement of QE3 this month(May) or at the June meeting...
...Investors are expecting QE3 to be announced this month (June) or to see what the meeting notes say in July
...Investors are expecting QE3 to be announced after this Months FMOC (August) meeting or next month at Jackson hole....
So putting on my swami hat and looking at the crystal ball I PREDICT next month will read.....Investors are expecting QE3 to be announced at Jackson hole this month or at the next FMOC meeting in Oct (...yeah...right before the election......lol)
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Posted 08/14/2012 1:45 pm
