Gold and Silver Recap: Silver Price to $50?

December 11, 2010

Another Precious Week

Usually we start this column with some guff about gold.  And then after talking mostly about gold we may hit the other metals.  Let’s face it, gold is usually the most exciting metal there is.  If the world collapses about us, we will be using gold as the currency that helps us rebuild civilization.  And after all, what could be more exciting than that.

But the real action has been in the silver market.  Not all up, it must be said as silver took a real pounding on some days, but there’s some real excitement that J.P. Morgan may be about to bite it on silver.

Precious Metals Prices
Fri PM Fix Weekly Change
Gold $1,375.25 -28.25 (-2.01%)
Silver $28.79 +0.05 (+0.17%)
Platinum $1,673.00 -45.00 (-2.62%)
Palladium $737.00 -21.00 (-2.77%)

Gold-Silver Ratio: 47.77 (was 48.83)

First let’s look at some history.  Bunker Hunt and a few friends tried to corner the silver market by buying silver and buying silver futures.  They drove the silver price skywards, to a level that’s not been reached since.  Then the authorities did some dirty tricks with the silver futures contracts, the price of silver fell, and everyone brushed themselves off and got on with life.

Now J.P. Morgan has been accused of doing the same thing, but in reverse.  Instead of buying silver they are selling it short, that is they are selling it now to buy in six months time.  They have, it has been alleged, sold far more silver than they can possibly have.  This has meant that the rise in the silver price is going to kill them if we all buy physical silver.  You see, someone may want to see all this silver they’ve been sold, and then J.P. Morgan will have to buy it and up shoots the price.

The core idea here is that the gold silver ratio is ridiculously high.  Historically (going back to Biblical times) it has been 16:1, now it is around 48:1, although this week it fell quite fast.  A return to historical norms would mean that silver would get to $87 per ounce.

So there’s some correction that’s due.  Now, this doesn’t necessarily mean that silver has to go up.  There could be a new paradigm, or if not, the correction could be postponed for a very long time. If the correction does happen, then it could be that gold would go down to around $500 – where it was only a few years ago.

Gold could keep going down, but there’s enough uncertainty and inflation to suggest that it won’t get all the way to $500 per ounce.  The correction could be delayed by decades or muted, but the collection will come.  You could still lose money betting on it.

Comments

By Crewton Ramone on December 11th, 2010 at 10:31 pm

There is a simple axiom in the mathematics called “revision to mean.” The mean has been 16:1 silver to gold. It’s been much higher than it is today, but is now below 50:1 and dropping…while both prices are rising.

Banksters thought they could rule the market and keep metals and especially silver prices suppressed, especially important after they stole it out of the USA’s currency in 1964. Right now (the value of the silver in ) 5 silver dollars will buy a fine meal for two anywhere is the USA, just like they did in 1964…that’s a store of value the federal reserve can’t even come close to matching with their fiat frn (“federal reserve note” which is not a U.S. Dollar).

Soon the revision to mean will return to “normal” and as is often the case in these matters will likely overshoot 18 and drop to 10 or lower temporarily.

Your historical norm of $87 is entirely low. The old high of $50 for silver will be met and surpassed before this financial crisis is over and inflation adjusted that’s at leaste $100.00.

At 16:1 that puts silver at $100.00 and gold at $1600.00 it’s laughable that people think these will be the highs for either metal with the central banks all printing HUGE amounts of money at the same time. Then again the average economist can barely do math…

By Claire on December 12th, 2010 at 12:21 pm

http://www.youtube.com/watch?v=JUVPtt7AQrk

The Silver Vigilante’s are in the middle of a showdown with the banksters right now. Buy an ounce of silver, fire a shot of your own!

By James M Nunes on December 15th, 2010 at 12:22 pm

Abolish the Federal Reserve nationalizing the central bank and restoring monetary authority to the U.S. Treasury to create and extinguish honest debt free money based on a two tiered system of precious metals and barter exchange contracts.
Pass a revalorization bill limitinng papere currency debts to 1% of their gold dollar value of $2,000 an ounce gold, reevaluating the currency and issuing new currency at a 100-1 exchange rate, pro-rating all prices, incomes and debts, and charging a 10% exchange rate fee to pay down the legitimate debt, except those debts held by the Federal Reserve.
Establish state private banks that are federally chartered that come under the suthority of the central bank and the regulations of U.S. Treasury Department.
Repeal the NAFTA and GATT agreements
Tax corporation at a higher tax rate that out-source their maufacturing off-shore and reintroduce their products back into the U.S. Corporations that locate their manufacturing in the U.S. would have lower tax rates.

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