Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

‘Implosive’ Silver Vulnerable To Big Price Drop

Commodities / Gold and Silver 2017 Nov 28, 2017 - 05:37 AM GMT

By: Kelsey_Williams

Commodities

Admittedly, it must sound encouraging, and even exciting, to hear proclamations that a “silver” lining is now apparent in the metals complex. Or that a silver “blast-off (is) about to happen”.

Expectations abound for the long-expected, vertical leap in silver prices that never seems to come. And we are told it is supported by solid fundamentals that include supply deficits, a return to the 16 to 1 gold/silver ratio, increasing monetary demand for silver, etc.However, an examination of those fundamentals reveals a different picture. And that picture is inconsistent with the call for higher prices.


The supply deficits (gaps in consumption over production) have been talked about for decades.  In the sixties and early seventies they were the principal fundamental in the case for higher silver prices.

Throughout the twentieth century, industrial use of silver increased to the point where the consumption of silver eventually exceeded new production. This is the start of the consumption/production gap to which people refer quite frequently.  The government  became a willing seller in order to keep the price down.  The specific purpose was to keep the price from rising above $1.29 per ounce. This is the level at which the amount of silver in a silver dollar is worth exactly $1.00.

The huge price gains for silver that occurred in the 1970s were largely attributable to years of price suppression prior to that.

Price suppression is not an issue now; and hasn’t been for nearly fifty years. The primary imbalance in supply and demand was corrected in the early seventies. If it hadn’t been, the silver price would already be a lot higher than it is.

The 16 to 1 gold/silver ratio is a myth. The gold-to-silver ratio that existed one hundred fifty years ago was mostly the result of political influence and appeasement. It was an arbitrary number.

There is no fundamental reason which justifies any particular ratio between gold and silver.

Silver is an industrial commodity.  Its primary demand is driven by – and its price is determined by – industrial consumption. Any role as a monetary hedge is secondary.  This is true even in light of the significant increase in the amount of silver used in minting bullion bars and coins.

The fundamentals simply do not support the bullish expectations for silver. And, there are fundamentals that make silver vulnerable to a big price drop.

Deflation is a more likely near-term possibility than extreme inflation.  True deflation results in a decrease in the general price level of goods and services.

As an industrial commodity, silver prices would reflect the full brunt of deflation’s effects. In recent modern history, the lowest recorded prices ($.28 per ounce in November 1932) for silver occurred during the Depression of the 1930s.

Any value from its monetary attributes would afford little or no cushion during deflation.

Another possibility is that we might continue for several more years with relative prosperity and disinflation. This would not stop further price declines for silver.

After it peaked at $48.00 per ounce in 1980, silver’s price declined ninety-two percent over the next thirteen years. It reached a low of $3.57 per ounce during the boom years (February 1993) of the nineties.

It has only been five years since silver last peaked at close to $50.00 per ounce again. How low might it go in the next five years? Maybe not under $4.00 per ounce but $8.00 per ounce is plausible.

Historically, silver is a bust. All of the reasons people give for support of dramatically higher silver prices lose any credibility when one looks at the facts.

For one, silver is ineffective as a monetary hedge. It is not real money (gold is real money) because it is not a store of value. Silver would need to be over $60.00 per ounce right now to approximate comparably what gold’s price reflects regarding the decline of the U.S. dollar.

It is not even close to that. And, ironically, if we use the 16 to 1 ratio that so many think is valid, gold’s price today would be $272.00 ($17.00 per ounce times 16) per ounce. I’m sure no proponent of the 16 to 1 ratio has applied it in such manner.

In addition, on the few occasions when silver has increased in price dramatically, it has been unable to retain any of the increase. I suspect that we are in the midst of something similar now.

In other words, there is likely more downside ahead for silver’s price.

And it could be quite significant.

By Kelsey Williams

http://www.kelseywilliamsgold.com

Kelsey Williams is a retired financial professional living in Southern Utah.  His website, Kelsey’s Gold Facts, contains self-authored articles written for the purpose of educating others about Gold within an historical context.

© 2017 Copyright Kelsey Williams - 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 losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 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