I read on some threads (can't find them now) that silver is very cheap right now, because inflation has been xx% over the last x years, while silver has only gone up by x% over the same years, and for this reason, silver is set to go up much more. An alternative explanation to this undeniable fact is that silver is not a good hedge against inflation, and the price of other goods goes up more than the price of silver. To state the obvious, inflation is estimated with tens or hundreds of goods, and if inflation is 4%, you have some goods that go up more than 4%, and some goods that go up less. Unfortunately silver is one of those goods whose price has historically gone up by less than "average" (i.e. inflation), and therefore it's not a good hedge against inflation. Your collective thoughts?
It is a good hedge though against currency deflation, a world war, an economic reset of some kind. I'm sure I've missed some.
The value of an asset is derived from the currency that is getting inflated. Therefore, any asset is an inflation hedge. I'm not sure an 'undeniable fact' has been mentioned. Could you clarify?
Todays price is 4 times the one of 11 years ago. Ehm, not a good hedge? Before, it hung 20 years while other prices doubled/tripled and more. Ehm, not a bad hedge? It's not the metal, it's the people on the market that determine the good/bad of the hedge. Including you. So don't blame the metal. It's dead, it can only go where people bring it, for a price.
Definition of hedge: Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract. note that the above definition doe snot state that a hedge has to fully reduce your risk, just reduce the risk. This actually states that silver IS a good hedge. The value on average of silver has increased, although not as much as the average good it still has increased. It has not decreased in value like cash has. Assume inflation is 4%, and silver price increased less than average of household goods, assume it increased only 2%. Value of commodity: Year1 Year2 CASH $100 $96 Average Goods $100 $104 Silver $100 $102 in this example silver is a hedge against inflation. Just compare it against a cash position. A better hedge in your example would be to stack average 100's of goods. Or you could just set up your own business selling goods
I'm probably a little older than most of you + I'm from the US. My formative years before the year I graduated from high school were during the years in which US coinage was still 90% silver. I inherited my first car in 1964 and gasoline cost me $.25/gallon, but that $.25 was a 90% silver quarter. Now a US 90% silver quarter is worth close to 14 times spot or right at US $3.50 and gasoline is selling here in Florida for around $3.55/gallon. So the same gallon of gasoline is selling for the same silver quarter. If you don't call that an inflation hedge in real terms, what do you call it?
Interesting example, thanks for sharing. It would be interesting to look at the progress of wages over the same timeframe.
I call it "temporarily-valid example". When silver price will halve to $10/oz, your example will no longer be valid (unless the price of oil also halves, which is possible). Silver has only been a good hedge against inflation since 2007 (and only if you didn't buy between 1973 and 1989). If it was a good hedge, the price would go up gradually, and never go down, while it goes up and down. Conclusion: you should time your purchase carefully, waiting for it to drop to $10/oz (or less) before making any big purchase.
it may of been an inflation hedge, but that silver you sat on for 50 years didn't make you anything. if you bought 6 apples with that silver quarter, sold them for 5c each, next day you would have 30c. 5c profit in a day, over 50 years, thats a mighty lot of apples.
A hedge does more than reducing risk: it reduces profit too. Seems to be mentioned much less than it should haha. Those that hedge, are basically giving away a part of a potential profit. If one buys a 5000 ounces stack and hedges it fully against price drops with 1 futures market short contract (5000 ounces), his net effect on the spot price will have been zero / neutral (his 5000 ounce purchase drives it up, his short contract purchase drives it down) If the spot price then drops, the loss on his stack will be 100% recuperated by the gains on his short position account. If the spot price then rises, the profit on his stack will be 100% lost by the losses on his short position account. This situation is a zero price exposure one. Seen from the price mechanism, it's like he doesn't exist on the silver market. He will only reappear when he sells the stack OR dumps the futures market short position (NOT both of course). About waiting for lower, well at some price that turns out to be wrong. And the question which price isn't determined by you, but by the whole of the people on the market, and all related markets, and since this is a monetary application, the entire economy. Instead of wondering/stating what a price will do, ask yourself if YOU would buy at $X, or if YOU would sell at $X. If YOU don't, why would anyone else do? Either they know more, either they know less than you, so might be an idea to wonder about what that is. Cheepo is now waiting for sub $10. Technically, that's the same as the girl in this story. Suspended buying at $5, then continued at $20.
I personally think it can be a good hedge against hyperinflation and also against inflation on the long term: 10-20 years. On medium term it might still be somewhat effective: 3-5 years. Anything less than 3 years is "short term" for me. I think it's not doing well right now. If you bought in 2011, then silver could have wrecked your investment more than anything else that I could think of!
Depends on when in 2011 though, with a price fluctuation sized as $30-$50, worth mentioning. 2011's average was $35, I swapped my savings in that year, in 5 times, feb/feb/may/oct, so that $32 was not that bad. Still, it's a wreck, although in less deep ocean. Things can change once again, I see enough reason to lift up the wreck metre by metre, until some day the shiny sun appears and the bees swarm 'round the ears. If that lunar in my avatar lost its gaps, it will be that day.
Well, admittedly but the purpose of the thread is inflation hedge, which is a different thing from an investment. There are all sorts of things that would have been much better investments than silver. I have several types of investments and I have a percentage of my investments in metals which I consider to be a hedge against certain types of events.
Ive argue with this guy before many times, and he refuse to accept any arguments for precious metals, cant reason with him, dont know why hes still a member of this site, maybe hes on the payroll of federal reserve
Missed this, nice logical sequence there. Makes very clear what hedging is: avoiding the losses, AND the profits.
What did we argue about, and what did we disagree on, and do you think that everybody who disagrees with you is a "can't reason with him"? And what is wrong with the first post of this thread?
