Oftentimes perception, and not reality, rules the day with the thousands or millions of speculators placing short term bets with assets like silver. These perceptions are particularly strong given that paper players in the silver market often control the price in the short term (6-8 months), since there is so much more paper silver than physical metal out there…Here are five common myths about silver that I bet many speculators still believe are true. Words: 1638
So says Ryan Jordan (http://goldsilver.com) in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below 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. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
Jordan goes on to identify, and explain, the 5 common myths associated with investing in silver, as follows:
As far as I’m concerned, there is no fundamental reason for silver to be so cheap. Instead silver fundamentals are badly overshadowed by misconceptions (or outright lies) about silver. Here are five common myths about silver that I bet many speculators still believe are true:
1. Silver is an “economically sensitive” metal
During the recession of 2008-2009, the CPM Group estimated that silver demand from photography, jewelry, and industry dropped by roughly 80 million ounces (CPM Silver Yearbook, p.69). Mine supply also increased by about 30 million ounces, along with a 15 million or so increase in recycling. Therefore, in order for the price of silver to remain stable (theoretically), you would need investors to make up this roughly 100 million ounce difference, which is exactly what they did. Given the fact that people understood the need to buy precious metals during a banking crisis, investment demand for silver increased by nearly 100 million ounces at the same time as demand fell and other sources of silver also increased. (p.11)
Over the course of 2008 and 2009, the silver price more or less remained stable, even as it saw wild swings induced by paper trading. As such, during one of the worst recessions in modern memory, real, physical demand for silver cancelled out declining industrial use. [That is] an important point to remember when someone tells you the silver price is destined to go down in the next recession.
2. Silver coins and bullion are more plentiful than gold
In fact, it is the exact opposite [- silver coins and bullion are less plentiful than gold]. Being generous (and using data from the CPM Group as well as the Silver Institute) there are maybe 1.4 billion ounces of silver coin and bullion in the world, versus roughly 3 billion ounces of gold coins and bullion. Yes, it is true that recently about 80 million more ounces of silver bullion/coins are produced each year than gold ones, but that still means that it will take over 15 years before the silver stockpile in the world even equals that of gold, let alone becomes greater. So why is the price of silver something like 50 times cheaper than gold? Ask the paper speculators above.
3. The high price of silver will drive down demand from industry
This one has had no basis in fact for the period from 2000 to 2010. During that decade, industrial demand, according to most estimates, basically remained flat (GFMS World Silver Survey, 2010). This is amazing when you consider that the price of silver went from 4 dollars to over 20 in that period. Because silver is used in such small amounts in things like electronics and solar panels, increasing silver costs have yet to dampen demand for highly desired toys like computers and cell phones, and many silver experts believe that such demand will only increase in the years ahead. You should realize that a rising silver price does not seem to dampen industrial demand.
4. At the right price, billions of ounces of silver will get recycled
Many believe that there are nearly 6 times as many ounces of silver jewelry (and silverware) than gold jewelry in the world. So you might think that there is a lot of silver that will get melted down someday. [Two problems] with this argument is that much of this silver either a) costs way more than even the current bullion spot price and b) is held in very small amounts all over the world by over 1 billion people (oftentimes women). They won’t care to sell for a very long time—if ever.
There is an even more important point here. I bet most people who claim to follow precious metals don’t realize that as of 2010, we had yet to see more silver recycled than during 1980. That is thirty years of silver recycling more or less going nowhere, even as the price of silver spent more time above 20 dollars an ounce in 2010 than in 1980. I am going to be generous and guess that we will finally best the old recycling high this year in silver (at over 300 million ounces) but in a world where 300 million ounces of silver is only 10 billion dollars, and in a world where investors are slated to purchase nearly that much silver in physical form over the next couple of years, you really have to wonder why anyone would think there is all of this silver just lying around ready to be brought to the market to cool off silver’s price. Given what I said about how impervious industrial demand is to silver price increases, a lot of whatever silver jewelry gets recycled will be used and consumed by industry (even assuming that preservation techniques get better as the price goes higher.)
