Best of the Week
Most Popular
1.US Paving the Way for Massive First Strike on North Korea Nuclear and Missile Infrastructure - Nadeem_Walayat
2.Trump Reset: US War With China, North Korea Nuclear Flashpoint - Video - Nadeem_Walayat
3.Silver Junior Mining Stocks 2017 Q2 Fundamentals - Zeal_LLC
4.Soaring Inflation Plunges UK Economy Into Stagflation, Triggers Government Pay Cap Panic! - Nadeem_Walayat
5.The Bitcoin Blueprint To Your Financial Freedom - Sean Keyes
6.North Korea 'Begging for War', 'Enough is Enough', is a US Nuclear Strike Imminent? - Nadeem_Walayat
7.Bitcoin Hits All-Time High and Smashes Through $5,000 As Gold Shows Continued Strength - Jeff_Berwick
8.2017 is NOT "Just Another Year" for the Stock Market: Here's Why - EWI
9.Gold : The Anatomy of the Bottoming Process - Rambus_Chartology
10.Bitcoin Falls 20% as Mobius and Chinese Regulators Warn - GoldCore
Last 7 days
The 5 Biggest Bubbles In Markets Today - 20th Sep 17
Infographic: The Everything Bubble Is Ready to Pop - 20th Sep 17
Americans Don’t Grasp The Magnitude Of The Looming Pension Tsunami That May Hit Us Within 10 Years - 20th Sep 17
Stock Market Waiting Game... - 20th Sep 17
Precious Metals Sector is on Major Buy Signal - 20th Sep 17
US Equities Destined For Negative Returns In The Next 7 Years - 3 Assets To Invest In Instead - 20th Sep 17
Looking For the Next Big Stock? Look at Design - 20th Sep 17
Self Employed? Understanding Business Insurance - 19th Sep 17
Stock Market Bubble Fortunes - 19th Sep 17
USD/CHF – Verification of Breakout or Further Declines? - 19th Sep 17
Blockchain Tech: Don't Say You Didn't Know - 19th Sep 17
The Fed’s 2% Inflation Target Is Pointless - 19th Sep 17
How To Resolve the Korean Conundrum  - 19th Sep 17
A World Doomed to a Never Ending War - 19th Sep 17
What is Backtesting? And Why You Need Backtesting System? - 19th Sep 17
These Two Articles Debunk The Biggest Financial Nonsense I See In The Media - 18th Sep 17
Bitcoin Price Crash 40% In 3 Days Underlining Gold’s Safe Haven Credentials - 18th Sep 17
The Sum of Risks – Global, Strategic, Political, and Financial - 18th Sep 17
The Netflix Of Canada’s Cannabis Boom - 18th Sep 17
Stock Market Sentiment Speaks: Either You Learn From The Events Of The Past Week, Or You Are Hopeless - 18th Sep 17
SPX 2500 … At Last! - 18th Sep 17
Inflation Lies, Lies and OMG More Lies - 18th Sep 17
How to Choose right Forex Trader? - 18th Sep 17
Who Has Shaped the World the Most? The Dozen Greatest Achievers - 17th Sep 17
Riding the ‘Slide’: Is This What the Next Stocks Bear Market Looks Like? - 17th Sep 17
Gold Up, Markets Fatigued As War Talk Boils Over - 17th Sep 17
Predicting the Future of the U.S. and the World - 16th Sep 17
Deceit in the Financial Food Chain - 16th Sep 17
Gold GLD ETF Investment Resuming - 16th Sep 17
Extreme Weather & Energy Markets: What's Next? - Video - 15th Sep 17
Trump’s Path to IP Wars - 15th Sep 17
GBP USD Approaches Fibonacci Target - 15th Sep 17
Higher US Interest Rates May Force Higher Inflation Rates - 15th Sep 17
Stock Market Investors: Taking the Road "Less Traveled" Has Its Perks - 15th Sep 17
The 3 Best P2P Lending Platforms For Investors In 2017—Detailed Analysis - 15th Sep 17
The US Debt Bubble Will Soon Warrant Serious Measures - 15th Sep 17
Why it is Often Difficult to Sell a House Fast - 15th Sep 17
S&P 500 At New Record High, Will It Break Above 2,500? - 14th Sep 17
Capital Market Trends - 14th Sep 17
Mike Maloney: The Top 10 Reasons I Own Gold and Silver - 14th Sep 17
The Only Real Europe is Greece - 14th Sep 17
7 Security Tips for Online Traders - 14th Sep 17

Market Oracle FREE Newsletter

5 Markets Ready to Move Before Year-End. Eexpert Analysis and New Trading Opportunities

The Silver Siren: Reversion To Reality

Commodities / Gold and Silver 2011 Sep 07, 2011 - 03:16 PM GMT

By: Rob_Kirby

Commodities

Best Financial Markets Analysis ArticleAccording to the World Gold Council – the overall level of global mine production is relatively stable. Supply has averaged approximately 2,497 tonnes per year over the last several years. 2500 tonnes is equal to 80.4 million troy ozs.


