If the price of silver were based directly on the real physical silver market, silver’s price should be at $5,000 an ounce. I’m not saying the price of silver will reach $5,000 an ounce; I’m just saying that the actual PHYSICAL silver spot price is not only extremely undervalued, but that it is an illusion compared to the real value of an ounce of physical silver, since it is totally disconnected from reality. [Let me explain further.]
By Fabrice Drouin Ristori (goldbroker.com) as originally entitled The Paper Silver Market is 250 Times the Size of the Physical Silver Market.
…[A price of $5,000] may seem totally crazy, but who can pretend knowing exactly how an ounce of silver is worth, after decades of manipulation and turning real investors’ demand from the physical market to the paper one, and years of exponential monetary printing by all the planet’s central banks?
The Physical vs. Paper Market Difference
The actual spot price for silver has no real value and is not legitimate when we seriously compare the real physical silver market to the paper market and its myriad of financial derivatives.
- [According to an] article by Bloomberg, which has always been a reliable source with their published data, the size of the global annual silver market is equal to $5 trillion…
- [According to a recent interview with] David Morgan…the annual physical silver production is roughly one billion ounces.
- With silver trading around $20 currently, this represents a $20 billion market for physical silver so the size of the physical silver market is of $20 billion.
The 250:1 Leverage
[The above discrepancy]…makes for a 250 to 1 ratio between the paper market and the physical silver market…meaning that, for every ounce of physical silver, there are 250 ounces of paper silver circulating in several financial products. In other words, only one contract or certificate issued out of 250 could be convertible into physical silver…[that is,] the silver market is being leveraged 250 to 1.
(The multiplication of those financial products on silver has skirted investors’ demand from the real physical market, thus creating a virtual silver supply without putting any pressure on the physical silver market. A roundabout way of keeping the price low.)
If now, as the regulation agencies are claiming, the goal is to create a new fixing for silver that would better reflect the physical market (notably from pressure coming from countries, like China, wishing to have their say in the fixing of precious metals prices), the leverage between paper silver and physical silver is at risk of radically evolving.
Let’s hypothesize what the silver price would be directly based on the physical silver market:
- Today, the actual size of the silver market is, according to Bloomberg, of $5 trillion.
- $5 trillion divided by 20 billion (physical market) = 250
- 250 X $20 (silver spot price) = $5,000 an ounce
Every investor holding silver in the form of financial products, without the possibility of verifying the physical existence of their investment, should ask the question as to what will happen when more holders of said products will ask for physical delivery. (In reality, we already know what will happen, because one of the large banks from the Netherlands, ABN-AMRO, already defaulted, a little more than a year ago, on its gold certificates by settling customers in cash.)
[The above article is presented by Lorimer Wilson, editor of www.munKNEE.com and the FREE Market Intelligence Report newsletter (sample here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. This paragraph must be included in any article re-posting to avoid copyright infringement.]
*https://www.goldbroker.com/en/news/paper-silver-market-250-times-size-physical-silver-market-526 (GoldBroker.com © 2011-2014; All rights reserved )
There is so much hype and cheer-leading out there amongst supposed gold & silver analysts that you probably wonder just who is worth your time to follow, if anyone. Having read and analyzed hundreds and hundreds of articles on the subject I have concluded that there is ONLY one such person. That’s Michael Noonan. Read More »
The “year that was” brought mostly disappointment to precious metals bulls. Silver prices fell for the third straight year but when we finally see a major rotation out of stocks and into precious metals, silver has the potential to lead on the way up just as it has led on the way down. Let me explain why. Read More »
Silver may be a precious metal but it also is one of the most important industrial metals too as this infographic so clearly illustrates. Read More »
Given the fact that a) the historical movement of silver is 90 – 98% correlated withgold-silver gold, b) silver is currently greatly undervalued relative to its average long-term historical relationship with gold and c) many analysts predict a parabolic rise in the price of gold over the next 5 years it is realistic to expect that silver will also escalate dramatically in price – but by how much? This article applies the historical silver to gold ratios to come up with a range of prices based on specific price levels for gold being reached. Read More »
Over the years only 14 pundits have been bold enough to provide a specific date as to when their forecast for the future price of silver would be realized. This article provides that information along with the criteria & rationale for their determinations. Read More »
James Turk and John Rubino are well known figures in the gold industry and they’ve just published a new book, ‘The Money Bubble’ in which they argue that the price of gold is about to soar to $10-12,000/ozt. – and silver to $500/ozt. Here’s why. Read More »
Silver has a reputation for being gold’s less desirable sister, but make no mistake, silver may still be a golden opportunity to invest in. Silver’s use is already very prevalent in the photography, consumer electronics, medical, and high tech industries and a major consumer of silver in the future will be the green technology sector in products such as solar cells and batteries. Read More »
Analysts and investors seem to be very bearish towards silver, but we think that the fundamentals of silver are now becoming extremely attractive in terms of contrarian opportunities. Volatility and risk are not always commensurate, and we believe that silver offers investors fundamentals that can be much stronger than expected and returns that would be magnified by the small size of the silver market (and the bearish positioning by participants). Contrarian investors would be wise to take note. Read More »
It is a reasonable bet that gold, about 40% below its 2011 high and facing large demand and dwindling supply, will rally in price over the next few years. Silver prices will follow gold prices but rally farther and faster from their currently low and oversold condition. Read More »
While not widely reported or analyzed, over the past several months there has been an enormous amount of buying in the various markets for physical silver – both one-ounce sovereign-minted coins and refined bars. Along with some standard trading signals I’ll discuss below, I believe the activity in the market for physical silver is signaling the potential for a large upside move sometime this year. Let me explain. Read More »
Silver has had three bad years while the S&P has had 5 good years. It is time for both markets to reverse. Here’s why. Read More »
The price ratio of gold to silver has fallen precipitously in raging bull markets for the metals, so the silver price could have an upwards move at four times the rate of any gold price increase. I think that the fundamentals look better than ever, and…[that] there is an explosive move coming in 2014. [Indeed,] I think that within a reasonable timeframe silver will probably trade over $100. Read More »
The process of the devaluation of gold and silver, started by the demonetization of gold and silver, is about to reverse at a greater speed than ever before. Read More »
I believe there is more opportunity in the silver market over the next two years relative to gold and, as such I’m now advocating accumulating a large overweight position in silver relative to gold because, over the long-term, there is such a great demand vs. supply situation developing….Before investing in silver, however, there are a number very important things that you must understand about the silver market. Let me explain. Words: 899 Read More »
Silver has moved above its 200-day moving average which is a signal for silver prices to challenge the $50 area, overcome it and then traverse ‘blue sky country’ to target the upper trendline shown in the chart shown below. Read More »
This article looks at physical gold, silver, platinum and copper regarding their respective versatility of use, durability, fungibility, store of value, liquidity and aesthetics which yields a new perspective and appreciation of each. Read More »