I also would not expect mine increases to somehow meet demand: few industry experts believe silver can increase more than 4 or 5 percent a year (roughly 50 million ounces, or less than 2 billion dollars), especially when nearly 80% of silver is a byproduct of metals like copper, lead, and zinc.
5. Retail silver investors are fickle/ there is no plan to remonetize silver
This myth had some basis in truth, at least according to the experts who tracked silver buying and selling activity in the 1980s and 1990s (such as the CPM Group or Silver Institute). Many agree that retail investors (probably following the lead of governments) sold far more silver than gold during the twenty years between 1985 and 2005 – probably to the tune of over 1 billion ounces – so many felt that silver investors were flakes who really didn’t have the staying power of gold investors. As I mentioned above, it may have just been the case that average investors followed the lead of governments, since those governments dumped far more silver than gold during the same period (gold is the only precious metal held by central banks, in addition).
I am struck by how many proposals there are like the one from Hugo Salinas Price in Mexico, attempting to bring back silver coins into the market in his country, – [and] all of the state legislation in the United States aiming to bring back both gold and silver into economic transactions. Remember, silver is perceived to be the money of average people (even as it is rarer than gold) so any grassroots effort to bring back precious metals into everyday transactions will dramatically increase silver’s value. We have already seen the amazing turnaround in silver retail investment buying over the past few years (hundreds of millions of new ounces) and I think some people are slowly waking up to how undervalued silver is. But believe it or not, many, many more have yet to do so.
Don’t Be Fooled By Silver Market Myths
As I said above, I understand that fundamentals often have no place in markets. This is why so many traders focus on chart patterns, or volume indicators, or anything other than the underlying, real-world reasons for an asset to move up or down in price. You can also see the lack of interest in fundamentals from those large speculators who believe that rumor-mongering is a safer way to make money than actually focusing on legitimate distortions in the market. You might be surprised how much money you can make from simply playing games, or from manipulating others’ emotions—at least in the short term.
In the end, of course, I don’t think gambling or trading wins out. Yes, there are those few great traders out there, just like there are a few great gamblers around but there are far more people who are simply the sucker drawn into the great casino called “the market.” This is a sad commentary on how our current financial system incentivizes reckless, speculative behavior but that is just the way our world works — at least for now.
Every day we see more evidence of the need for retail investors to truly diversify their portfolios with an asset that is set apart from the stock/bond market or banking system. The world is not going to end, but gradually, perception will come around to the cold, hard facts that currency debasement, financial repression (artificially low interest rates), combined with fiscal austerity are here to stay. In an environment where measures such as quantitative easing are really only easing the transition to a downsized economy (at best), people will be looking for assets which don’t need leverage to move higher…[and] don’t rely on endless consumption or indebtedness on the part of the consumer in order to become more valuable…
In the long term, the current price correction really will be a blip on a screen. [Don’t make the mistake of buying into the above mentioned] 5 myths regarding silver [because it is just a matter of time before] silver’s price one day explodes higher again.
