How deflation is going to smash silver prices

About that connection between gold and silver mentioned by user TreasureHunter:
This afternoon I was collecting US Mint data for another reason:
Silver ASE

1999 9,008,500
2000 9,133,000
2001 8,827,500
2002 10,475,500
2003 9,153,500
2004 9,617,000
2005 8,405,000
2006 10,021,000
2007 9,887,000
2008 19,583,500
2009 28,766,500
2010 34,662,500
2011 39,868,500
2012 33,742,500

Gold AGE + buffalo24k:

1999 2,055,500
2000 164,500
2001 325,000
2002 315,000
2003 484,500
2004 536,000
2005 449,000
2006 261,000 323,000
2007 198,500 167,500
2008 860,500 172,000
2009 1,435,000 200,000
2010 1,220,500 209,000
2011 1,000,000 174,500
2012 753,000 132,000

And I wondered about the remarkable differences.
Look at how volatile the AGE demand was 1999-2007. Years with double/halve amounts of other years.
Look at how stable the ASE demand was.
Look at how the ASE sales steadily increased 2008 onwards. Even last year could have added to that series without that first sales suspension.
Despite the increasing premium.
Now look at how AGE+buffalo sales steadily dropped 2009 onwards.
Delivered gold/silver is a key indicator much more important over the longer term than derivatives based purchasing.

I'm not willing to draw any conclusions yet, due to uncertainty of having complete data, but I see enough reason to wonder about that so called gold silver connection. Sure they are connected. But is it really in the degree that some seem to suggest?
 
I think there is a distinct possibility of a deflation, just as there is perhaps an equal possibility of inflation. In the case of inflation those who have stacked metals will have hedged correctly so I don't think it warrants any further comment.

Deflation is another kettle of fish entirely. Firstly I believe there is some bad information floating around about how a world wide depression would affect silver prices. We should certainly question silvers promise in a deflationary environment but that does not mean it is a poor investing decision for the following reasons.

1. Silver mining uses large amounts of energy to bring AG to market. Since it is such an energy dependent element it is thus subject to the forces of EROI. Relatively abundant amounts of silver based upon back of the envelope conclusions does not guarantee it arriving in your local coin shop if the price in energy makes it unprofitable. So I believe that $5 silver is gone forever. I have read a blurb somewhere that under current market conditions silver can be produced for about $11 but I suspect that is under optimal conditions. Remember silver mining is unlike gold. Silver must be mass processed and chemically separated. Its expensive as all get out. Without the EROI math, claims on silvers price simply are darts thrown at the board.

2. Demand in the developing world. I have found that many who poo poo AG have what I would call a western ethnocentric view of things. Conclusions based upon maintaining certain living standards and how they are affected by global financial issues simply does not take into account that fully 1/3 of all consumers in the world live in India and China alone. China is now the largest car market in the world and its only beginning. The silver detractors point out that photographic demand for silver is down and that industrial use is about 50% of silvers current consumption so they reason if our western systems slow down so will demand, yet conveniently throwing out Chinese and Indian market demands, not to mention Western stacking demands as well.

About silver as money

3. Silver's history as a monetary metal is essentially just as old as that of gold so all the arguments made in favor of gold also apply to silver. Therefore we should stack both.

About Silvers ratio to gold

4. Ratios are clearly out to lunch as far as I am concerned. Perhaps as paper positions become marginalized we will see a return to historic norms but as long as derivatives can affect market prices expect the ratios to stay where they are. If you don't believe market prices are manipulated both UP and DOWN do a google search on Sumitomo Copper or Mr Copper and you will see what deep pockets can do to commodities for a decade. This isn't some rogue trader but rather a well connected person with executive support moving prices in such a manner as it benefits the Sumitomo corporation.

there is more I want to say but this post is probably getting a bit long in the tooth so I will stop it for now.
 
I've been warming to raw dog's ideas about the possibility of deflation, but I'm not sure how this would affect Australia. Silver would drop in the US, but wouldn't it still be high in Aus due to the exchange rate dropping below parity?

I don't quite understand it all yet. It seems like the AUD can only get weaker in the future, meaning PMs are still a good hedge from our perspective.
 
Well in recent weeks I bought 3682 gram silver as 60 heavy junk coins years 18xx, 40 philharmonikers 2012, 25 maples 2012 and 10 libertads 1990.
Why in recent weeks? Because after 5 months bidding and no winning, the same bids now do give wins.
Screw deflation.
Deflation in the way the precious metals communities seem to interprete it, is relying on other peoples error to sell lower. I'm not -that- greedy regarding lower. A fair (as no big gain or loss for both sides) price is okay for me.
Also, I rather prefer to hold a real thing (silver) than a promise (euro).
Those that sold in the 'deflation' of 2008, well, we all know who was the smarter side then.
My silver stack increased 1,12% here. :)
 
If silver goes lower I will buy buy buy. Physical silver will not crash because the market will reflect the real value. I believe if the price drops to $20 you will be hard pressed to actually buy it for that price. I never intend to sell anyway. I am in love.
 
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