If you haven't been paying close attention and just heard that the price of silver bullion hit $20 an ounce last week, you might be inclined to think you missed the opportunity. The last time silver breached the $20 mark was in March of 2008, and it didn't last long. Silver investing has been difficult, and seemingly unpredictable, the last 12 months. An uptrend began in December of 2008 in both gold and silver.
The uptrend in gold prices continues, while the uptrend in silver stalled out... almost a year ago. Why has gold investing been so much easier (predictable) than silver investing the last few years? Aren't the price drivers the same for all precious metals? Wasn't the price driver/s that sparked the resumption of the gold uptrend in December 2008 the same one/s that caused silver prices to resume their climb? If so, why did silver price move into a trading range while gold price continued to rise, touching its all-time price high last week?
As to price drivers of precious metals being the same... not so much. Since all precious metals are priced in U.S. dollars, the effect of the changing value of the U.S. dollar is the same is the same on all precious metals. But this is the only consistent common price driver. How about Supply/Demand dynamics? Of course, Supply/Demand dynamics is the primary driver of price, not just for precious metals, but for all goods and services. But the Supply/Demand dynamics for gold and silver are vastly different. Stated briefly; the practical demand for silver relative to the supply of silver is much greater than that of gold.
There are three primary practical demands for gold. First, there is a small industrial demand. Second, there is a larger demand for jewelry. And third, a huge demand for what I will generalize as "investor demand." Hence, there is a very large, and growing, supply of gold. It is sitting in vaults all around the world --- tons, and tons, and tons of it. Silver, on the other hand, has a huge industrial demand. So much so that an estimated 90% of all silver ever mined has been consumed. It is gone, and gone forever. And industrial demand is rising. One example; the Chinese are going crazy with solar. Not for export, but for their own use. The solar panels they produce use silver.
Since the practical demand for silver is increasing, and the inventory is low, silver investing should be easy. Buy and hold, right? But what should have happened for us silver investors the last few years didn't happen. That is because there is a supply of silver of which the typical silver investor was not aware. It is not a supply of silver bullion, but of paper silver. And it is huge.?There have been massive short positions maintained in the silver market for about two decades. Recently, that short position has been maintained around the $20 strike price. This huge (paper) supply of silver has acted as a price ceiling.
Theodore Butler, noted silver researcher and analyst, has been beating the drum for two decades. He calls it intentional manipulation, and I am inclined to agree. Thanks to him, more and more investors are becoming aware. There a "silver lining" (pun intended) to this situation for the silver investing public. The price of silver will explode when these positions are dissolved. It might be done voluntarily, or perhaps the regulators will step in and force it, now that it is in the open.
The 1980 high for gold was $873 an ounce. Gold traded near its all-time high of over $1,260 an ounce last week. The 1980 high for silver was just short of $50 an ounce. Yet silver traded for only $20 an ounce last week. There is explosive price potential in silver.
Learn how to protect yourself against the current (and impending) economic disaster with silver investing. For more information: http://www.esilverinvesting.com.