Once you see that precious metals are the place to be, then you need to choose between the big 4 precious metals; gold, silver, platinum and palladium. Platinum and palladium have rarity and industrial use going for them but they have never been used as money in history. With a currency collapse, I want something that will have the most demand to drive up the price the most. I want my metal to have industrial, investment and monetary demand. This leaves us with gold and silver as the only two rational choices for investment in the face of a mathematically inevitable world-wide currency collapse. So let us go through the competitive advantages of silver over gold. Words: 2206
You have no doubt read countless articles on the price of gold costing x dollars per “troy ounce” or perhaps just x dollars per “ounce” but the difference between the two measurements is significant. For that matter, what’s the difference between a 24 karat gold ring and an 18 karat gold ring? What’s the difference between a .75 and a 1.0 carat diamond? Let me explain. Words: 963
If you concur with the 159 analysts (see below) that maintain that physical gold is going to go parabolic in price in the next few years to $3,000, $5,000 or even $10,000 or more then you should seriously consider buying physical silver. Why? Because the historical gold:silver ratio is so way out of wack that silver should appreciate much more than gold as it goes parabolic in the years to come. Indeed, silver could easily reach $100 – $200 per troy ounce, maybe even $300 and conceivably in excess of $400 depending on how high gold goes. The aforementioned may be hard to believe but an analysis below of the historical price relationship between silver and gold suggests that such will most likely occur if gold does, indeed, go parabolic. Take a look. Words: 1423
[Silver is] a popular investable asset, attracting investors from around the world thanks to its numerous industrial applications as well as its traditional role as a store of value and an inflation hedge. There are a number of different options for investing in silver, including exchange-traded futures contracts, stocks of companies engaged in the extraction and sale of the metal, and both physically-backed and futures-based ETFs and ETNs. Investors also have the option of buying coins or bars of the metal in order to obtain physical exposure. [Let’s discuss the merits of investing in silver and review what the options are.] Words: 2319
Silver’s rise in price is no fluke – it’s the result of a compelling supply/demand dynamic within a unique market structure. We hope the following comments convey our enthusiasm for “the other shiny metal” as an exceptional investment opportunity. Words: 2226
With so much talk these days about the risks of investing in silver, we think that perhaps it may be timely for us to weigh in on the matter. The silver market is riskier than ever – but for reasons the vast majority of pedestrian commentators have failed to grasp. [Let us explain.] Words: 1517
CPM Group’s recently released its 2011 Silver Yearbook…[which] presents some interesting facts that paint a decidedly bullish picture for the metal going forward. If you’re a silver investor, and/or are concerned about the recent selloff, you may find the following data very compelling. It provides an inside track on the market and will certainly make you a more knowledgeable investors.[Read on!] Words: 1280
Silver is now rarer than gold and will be for all of eternity. From this point forth we work from current silver production alone and, from this point forth, demand will outstrip production without exception. [Can you imagine what that means for the future price of this, indeed, precious metal? Forget about the popular expression: ‘Got gold?’ The much more important – and potentially more profitable – question to ask these days is, ‘Got silver?’] Words: 972
Few investment opportunities arise in our lifetime like silver. The stage is set for a percentage gain of extraordinary magnitude! Forget the popular refrain of “Got Gold?” and make some additions to your portfolio to take advantage of the coming silver supernova! Words: 513
I am very, very bullish on silver; the metal which is overlooked by most but will make the few who own it extremely rich. While gold will have a spectacular performance over the course of this bull market, it is silver that will be the MVP. Silver is about as close as you can get to a sure bet. Here are 7 reasons why silver will make you rich. Words: 2074
A win-win situation, as we all know, occurs when opposing parties both gain from a certain outcome. Perhaps both don’t always get all that they want but both ‘win’ something in the bargain. It’s the best outcome that can be expected for both parties. With silver there is a lose-lose and a win-win scenario. Let me explain. Words: 917
Silver is extremely volatile, however, and tends to rise or fall in spurts so I’d like to focus on its attributes as compared to gold, make a case for holding some, and discuss some ultimate price possibilities. Words: 1606
Understanding silver is not difficult but ACTING upon your understanding and purchasing the physical metal is PSYCHOLOGICALLY a VERY difficult thing to do. You will always second guess the timing, always be told you are crazy for paying REAL MONEY for a piece of metal and ALWAYS be having to justify your ACTIONS to those who have taken NO ACTION. [Let me explain things further and lay out some sound reason why you should sell whatever gold you currently own and buy silver instead.] Words: 2273
The opportunities expected to arise from investing in silver now are even more pronounced than those of gold. [Let me explain why that is the case.] Words: 1367