Let me explain. Gold ran up from $35 to $850 then was knocked back to ridiculously low levels of $250+/- around 2001. These levels of $200-250 were not fair value but significantly undervalued as compared other commodities. Now we have had a run up to $1900 and then a fall back consolidation to $1700. Other commodities have also had a run but they did not start the rally so undervalued. So in reality gold/ Ag/Pt cannot be compared to other commodities as they did not start this run over the past 12 years from the same point. Today PM continue to be undervalued as compared other commodities. Then you add the issue of money printing and there is no other way then up. I don't look at the short term play step back and see the yearly moves.....(below) As a physical investor forget these short term plays it has no meaning...to me. If I made my living off betting on price moves then yes it is important but I don't. Most people on SS don't.
Silver is just a way to stop spending cash and save for the important things. Its harder to spend metal.
@volrathy, i've said the same in previous posts as well - bit like de ja vu sometimes do you believe in de ja vu?
@volrathy, i've said the same in previous posts as well - bit like de ja vu sometimes do you believe in de ja vu?
It's abit the same 'explanation' you give. Again that 'undervalued'. And a 'ridiculous' low. Who gives it value? You? Me? Both of us? Everyone that buys & sells? I think it's the latter. We all want to buy cheap. We all want to sell expensive. The price mechanism takes not only you, me or us into account. Whether you, me or us like it or not. Since 2008, the precious metal prices were driven up by those 'quantitative easings', but after over 4 years, these dollars etc didn't add to the circulating amount, they didn't move into the economy but onto a balance named 'Excess Reserves'. http://research.stlouisfed.org/fred2/data/EXCRESNS.txt 2008-01-01 1.648 2008-02-01 1.615 2008-03-01 2.645 2008-04-01 1.737 2008-05-01 1.838 2008-06-01 2.225 2008-07-01 1.913 2008-08-01 1.875 2008-09-01 59.482 2008-10-01 267.157 2008-11-01 558.808 2008-12-01 767.318 2009-01-01 796.835 2009-02-01 642.071 2009-03-01 723.103 2009-04-01 822.598 2009-05-01 842.144 2009-06-01 749.401 2009-07-01 732.245 2009-08-01 765.626 2009-09-01 859.887 2009-10-01 994.502 2009-11-01 1077.011 2009-12-01 1075.199 2010-01-01 1045.801 2010-02-01 1161.852 2010-03-01 1120.370 2010-04-01 1050.215 2010-05-01 1044.779 2010-06-01 1034.927 2010-07-01 1021.646 2010-08-01 1019.559 2010-09-01 980.831 2010-10-01 973.591 2010-11-01 971.565 2010-12-01 1006.636 2011-01-01 1036.466 2011-02-01 1190.001 2011-03-01 1362.146 2011-04-01 1451.947 2011-05-01 1512.488 2011-06-01 1588.726 2011-07-01 1618.117 2011-08-01 1583.344 2011-09-01 1550.977 2011-10-01 1545.136 2011-11-01 1497.769 2011-12-01 1502.206 2012-01-01 1519.451 2012-02-01 1560.121 2012-03-01 1509.593 2012-04-01 1486.176 2012-05-01 1457.460 2012-06-01 1457.475 2012-07-01 1483.049 2012-08-01 1477.750 2012-09-01 1409.441 2012-10-01 1418.274 2012-11-01 1435.304 It's the reason why general prices didnt go up due to the new money. In the period 2000-2008, the amount circulating US dollars doubled to 875 billion. And they were all spent. Alot products saw strong price risings. The same in EU, since Euro introduction. A bread here costs now 50% more than then. An average house rose even more. The precious metals... guess... doubled over that period. After that period, thus since end 2008, precious metal prices doubled/tripled (silver even 5-folded at some point). All due to anticipation of serious (200%) inflation. That as of today, 4+ years later, still not arrived. And then you talk about undervaluation? That the PM prices would LAG on other commodities? It's exactly the opposite, they run ahead of them. Far ahead. If I would project todays situation to the year 2000, it would be like paying $30 an ounce silver, anticipating on inflation>general price increasings a decade later. Smart? I would say no. You'd have lost purchasing power that entire period. Other stuff rising in price, PM's hanging due to profitgrabs and the demand not keeping pace to continue snooping up the new produced gold/silver. Those that bought gold/silver in 2008 did the 'hedge against inflation' job. Those that bought at $30 levels, including me, will have to bit through some years failing hedge, before getting opportunities to undo some inflation loss. Those that can't cope with that, and sell, might well have added a second error. Because the money for nothing club isn't stupid. When they see some basis being formed for a new demand wave, be sure that they will frontrun it once again. And be sure, they like to see us paying higher prices for precious metals. That's all purchasing power removed. That means that we be able to buy less. No buying competition anymore for them. The same effect as sterilisation on the macro economical central planning level.
