Why Is Silver Price Going Up ?

I'll just throw out a trend line for Ag since 4-04:



As an op-ed, I added that red arrow to signify a particular event: this is when real-estate related investments began to show weakness, and talk began in some investor circles of moving money into spot metals. Just my observation...draw your own correlations. From what I heard on the market, I suspect there's a relationship.

One should ask whether industry is solely behind the demand on silver, gold etc, or may it also be due to herds of "investors" buying up metals, hoping the price will continue to some point where they'll sell on to the next person, ad infinitum? If everyone decides to sell, don't be the last person holding the bag. Last time this happened, I sold my silver at $40, which in today's dollars was significantly more A few didn't time the market (especially those who had it basically cornered), and they lost millions-billions.

Well, I can't say for certain...but I've observed that 75% of 2 dealer friends business is trading melt-value silver or gold bullion coins.
I just have a gut reaction about this from seeing market activity--not from any real knowledge of silver production or real supply-demand figures. Do you have that data?
If hoarding has produced an artificial scarcity of the metal, then there's a possibility that supply will get converted to cash when the price gets high enough--what happens then? I'm not posting this to discourage anybody, but I'm simply a little cautious when I see trend lines like above--and I don't mind telling people. I also called real estate crash back in 2005.

even on that graph it looks like the price of silver is about to explode.

When the US dollar starts to really go down (I think we're just seeing the beginning of it) and the US economy experiences its biggest downturns, every other place in the world (including Europe) will be affected, it doesn't matter what currency you use silver and gold are going to go up in value.

grmike-just curious, do you currently own a lot of silver?
Like I said...silver can go far higher. The high in 1980 was around $50/oz, which was far more in today's US or CA dollars.
However, in 1981 Ag dropped below $16, followed by a slow grind downward to $4 by 1992.

So I'm just saying--the higher silver/gold climbs, the more downside risk for the investor. And if the economy plunges, people may need to sell their metals to remain solvent, which will simultaneously increase supply while reducing demand. Prices cannot climb in that scenario.

"even on that graph it looks like the price of silver is about to explode."

Market psychology notwithstanding, there are several scenarios that can play out, so if you have a stake, it's good to prepare yourself for all possible risks (imo)

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So I'm just saying--the higher silver/gold climbs, the more downside risk for the investor. And if the economy plunges, people may need to sell their metals to remain solvent, which will simultaneously increase supply while reducing demand. Prices cannot climb in that scenario.

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Yes, prices can still climb in that scenario, if you remember that the precious metals market is an international market. What happens in one economy may not happen in another. There could still be a higher number of buyers than sellers even if selling is due to a panic in one economy.

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I know people that bought silver at around $50.00 a ounce and are still holding onto most of it and they say as soon as it gets close to that they are dumping all they have (which is quite a bit) just to get their money back from the time they bought it

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While anecdotal evidence is good evidence of a kind, I can assure you from an investor mentality standpoint that the amount of silver purchased at the top and held until now is relatively small. There will be many more people who sold at or near the bottom--usually these won't admit it, which is why you are hearing more about the people who are finally being proven 'right.' There's not much point in holding on for thirty years to a bad investment just so you can break even, so most investors will have taken their losses and used the experience (hopefully) as an educational one.

I think there are 2 main differences between now and the 1980's

- The US (and every other major country) doesn't have tons of silver to drop onto the market

- the economic crisis the US is about to face in the next decade.
China's ppp gdp is about to surpass that of the US's, India and China's economies are on the verge of exploding the demand for commodities in that part of the world could be enormous.
During Bush's presidency the US has gone from having the largest economy in the world (nominal gdp) to being almost 25 percent smaller than the EU's nominal gdp (today).
Even Greenspan is advising Arab countries to dump the dollar, I heard someone say that if the dollar devalues another 20 percent it will affect the value of every other currency in a bad way (including the Euro).

Unlike in the 1980's the US didn't have the huge trade imblance it does today with communist countries like China. China's economy in 1980 might's been smaller than Mexico's.

All you need is one more terrorist attack to really knock everything down.
50 dollars in 1980 is like 100 or more dollars today, so 50 dollar silver today is like 20 or 25 dollars then.


with rumours of wars, global economic uncertainty silver and gold can only increase in value.
The world's currency is the US dollar, if that starts to fall silver goes up in value doesn't matter what part of the world you live in.

every other commodity is soaring in value, Oil is at US$100. Soybeans have reached 34-year highs on a spike in demand. Gold is within shouting distance of US$1,000, all are scarce given the high industrial demand for silver and the lack of production of it (not much held in reserves by the US government either) 5 dollar silver is history. I wouldn't sell it until it reached at least 50 dollars an ounce (its real value in today's dollars, especially given how how rare it is and how much demand there is for it).

"In 1980, silver prices went as high as US$48/oz. But that doesn't tell the real story. Adjusted for inflation, the 1980 price was more like US$129 in today's rapidly depreciating U.S. dollars. The following chart shows the historical silver price, adjusted for inflation. You can see that while silver has begun to move up, it hasn't come close to imitating its performance during the last precious metals bull market. If it does, a new high in inflation- adjusted terms is not just likely, it's probable. The gold silver ratio is currently around 55. Let's say the ratio begins to narrow again and goes to 30. At a current gold price of US$894, you'd have silver at $US29.80/oz. (894/30=29.8). If the ratio narrows even further, the possibility for a much higher silver price also exists"

During the last great inflationary boom in precious metals, a speculative blow-off top drove the gold silver ratio back down below its historic level of 15.http://www.dailyreckoning.com.au/go.../2008/02/12/


there's the war on terror (could go on for the next century), illegal immigration (will probably continue until Mexicans become the majority in Texas and California, this would produce even more problems in the South and could eventually lead to a war with Mexico), NAFTA highway through Texas, North American Union would allow more Mexicans into the US.
-I think China has around 1 trillian US dollars, at any time it could sell them for Euro's and drive the value of the US dollar down a lot.
- Russia's economy is starting to heat up. People are talking about a new cold war, except this time China and arab countries like Iran are on Russia's side.
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if you own silver coins you have already invested in silver. A lot of the value of those coins is determined by the price of silver.

1 there are rumours of wars everywhere, the US dollar is in big trouble and could lose a lot of its value very soon.

2 the gold silver ratio is about 51 to 1 during the last bull market in commodities that ratio went to below 15:1

3 most people haven't even thought about buying up silver or gold yet and the value of both commodities is high.

4 Growth in India and China could result in the greatest commodities bull market in history.

There can't be any risk in buying silver at 18.72 an ounce, I've been going to a coin shop nearby every week and buying up some silver mostly coins but I might buy bullion next time.

Although I do a decent amount of investing I'm not a financial genius, & I don't play one on TV. When I see a chart like the one shown above, where the price of anything has doubled, tripled or more over a short period of time, I tread very cautiously. I don't base investment decisions on charts, I'm more of a fundamentals guy. However, over the years I have seen that it's more likely for a chart like that to have a precipitous drop rather than to continue to rise. I'm not saying the price will drop next week, next month, or next year, but when it drops (& it will eventually) it will be sudden & steep. Plan accordingly.