What's Happened To Silver Lately?

In short, too much greed. Investors went too overboard and failed to notice that it had an impact on everything, namely oil. Now everyone pays a lot more for food, transportation, etc thanks to them. We know that once common commodities prices go up, they rarely go down.

I don't know if anyone is as bullish about silver as Ted Butler, but in his weekly commentary (http://www.investmentrarities.com/08-18-08.html ) he discusses short selling is being responsible for the sell-off in silver.

It takes fewer stronger dollars to buy an ounce of silver. The dollar has been stronger against the major word currencies lately.

Interestingly, in the past, 100 oz bars of silver would sell for about $1/oz over spot price, but the recent prices on ebay for these bars are 2-3/oz over spot

Just following the law of gravity. What goes up must come down.
How soon we all forget. Not very long ago Silver was going up, up, up. Then it went down, down, down. Gold went up, up, up and everyone was running around buying it then and eventually it went down, down, down. Gold to is on it's way down again. House prices have gone up, up, up and lately going down, down, down. Regardless of the ups and downs of Gold, Silver, Platinum, houses and yes, even Beanie Babies, just when are the prices of coins going to go down. I want to buy more.
Anyone remember when you could buy a car for a few thousand dollars?

Quite possibly the result of bids by people like the OP, who weren't aware the spot had dropped.

This is why it's important to know the coin dealer spread on silver coins, not just the spot value. Couple examples:

When silver hit $50 an ounce, a guy had ten bags of coins to sell. He was offered $25,000 a bag, .5 times spot. He turned it down, wanting at least .7 times spot ($35,000).

The next day, he decided he better sell, since silver dropped to $30. The same dealer offered $12,000 a bag (.4 times).

The reason was that the spot price had almost no meaning. That was for refined silver, today. Refineries were taking 90 days to proces silver, and while some would lock in at today's price, many would pay at whatever price the market was once they refined it, which could be $10 an ounce.

So unless you had a customer for 10 bags of silver coins (and they were scared away by the price drop, too), you faced having all your money tied up for three months, even if you could lock in at spot. And banks were charging 20% interest to their best customers, IF they'd lend you money at all.

So the dealer price was based on where they could go with the silver once they got it from you.

At near the same time, when silver was $42, a dealer friend was paying $50 for one ounce bars (and getting $60).

Financial advisors, who finally woke up to the fact that silver had gone up about 9 times in as many months, were telling their customers that if they had to invest in silver, don't buy mining stock or speculate in futures contracts. Don't buy coins which are inconvenient weights and need refined before use. Buy .999 fine bars, and not in some plan where the company held them for you, but take physical delivery.

So now lots of speculators want physical silver bars, there are only so many out there, and refineries don't have time to make more. Up goes the price.

And of course, you've always got the novice who kids themselves into thinking they're investing in silver by buying $1000 worth. Even before the runup started, a single silver contract was $25,000.

Sorta like thinking you're a stock market typhoon because you own one share of stock.

What I find hilarious with most investment advices is that they only look at the demand, RARELY if not NEVER at the supply side, probably because they are not capable of doing so. People need to know that there are always fresh supply of minerals that are mined on a yearly basis, not from just investment hoard and recycling which is probably less than 10% of the total supply for all metals.

Indeed the prices of most metals have gone up but that's because the operating cost of all mines have gone up due to sharp increase of demand from China. In the past, mining workers were given the worst condition and not many are keen to work in the industry. As such, the mining industry suffered a huge loss as workers demand better treatment, pay, health, work condition, as well as strict government regulations worldwide. Environmental damage isn't an excuse to reduce operation costs. More costs. Fuel prices aren't helping either which pushed up the operating cost.

This however does not necessarily mean that prices of all minerals should go up. Because it takes years to plan and setup how to mine economically, there is a lag between demand and supply. Now though, supply is catching up and I find it absurd for people to believe that there are no new mines setup to meet production. The extremely strong demand for various minerals by China was in 2003 and if anyone here is to say that there are no new mines setup or in development, I'm very puzzled.

Here is another article I came across discussing some issues on gold and the US Mint's shortage. Also a very interesting read.

http://www.fnarena.com/index2.cfm?t...F23473328901