July 6, 2022

U.S. Mint Runs Out of Silver Bullion Coins – Gold and Silver Coin Sales Hit Record Levels in November

rooseveltLong term proponents of sound money cannot seem to get enough of U.S. Mint produced gold and silver bullion coins.  Ever since the financial crash of 2008 many Americans remain profoundly skeptical of the paper dollar system backed by the “full faith and credit” of a nation that has borrowed itself into poverty and promised more in social benefits than the economy can possible provide.

From 2000 to 2007 sales of the U.S. Mint American Eagle gold bullion coins averaged about 341,000 ounces annually.  After the crash of 2008 exposed the risk of paper assets, sales of the gold bullion coins have averaged about 1,011,300 ounces annually from 2008 to 2013.

Year to date sales of the American Eagle gold bullion coins as of the end of November totaled 800,500 ounces, surpassing total 2012 sales of 753,000 ounces.  For November the U.S. Mint sold 48,000 ounces of gold bullion coins, slightly below the sales figures of 48,500 for the previous month.  Since 2000 investors have stashed away 8.8 million gold bullion coins currently worth about $11 billion.

Gold has retained its value throughout human history and strong demand for gold over the ages has resulted in the depletion of most gold deposits on the planet.  As noted in a previous post, about 75% of all gold deposits have already been mined which forebodes a future gold shortage.

american-silver-eagleAs noted in a previous post, sales of the U.S. Mint American Eagle silver bullion coins hit record annual sales volume in  November.  The U.S. Mint sold a total of 41,475,000 silver bullion coins as of November 30th, surpassing the previous record sales year of 39,868,500 coins in 2011.

Sales of the American Eagle silver bullion coins for November came in at 2,300,000, a decline of 787,000 coins compared to 3,087,000 in the previous month.  The lower sales figures for November do not reflect a drop in demand for silver bullion coins but rather the opposite due to the fact that the U.S. Mint has run out of coins due to unprecedented demand.

This same shortage situation existed last year when the Mint ran out of silver bullion coins in mid December  with orders for the new 2013 silver bullion coins not being accepted until January 7, 2013.  This situation resulted in a three week period during which the American Eagle silver bullion coins were simply not available.

The period of time during which silver bullion coins will be unavailable from December 2013 to January 2014 will be even longer than last year.

peace dollar

According to coinupdate.com silver bullion coins will not be available for investor purchase for over a month and supplies will be rationed when available.

The United States Mint recently provided authorized purchasers with information on year end ordering procedures and the availability of 2014-dated releases for the American Eagle and American Buffalo bullion programs. Based on the details provided, it seems that the American Silver Eagle bullion coins will experience roughly one month of unavailability between the final allocation of 2013-dated coins and the release of the first 2014-dated coins.

The situation for American Silver Eagle bullion coins differs from the prior year. Authorized purchasers will be offered the last weekly allocation of 2013-dated coins on Monday, December 9, 2013. With demand continuing to run ahead of the available supplies, the allocation will likely be quickly depleted.

The 2014-dated Silver Eagle bullion coins will not be available to order until Monday, January 13, 2014. The initial release will be subject to the US Mint’s allocation program, which rations supplies amongst the authorized purchasers.

With such a severe shortage of silver bullion coins, expect buyer premiums to increase significantly over the next two months.

U.S. Mint Silver Bullion Coin Sales Hit Record High

proof-silver-eagleAs discussed in a previous post, sales of the American Eagle silver bullion coins were on track to post record sales volume in 2013.  It’s now official – sales of U.S. Mint silver bullion coins surged past the old record set in 2011 and are track to hit a record high of 45 million ounces in 2013.

According to the U.S. Mint year to date sales of the American Eagle silver bullion coins total 40,175,000.  The previous record was set in 2011 when sales of the silver bullion coins came in at 39,868,500.  Based on monthly sales volume, the U.S. Mint might sell an additional 5 million coins by year end.