^ To put Pirocco's message into better perspective, below is the graph of the Fed's money supply (M0). From the top line you can see the explosion in printing associated with QE to infinity from old helicopter Ben. Ordinarily one would expect significant inflation as a result (of around 180% over the past 4 years, all else equal). However, as Pirocco said, much of the money has not actually left the Fed and entered the real economy, hence the M0 money supply in the economy has not increased anywhere near as fast as one would think from the raw numbers. The dotted line on the graph is the raw M0 minus the money still on deposit in the Fed and as you can see it is essentially growing at trend. Consequently, to date we should have expected US inflation to be roughly at historical rates. Looking at M0 is a simplification of the true money supply but as presented in the earlier thread where Pirocco raised this, the true money supply hasn't really changed much faster than inflation either (but looks like we could potentially be at the start of the inflation kicking in).
Undervalued or overvalued or fair valued is a measure of the price of production. Why do you think mining stocks have done so badly ??? because the cost of production is high and they don't make big profits ? That is what determines price - production costs...not my opinion or yours. Dont worry the freshly printed money will work its way into the system one way or another. When interest rates start pushing up (unless you believe we will have ZIRP forever) then bonds will fall and money will come flooding into the general economy looking to buy. The chances uncle Ben with withdraw that cash before it creates real inflation is as likely as world peace.
Mike has a good video - a bit old but...very good. *Deflation then possibly Hyper-inflation. *Borrow and spend to keep the game going. *If the US doesn't borrow and spend then the whole thing goes into a deflationary collapse. *Gold and silver will still do the accounting! *Better to be way to early than one second too late! [youtube]http://www.youtube.com/watch?v=E-ShSGz89mA[/youtube]
oh the things I'd do to her alone in a dark room...... ..... ... .. . like asking her the latest economics news...
Price is determined by everything that causes people to buy or sell. Production cost is one of such elements. And those elements interact in many ways, sometimes complex, ex silver is dominantly mined as a byproduct. This links the cost to yet other elements. But I have an easy approach for you: Did the silver production price triple since 2008? Did industrial demand triple since 2008? Did aliens hijack 2/3 of the supply? The answer is 3 times NO. It was solely "investment" demand, thus hedging against inflation, and hence the direct link to quantitative easings / dollarcreation / spending of the created dollars.
Yes, that's why I dumped my bank savings account for silver. The most influential element that makes me agree with above scenario is that I think that the producing part of the population is unable to triple its production at the same cost. In the 1980's computers, automation, big scale operation allowed this. An average company does the same job with 1/3 personell. If you look at the mega machines/constructions/tools, and the very efficient / strict time scheduled operation in order to recuperate the production tools costs, it's clear to me that we arrived on the end of the road. Since governments continue to interfere/steal/inflict cost/damage/timewaste, I expect a depression. Due to the world wide level the crisis story is happening, it will probably be a long slow pain. For me the role of silver in the storyline is saving and own control of worth. The central planning thieves can try whatever, interest rates, taxes, regulation, I'll do my best to silver-hop throughout all their ugly crap.
Btw, thanks for the open mind. I got used to negativity and stubborn denials and X wrongs in a row, being treated as an enemy of silver and those that are on its market, while all I try is to avoid those that want to evade the parasiting population parts theft, from being inflicted a loss on the silver market just like on a bank account. Look at all those that bought silver at $35 in the middle of the positivity moons a couple months ago. The price is now $5 less, -15%. A monsterbox at $35 is at $30 the monsterbox + 83 extra coins. 15% is many years interest on a bank account. Realize what happens? In a couple months, they were inflicted a loss equal to X years bank account. A luck it doesnt materialize without selling, and if they show some wisdom they might recover the loss in the future, but the silver market was inflicted a loss / drained off, even if they sell it to another stacker that makes the same error.
I still disagree with this point you consistently put forward of not realising a loss until you sell. You have demonstrated above that the loss is realised at 83 coins, or -15% before selling.
Greg Mannarino bullish, expects price rebound: [youtube]http://www.youtube.com/watch?v=SfRmTn6CuK4[/youtube]
Just to clarify, a tripling of price does not require a tripling of demand. A 1% increase in demand for a product with limited supply capacity could result in a 100000% increase in price.
Hi grinners It is impossible to know the true supply, true production and demand. Most of the traded silver is paper and who knows if there is real silver behind these contracts. That is why you perceive a 1% rise in demand moving a market 30%. In normal markets that would not happen but in leveraged markets that is the norm. That is the reason why price discovery is so difficult and inaccurate.
