Silver has more than doubled [in price] from its 2008 multi-year high…[primarily due] to demand among the industries of the developing world…and among those industries where silver is virtually irreplaceable… If silver goes too high, however, it could provoke government interference in the name of ensuring national security. [Let me explain.] Words: 606
So says Stephen Leeb (www.leeb.com) in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Leeb goes on to say:
Current Silver: Gold Ratio Doesn’t Make Sense
For more than a century gold has been favored by institutions as a monetary metal probably because it is much easier to store large amounts of money in gold, which is more valuable per ounce than silver, and because gold is even less susceptible than silver to tarnish and oxidation. Still, if you look at the amounts of silver available compared to amount of gold the ratio of gold to silver does not make sense. Above ground there is roughly five times more silver than gold, and below ground (according to US Government statistics) the ratio is about 10:1. So valued in terms of their relative scarcity, a silver:gold ratio of roughly 10:1 makes sense; but the current ratio of approximately40:1 doesn’t. The public appears to have caught on to this fact, though. Individual demand for silver coins has been soaring – which is one reason for the strong performance of the metal.
Virtuous Cycle Could Ensure Continuous of Bull Market
Add up all these silver factors:
- its industrial value,
- its underpricing relative to gold scarcity,
- its appeal as a proxy precious metal investment for gold
and the dynamics are in place for the continuation of an explosive bull market in silver. Industrial users could even end up competing with individuals seeking protection against currency inflation. The situation could become a “virtuous circle” for pricing, one in which demand from one sector reinforces demand from the other.
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Government Might Interfere IF Silver Goes TOO High
IF the price goes too high, [however,] it could provoke government interference. During the Great Depression, the government restricted gold ownership as it delinked the dollar from the gold standard. Of course, the purpose of that restriction was to prevent gold hoarding and to move our currency away from precious metals once and for all. Gold no longer backs our currency, so it is not in danger but silver is a key industrial metal as well as a precious one. If silver prices rose high enough to restrict activity in sectors deemed crucial to national security (and energy could certainly fall in that category) an activist government might be tempted to interfere once again – this time in silver.
We don’t know what that “danger price” would be – our guess is well into triple digits – [so,] for now, our advice is to accumulate any precious metal producer, whether silver or gold.
- Update: Why $300+ Silver is a Realistic Future Peak Price http://www.munknee.com/2011/07/with-gold-at-10000-silver-could-reach-714/
- New Series of Canadian & American Silver Coins Coming to Market http://www.munknee.com/2011/07/new-series-of-canadian-american-silver-bullion-coins-coming-to-market/
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.