Bullion barron

Discussion in 'Questions & Comments' started by Ilovesilver, Dec 4, 2018.

  1. SlyGuy

    SlyGuy Active Member

    Joined:
    Sep 6, 2018
    Messages:
    150
    Likes Received:
    88
    Trophy Points:
    28
    Location:
    USA
    Yes, but nothing will sell at a loss for any prolonged period of time. The price will stop dropping and/or the product will cease to become available if there is no demand at the lowest possible price point.

    Yes, there are "loss leaders" or free items in business where a grocery store or clothing store might sell something at a small loss to get people in the door and profit on all the other things they may buy. Yes, auto companies will sometimes sell their cars at break-even since they will make a ton of money on the loan financing. Sometimes there are merchandise clearances or even store closing liquidations with items sold at a loss or break-even. None of those are long term plans, though. That would be impossible.

    Suppose the aluminum for cans of CocaCola suddenly cost $5. They would be sold for at least $5.50. Sure, people might not buy them at that price, but the company couldn't sell them for any less. They wouldn't just sell them for $1 or $2 when the aluminum is costing them $5 and the soda + labor + marketing/storage/etc costs them a tiny bit also. It's simple econ.

    Likewise, the Metals mints couldn't sell coins and bars for less than they pay for the refined metal + labor + machinery costs of them... maybe for a short sale, but not for any sustained period of time. They would liquidate or close down... but most likely, they would just have to keep prices at least slightly above their profit line... even if that were ever well over spot.

    ...as Ipv explains it well below, we don't know what real mining + refine + minting + storage/marketing cost is for the precious metals mints.
    I have a feeling that that cost is always over-stated, but what I always hear is a few dollars below spot, typically. I have heard around $12USD per ounce as the cost on silver. Nobody really know. There must be some lower limit where they actually would lose money... and therefore be unable to sell it at that price point for any length of time. We obviously haven't gotten there yet, and it went below $12, we would therefore know those figures were not true.
    This is not possible for reasons stated above by Ivp. That is just smoke and mirrors.
    If mining + refine + mint cost for silver really was $15/oz, then you wouldn't see even ugly generic rounds or bars available (new ones) for any less than about $16/oz. In order to stay in business, the bullion site needs to cover storage, labor, utilities, marketing, etc fees... plus turn at least some kind of profit. They could only sell for a loss in the very short term (and that would be done in hopes of long term gains: new buyer specials, promotions, refer-a-friend, etc).
    The secondary market and private sellers are a different animal. They could sell used bullion and rounds from their collection for $10/oz or whatever they want (and some people who inherit it are happy to do just that), but new silver will always be limited by the production cost. It is simple business math for the mints and bullion dealers.
     
    Last edited: Dec 6, 2018 at 12:47 AM
    Ag likes this.
  2. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

    Joined:
    Nov 15, 2010
    Messages:
    17,524
    Likes Received:
    1,121
    Trophy Points:
    113
    Location:
    昆士蘭
    Just pointing out that your production cost of $12 doesn’t suddenly become less than $12 if the price of silver drops.

    Only productivity improvements drive down the cost of production.
     
    SlyGuy and Ag like this.
  3. alor

    alor Well-Known Member Silver Stacker

    Joined:
    Jun 16, 2011
    Messages:
    5,843
    Likes Received:
    537
    Trophy Points:
    113
    Location:
    Pulau Alor ;)
    Washington reportedly offered its partners in Europe and Asia subsidies to buy non-Chinese equipment so they ditch Huawei or any other Chinese firm, such as ZTE.
    so bribery can explain why certain products can be sold at below production costs
    just like US paying Israel 3 B each year to cover their budget or other purpose
     
  4. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

    Joined:
    Jan 8, 2016
    Messages:
    3,172
    Likes Received:
    369
    Trophy Points:
    83
    Location:
    North Sydney
    A caveat on what I wrote about blanket cost of X mining.

    $15 cost of silver is very possible for a specific mine but as an industry it doesn't mean much.

    Looking at the silver landscape in a more holistic way, the cost of silver is pretty low
    Since 50% to 85% silver demand can be supplied by Non Primary Silver mines, cost of "average" mining figures are FUD.

    35% of silver comes from Primary Silver mines (price takers)
    15% of silver is recycled (10% to 25% depending on the price of scrap, higher spot more is recycled) (price influencer)
    50% of silver is a byproduct (40 to 60% dependent on underlying ore price ie high copper/nickel/lead prices leads to increase silver production) (price setter)
     
    bron.suchecki likes this.
  5. sgbuyer

    sgbuyer Active Member

    Joined:
    May 25, 2018
    Messages:
    306
    Likes Received:
    69
    Trophy Points:
    28
    Location:
    Singapore

    This would probably be the reason why silver price is around the average primary silver miner AISC of $14~15 while gold is well above the $900-$950 industry average. At the end of the day, price will solve the problem.
     
  6. alor

    alor Well-Known Member Silver Stacker

    Joined:
    Jun 16, 2011
    Messages:
    5,843
    Likes Received:
    537
    Trophy Points:
    113
    Location:
    Pulau Alor ;)
    price can't solve anything, when the SUA is in charge of mining and markets
    there never a fair market
    with bribery this world is really out of order
    just imagine the largest producing countries do not even sell the stuff in the producing countries,
    if you can not buy oil in oil producing country such as Iran
    or buy a hellfire from USA to put on your drones
     
  7. Ipv6Ready

    Ipv6Ready Well-Known Member Silver Stacker

    Joined:
    Jan 8, 2016
    Messages:
    3,172
    Likes Received:
    369
    Trophy Points:
    83
    Location:
    North Sydney
    unless people buy more silver jewellery or industry finds more uses for it, Silver is beholden to third party output, that will sell silver at any price.

    Just too much silver in the ground. We also have to consider all the mothballed silver mines or even secondary mine where if the silver spot hit $25 and up, that will come back online saturating supply.

    Much like fracked oil in US, oil at $50 and below a barrel US frackers are mothballing drilling rigs, when oil hit $70 plus rigs will start drilling again and the cycle starts again.

    Could you imagine if there was a marketing body like deBeers for silver, imagine if they somehow made owning a silver pen, cutlery, and what ever else was a must than silver would be worth $200 an ounce.

    Imagine silver impregnated tissue, make up pads, dish scrubbers and toilet paper to help kill germs.
     
  8. sgbuyer

    sgbuyer Active Member

    Joined:
    May 25, 2018
    Messages:
    306
    Likes Received:
    69
    Trophy Points:
    28
    Location:
    Singapore

    It's already starting to happen. New populist governments are threatening to shutdown or take back copper and nickel mines in Africa and Indonesia unless foreign mining companies pay up.

    https://www.wsj.com/articles/countr...ore-cash-from-big-mining-companies-1542568635

    The fear that the new president AMLO will do the same to silver mines in Mexico has been slamming down mining stocks. Even if AMLO does nothing, the falling stock prices will ensure that miners will have difficulty borrowing money or raising capital.

    Governments all over the world are running on deficit, and mines are a great source of tax revenue - Australia included. The days of reckless mining in developing and 3rd world countries without regards to the local environment are over.
     
    Last edited: Dec 6, 2018 at 6:52 AM
  9. SlyGuy

    SlyGuy Active Member

    Joined:
    Sep 6, 2018
    Messages:
    150
    Likes Received:
    88
    Trophy Points:
    28
    Location:
    USA
    Crypto has obviously been crushed beyond belief in 2018 (but it is debatable if that was a real market or basically just a greater fool theory speculative bubble to begin with).

    ...where is this "bear market" for the bona fide PM, though?

    For last 1 year (2018): silver is -13.6%, gold -4.1%
    Last 5 years (2014-present): silver -24.5%, gold +3.7%
    Last 10 years (2009-present): silver +31.3%, gold +42.2%

    In stocks, a bear market is generally a 20% drop within two months to even *start* a true bear market. Metals have never seen drops like that, especially not recently. The only sharp drops that were even seen in modern history are after the silver or gold values just overshot on a big surge upwards (Bretton Woods dissolve, Hunt brothers, GFC 2008, etc). Even if I bought gold at the very peak in Sept 2011 for $1850 (it would be very hard to buy at that exact wrong time... especially for my entire stack), then I'd still only be -32.4% overall on the gold (avg -4.6% per year over last 7 years). Heck, a lot of stocks can lose me that 32.4% in single bad month - or even in a week. The ability of crypto to make money evaporate even more rapidly was also clearly demonstrated.

    Yes, gold and silver can be boring as hell. They don't pay dividends like bonds or stocks and gold and silver have both gone sideways in price for a decade or more (from roughly 1980-2000 would be the most recent). That might be starting again right now. Sure, those are not bull market times, but I don't think that automatically makes them a bear market. Of course any time where graphs aren't rising will frustrate some investors... but they aren't losing much money on the PM either (they are likely gaining money overall, assuming the PM are only one part of a balanced portfolio). Those times where gold and silver price remain stagnant are just building more pent-up demand as paper currency supply inflation continues to expand faster than supply of the metals do. That is what makes them excellent stores of wealth, though. I guess you can call the sideways markets bear markets if you like. I always consider a bear market to be where you see your portfolio value dropping significantly and quickly, though.

    At any rate, happy holidays and good luck on future endeavors. I understand getting burnt out on the internet 1000%, so hopefully you have more time for fitness and hobbies now :)
     
    Last edited: Dec 8, 2018 at 1:33 AM
  10. SilverDJ

    SilverDJ Well-Known Member

    Joined:
    Nov 1, 2014
    Messages:
    3,120
    Likes Received:
    305
    Trophy Points:
    83
    Location:
    Australia
    Graphs are better.

    1 year. Gold went through a full cycle. Silver sucked.
    upload_2018-12-8_13-57-39.png

    3 years. Gold did well. Silver came out even.
    upload_2018-12-8_13-59-27.png

    5 years.
    Gold came out even. Silver sucked.
    upload_2018-12-8_14-0-50.png
     
    SlyGuy likes this.
  11. alor

    alor Well-Known Member Silver Stacker

    Joined:
    Jun 16, 2011
    Messages:
    5,843
    Likes Received:
    537
    Trophy Points:
    113
    Location:
    Pulau Alor ;)
    this are two points comparisons,
    for 1 year, no buy and sell at better price, can't be done ; unless there is a sale or discount
    for 3 years time frame, there is possibility of buy low and sell high
     
  12. SlyGuy

    SlyGuy Active Member

    Joined:
    Sep 6, 2018
    Messages:
    150
    Likes Received:
    88
    Trophy Points:
    28
    Location:
    USA
    "Never be upset the market is moving up or down... just be very glad it moves up and down." :)
     
    oziwassabi likes this.
  13. alor

    alor Well-Known Member Silver Stacker

    Joined:
    Jun 16, 2011
    Messages:
    5,843
    Likes Received:
    537
    Trophy Points:
    113
    Location:
    Pulau Alor ;)
    be happy when there is "on sale"
    no point to cerebrate when prices hit rock bottom but the sign says we are "sold out"
    be sad when you can not click the buy when there is on sale button and still waiting for lower prices that never come
     
  14. Bullion Baron

    Bullion Baron Well-Known Member Silver Stacker

    Joined:
    Sep 15, 2009
    Messages:
    2,399
    Likes Received:
    50
    Trophy Points:
    83
    Location:
    Adelaide
    2011 to now (or 3 years ago if no new low is made ;))

    [​IMG][​IMG]

    Depending on what the price does from here it's possible we are in the early stages of a new (cyclical) bull market (or just a sideways period), but for the time being sentiment is still very bearish.

    I should make more time for fitness.. not so much a case of being burnt out, just moved on to other projects (an online startup I co-founded for one).
     
  15. sgbuyer

    sgbuyer Active Member

    Joined:
    May 25, 2018
    Messages:
    306
    Likes Received:
    69
    Trophy Points:
    28
    Location:
    Singapore
    The dow jones index does not represent the true state of the stock market. I remembered they will remove stocks that are falling and add those that are doing better. The real stock market is doing much worst than what the indices suggest. Most blue chip stocks like bank of america, apple, gm have fallen 20-25% from their tops this year, much more than silver. Some like nvidia have basically halved. And we're not even in "bear market".
     
  16. alor

    alor Well-Known Member Silver Stacker

    Joined:
    Jun 16, 2011
    Messages:
    5,843
    Likes Received:
    537
    Trophy Points:
    113
    Location:
    Pulau Alor ;)
    money managers, who say you can come near the bear territories
     
  17. alor

    alor Well-Known Member Silver Stacker

    Joined:
    Jun 16, 2011
    Messages:
    5,843
    Likes Received:
    537
    Trophy Points:
    113
    Location:
    Pulau Alor ;)
    the mining rights were issue under bribery and will be prosecuted, recall the army and let the local people looted the whole assets there, just like what is happening in Paris, let the people take it to the street, after all the people make the laws
     

Share This Page