The American public loves the American Eagle silver bullion coins and can’t seem to get enough of them.  After an exuberant rise to almost $50 per ounce during 2011 silver has corrected in price to the low $20’s.  Although the decline in silver has elicited numerous bearish commentary in the mainstream press, long term investors seem to be doubling down as the price of silver price has become irresistibly cheap.  Yearly sales of the silver bullion coins have increased by almost 500% since 2008.

Total yearly sales of the American Eagle silver bullion coins are shown in the chart below with the 2013 total as of November 12, 2013.

2013-W Proof Silver Eagle

proof-silver-eagle

In addition to the silver bullion coins the U.S. Mint produces a proof silver eagle coin.  According to the Mint News Blog the 2013-W Proof silver Eagle has already sold out and 2013 is the third year in a row that this popular product has sold out well before year end.

Sales for the 2013 Proof Silver Eagle originally began at the US Mint on January 24, 3013. Opening orders were slower compared to the prior two years, however the pace of orders remained brisk throughout the year. The coin typically represented one of the US Mint’s top sellers on the weekly sales reports.

Recently, weekly sales had spiked, with 29,613 units orders in the previous reporting period and an indication of 29,025 units ordered in the week just ahead of the sell out. Sales data shows total orders at 880,030 units. This is a bit higher than recent prior years.

In 2011, the individual proof Silver Eagle had sold out on November 22 after reaching sales of 850,000. In 2012, the sell out had occurred on November 13 when sales had reached 819,217.

The American Eagle silver bullion coins cannot be purchased by individuals directly from the U.S Mint.  The coins are sold only to the Mint’s network of authorized purchasers who buy the coins in bulk based on the market value of silver and a markup by the U.S. Mint.  The authorized purchasers sell the silver coins to coin dealers, other bullion dealers and the public.  The Mint’s rationale for using authorized purchasers is that this method makes the coins widely available to the public with reasonable transaction costs.

1881-CC-Morgan-Dollar

The U.S. Mint American Eagle silver bullion coins remain a popular method of building wealth with periodic purchases.  The American public can’t seem to get enough of the bullion coins and the desperate actions of global central banks to keep the financial system afloat with a deluge of paper money can only cause more financial anxiety and more silver purchases going forward.

American Silver Eagle Coin Sales On Verge of Record Shattering Year

american-silver-eagleThe American public’s love affair with the U.S. Mint American Eagle silver bullion coin continues unabated.   Ever since the financial meltdown of 2008 there has been an explosion in demand for the silver coins.  Average yearly sales of the silver bullion coins have increased by almost 500% since 2008 and sales for 2013 are on the verge of shattering all previous yearly sales records.

According to the U.S. Mint, sales of the American Eagle silver bullion coins totaled 3,087,000 ounces for October up slightly from September monthly sales.   Demand for the silver coins has remained robust throughout the year and total annual sales at the end of October reached 39,175,000 million ounces.

The all time yearly sales record for American silver bullion coins was 2011 when sales hit 39,868,500 ounces.  Based on current monthly sales the total number of silver coins sold in 2013 should be in the neighborhood of 45,000,000 ounces or almost 13% higher than the record hit in 2011.

Total yearly sales of the American Eagle silver bullion coins are shown in the chart below with the 2013 total through the end of October.

The market value of all silver bullion coins purchased since 2000 is $5.9 billion.  We know that silver prices will fluctuate over the years.  We also know that the “all mighty government” cannot produce silver coins by the trillions like they do with the U.S. dollar.  Based on the irresponsible financial conduct of both the Federal Reserve and the Federal government, is it any wonder that citizens are voting with their pocketbooks and moving into real stores of value such as silver?

SILVER DOLLARSThe American Eagle silver bullion coins cannot be purchased by individuals directly from the U.S Mint.  The coins are sold only to the Mint’s network of authorized purchasers who buy the coins in bulk based on the market value of silver and a markup by the U.S. Mint.  The authorized purchasers sell the silver coins to coin dealers, other bullion dealers and the public.  The Mint’s rationale for using authorized purchasers is that this method makes the coins widely available to the public with reasonable transaction costs.