The Silver Institute tells us there were 735 million ozs. of Ag mined from the earth’s crust in 2010.  Simple math [735 / 80.4] tells us that “nature” is implying that the gold / silver ratio should be 9.14: 1.

Historic Gold/Silver Ratio – 650 Years

This is a 650 year graph of silver prices and silver/gold ratio from 1344 to 2004.

Source: http://goldinfo.net/silver600.html

From 1300 to the mid 1800’s – the gold silver ratio never went above 20 and gravitated to 15 – that’s 500+ years worth of equilibrium.  It’s really only been in the past 140 years [while the private Rothschild controlled Bank of England centric debt based monetary system has been in force] that we’ve seen such strange “aberrations” in the gold/silver ratio.

Only a “CHERRY PICKING HACK” would show 140 yrs. worth of PERVERTED data and make the “insinuation” with this data and by naming the piece, ‘140 Years of Silver Volatility’ -  that 15: 1 is “LOW” for the gold / silver ratio. 

What this 140 Years of Volatility better reflects is the political nature of the monetary metals – and how free markets in them stand between spend-thrift megalomaniacs who have increasingly occupied political offices over that time frame.  Take this account explaining the “end of bi-metalism” – which explains silver’s fall-from-grace. The fall created artificial gluts of Ag [artificial because, unlike gold, silver is consumed] – which have been sold-off or generally disgorged for more-or-less the past 100 years.  Well guess what folks?  The very real glut which was synthetically created in silver by ‘de-monetizing’ it – has now been consumed:

II. The end of bi-metalism.
The 19th century is the period when the very long-established ratio of 15 between the price of gold and silver is displaced. Throughout the previous three centuries, this ratio of 15 - or less - had prevailed globally. I shall examine this period in more detail in the next article on the same subject.
The ratio of 15 seems to be a sort of natural balance between the price of gold and silver. This balance was broken at the end of the 20th (19th???) century, with the depreciation of silver.

This depreciation resulted from several factors:

- The end of bi-metalism - silver was no longer a specie metal. This factor seemed to lead all the others

- The increase in production of silver in the United States.
- The sales of silver by Germany, which had furthermore a very strong psychological impact. Germany was in a different situation from the other countries, because it went from a silver mono-metalism to a gold mono-metalism. This was unique, because other countries went from bi metalism to the gold standard. It thus had large inventories to be sold – and the threat of the sales depressed prices more than the sales themselves.

- The sales of silver by the Scandinavian countries.

The volatility we’ve experienced in the past 140, or so, years “IS” the aberration.  The profligate political factors which created the aberration [glut] have now been removed from the landscape.

With above ground stockpiles now gone, along with the re-emergence of investment demand for silver – we WILL return to the historic 15: 1 at a MINIMUM.

This is math and – when it happens - represents nothing more than a reversion to a mean. 

As for silver [or gold] trading at a “premium” to the paper COMEX price – we should all take a deep breath and remember that Eric Sprott is trusted and believed by the public to posses the REAL silver which backs the fund he markets in his name.  Sprott PSLV actually publishes their NAV and share price daily – so, like it or not, there is transparency.  Don’t forget, Sprott PSLV shares are readily convertible / exchangeable into physical silver.

COMEX, on the other hand – is widely – if not universally - understood to possess a “tiny” fraction [perhaps as little as 1/100th] of physical metal for each paper contract they sell.  Getting physical delivery from COMEX is extremely cumbersome and – according to reliable market participants who have been through the process - reportedly inexplicable [if they really have the metal] fraught with delays.  Promoters / adherents of this scheme get around the transparency aspect of the fractional fraud with the semantics of “allocated” and “unallocated” accounts – verbiage which has been developed / adopted to obfuscate the difference between REAL and imaginary. 

At the time of writing - Kitco is charging $ US 45.77 per oz. [9.11 % premium] for a Cad. Maple and $ US 4,382.00 for a 100 oz bar [4.46 % premium] of silver basis spot $ US 41.95 spot for silver.  BMG Bullion Bars [shamelessly and promotionally which are available through myself] are still available at spot plus 3 %.

This brings us to another unfortunate but logical conclusion: we are very likely fast approaching the day when REAL gold and silver will not be obtainable with fiat money – period. 

In order to procure these stores of wealth in the future one will likely be required to trade other REAL ‘tangibles’.  Hurt feelings, vendettas and foul language will not prevent this from happening – and by the way, our “paper markets” are much worse than a joke – they’re criminally hallucinogenic and an insult to free markets and humanity.

Got physical precious metal yet?

By Rob Kirby

http://www.kirbyanalytics.com/

Rob Kirby is proprietor of Kirbyanalytics.com and sales agent for Bullion Custodial Services.  Subscribers to the Kirbyanalytics newsletter can look forward to a weekend publication analyzing many recent global geo-political events and more.  Subscribe to Kirbyanalytics news letter here.  Buy physical gold, silver or platinum bullion here.

Copyright © 2011 Rob Kirby - All rights reserved.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Rob Kirby Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife