Help a newbie out, how to evaluate current Spot

Discussion in 'Silver' started by Rob Bennett, Jan 4, 2021.

  1. Joe King 79

    Joe King 79 Member

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    Hi there. Not anywhere did I mention fair price, I did state "fiat price" did you misread this?
    I started stacking in 2016, very slowly as I don't earn that much but I wish I had started in the early 2000 when silver was dirt cheap. Then again would the dollar amount then equate to the dollar amount today?
    Definitely a rise in the next 8 years.
    I understand there is a price and whether its fair or not is irrelevant as you state. I guess I am asking, what is the actual true price of silver? Could you go to the 8:1 ratio out of the ground, would this be a better way to work out silvers actual true value?
     
  2. STKR

    STKR Well-Known Member Silver Stacker

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    It's all in the supply and demand of the physical market. The current price point today is slightly inflated above where it's true "value" lies, based upon the cost of production of approx. $15-17 USD per Oz.

    We do have above ground stockpiles of silver. Until those become depleted and we see widening deficits within the physical market, further price increases are likely to be generated from speculation and/or inflation. It doesn't mean we can't see an exponential growth in the silver market as result of increasing investment demand, both for the physical asset and Paper "asset" (ETFs).

    It's a complex market with many variables. The Physical investment side of the market is a seperate market within itself. We saw evidence of that this year with the periodic supply shortages of investment grade Bullion, leading to increased premiums and a wave of FOMO frenzy from retail "investors".

    One thing to keep in mind is the demand for investment grade Bullion prior to 2006 averaged 30Moz. Over the past decade, that has increased to a consistent 200Mozs +. I think 2020 saw record levels of demand @ 300+ Moz's. If the Trend continues, we could eventually see more than half of total mine supply going to the production of coins and bars - leaving a lot less Silver for industry and dwindling stockpiles.

    I think we have about 5-10 years before we see a significant move towards a moonshot. All I know is that silver does pose a great opportunity as a long-term hold. More so than Gold IMO.
     
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  3. Joe King 79

    Joe King 79 Member

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    Yeah the EV, solar panels, medical, computing and "green" tech etc. will all play a part in this, apparently a Tesla has 3-5kg of silver in it. At work recently I found an old national geographic and it had a 30 page article on silver. I should bring it home and maybe scan it in. Quite interesting.

    So you're saying the true value is only related to the dollar cost of mining production? And that the above ground stockpiles keep the price relatively stable? Supply and demand dictates the price will go up as you are saying. Yes I agree about silver going higher than gold, its a more volatile market and usually follows gold when gold rises.
     
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  4. Tokyo

    Tokyo Active Member

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    Not to mention major supply crunch coming do to environmental problems in 2,3rd world country = companies are not following the pollution guidelines. Not restoring and violation of water&nature rights, they would get kicked out and fined.( we see more happening ) no more new mining rights for them.
    All Reckless mining going to stop sooner then later and be efficient ( we know minerals are not unlimited supply ) byproduct on silver by lead/copper/zinc mine shrunk significantly. ( since 60-80’s ) For this I am bullish silver
     
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  5. STKR

    STKR Well-Known Member Silver Stacker

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    I wouldn't call it true value, more baseline value. When you can buy retail silver for less than the cost per Oz a primary producer needs to break even, you're doing well IMO. That was the case in March 2020 and also the case in late 2018 and several instances prior.

    The way I like to look at the market is through the scope of the primary silver miners. Secondary miners don't really care what the silver price is and they make up over 60% of annual mine supply. Some of these secondary producer's even declare their production costs (All In Sustaining Costs) as $0. This is because of mining "credits" they use to massage to production cost to appease investors. A primary gold mine can offset the cost of silver production with ease. These miners aren't dependant on the revenue generated from silver production like many primary silver miners. Although Primary producers only make up 30% of mine supply, without them, we'd have major deficits within the physical market, leading to an innevitable increase in price. That's why I see the primary miners average production costs as the effective floor in the silver market. I don't think it's a coincidence that silver struggles to maintain a price point below $15 USD for any period of time.
    Keith Neumeyer openly talks about times he has withheld sales due to unsustainable price drops.

    Another factor to consider is that even primary silver mines aren't really primary mines. Most don't generate more than 50% of revenue from silver and rely on the byproduct mining and sales of Gold, Copper, lead and zinc. So the higher the price of each can very well translate to lower overall production costs for silver due to the offsets via byproduct mining "credits" as mentioned above.

    It's a complex market with MANY VARIABLES. One thing is certain though - The supply and demand fundamentals are extremely favourable for a long-term position. I think we could see a significant physical shortage within the next 5 years, but 10+ years is my conservative assessment.
     
  6. STKR

    STKR Well-Known Member Silver Stacker

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    100% agree. We are apparently set to reach peak lead and zinc production by 2025, peak copper by 2030 and there's mounting evidence we've already reached peak gold.

    It's fair to say that we are likely to expect less silver production from secondary mining going forward into 2025-2030.

    Environmental red tape is also restricting new developments for seabed mining, a source of supply that could alter the market fundamentals unfavourably to us stackers.
     
  7. Tokyo

    Tokyo Active Member

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    Not too worried about seabed mining until I see big numbers, but probably nothing compare to reckless mining was all about production and more cash flow. Massive scale seabed mining eventually run into same problems. I am technical&fundamental investor have plans and be prepared
     
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  8. Slimey

    Slimey Well-Known Member

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    Sorry, I should have invested in glasses instead of silver. As for true value, if you use 8:1 as your guide and then apply it using past price history, your great, great, great, great grandchildren will probably see that ratio.
    2016 was the best time to stack after the early 2000's. I started in 2005 and have seen price go up, down and then very slowly up. As an investment, it is only now looking ok. It just took 16 years. You will not have to wait as long as me. My only advice is not to focus on ratios but to be aware of what a parabolic blow off looks like on a chart. Bitcoin will soon show another one over the next few days/weeks/months.
     
  9. Joe King 79

    Joe King 79 Member

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    Yeah well I started in July 2016 and have been stacking ever since, after I sell I will start stacking again. There's just something about collecting silver. You didn't manage to sell off in 2011 when it hit $50?
     
  10. Slimey

    Slimey Well-Known Member

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    No, I was too smart for that...cough, cough......I expected a pullback but not 8-10 years of misery watching every other asset class going up. I am expecting another 6-7 years before this will peak. I have kind of acclimatised to the pain now. Whats another 6 years. For you on the other hand, your experience will be far more positive. You did not waste 10 years waiting.
     
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  11. Joe King 79

    Joe King 79 Member

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    I guess I mentioned $50 as that seems like a parabolic shift, are you ready for the next high? My experience has been positive, when I started I think it was $19-$20 US and I remember people stating then that it was too high. I thought it was a steal and still do, I still think whatever it is now is a steal, but hey everyone's different.
     
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  12. Slimey

    Slimey Well-Known Member

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    I have now changed my focus to silver shares. Silver Mines Ltd in particular due to its proven resources and its attraction as a takeover target. If silver does eventually move towards $300 ( the equivalent of its $50 price in 1980), the percentage rise of the shares will far outstrip the rise in the silver price with the benefit of being able to sell very quickly.
    My aim is to off-load most of my silver and convert to shares. I will keep some of my coins as I am a magpie and like shiny things.
     
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  13. Slimey

    Slimey Well-Known Member

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    If wrcmad reads this....what are your thoughts on SVL?
     

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