The U.S. Mint American Eagle silver bullion coins remain a popular method of building wealth with periodic purchases.  The American public can’t seem to get enough of the bullion coins and the desperate actions of global central banks to keep the financial system afloat with a deluge of paper money can only cause more financial anxiety and more silver purchases going forward.

No Silver Manipulation Says CFTC After Five Years and 7,000 Hours of Work

proof-silver-eagleThe case has been conclusively settled.  All those paranoid people who have been claiming manipulation of the silver market are wrong according to the Commodities Futures Trading Commission (CFTC).

After a five year investigation and 7,000 hours of investigativing silver trading the CFTC says there is no “viable case” for charging anyone with manipulating the silver market.  To prosecute a case the CFTC must prove the intention to manipulate prices along with proof of the actual trades involved in the manipulation.

Casting doubt on the CFTC’s decision was none other than CFTC Commissioner Bart Chilton who implied that even if there was manipulation, the standards for proving manipulation are so difficult that a lot of the bad guys are escaping justice.

CFTC Commissioner Bart Chilton, a vocal backer of the probe, said the decision shows it remains difficult to mount a case even after the Dodd-Frank financial overhaul eased some restrictions.

“It’s been the most frustrating and disappointing non-policy related item since I joined the CFTC in 2007,” Mr. Chilton said. “Our manipulation standard remains too high a hurdle for regulators to overcome; not enough bad actors are being punished.”

The CFTC has won recent acclaim for aggressive enforcement efforts in markets including interest rates, crude oil and platinum. But even with expanded powers to police derivatives markets stemming from Dodd-Frank, the agency has successfully concluded just one case–In the power market–from trial through appeal in its 39-year history.

The conclusion comes as policy makers reassess the banking industry’s role in commodity markets. The participation by firms such as J.P. Morgan and Goldman Sachs Group Inc. in businesses such as aluminum warehousing and power marketing have been the subject of congressional hearings and enforcement actions this year. The Federal Reserve is expected before 2013 ends to issue new rules governing banking companies’ participation in these markets.

Translation:  Even though the too big to fail banks such as JP Morgan have been found guilty of manipulating everything from the LIBOR rate to the price of aluminum the CFTC can’t find any evidence to prove that they manipulated the price of silver.

For an alternate view on silver market manipulation see How the COMEX Crashed the Silver Market and How Wall Street Pros Made Huge Profits On Silver ETF Crash As Small Investors Sold

Silver Soars On Strong Physical Demand and Bargain Prices

proof-silver-eagle3There is no denying that it has been a really tough year for silver investors with silver dropping from $32.23 in January to a yearly low of $18.61 in June.  Is the silver price correction finally over?  The ridiculously low price of silver has resulted in a strong surge of demand worldwide and the price of silver has soared by 23% since the June low.

No one knows if the three year bear market in silver is finally over but investors seem to have made up their minds that the current price of silver is at give away levels.  The World Gold Council reported last week that bar and coin purchases rose to record levels last quarter.  Silver demand in India and China remains very strong and U.S. investors have been buying American Eagle silver bullion coins at a record pace.

Sales by the U.S. Mint of the American Eagle silver bullion coin may hit an all time record this year based on year to date sales data.  The all time record year for sales of the silver bullion coins was in 2011 when the Mint sold almost 40 million one ounce coins.

Sales of the silver bullion coins since 2000 are shown below with sales for 2013 as of July 31st.

American Silver Eagle Bullion Coins
YEAR OUNCES SOLD
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
2013   29,450,000

TOTAL 261,593,000

With sales of almost 30 million coins through July, annualized sales based on monthly sales to date would result in a record smashing year with investors purchasing over 50 million American Eagle silver bullion coins.  With governments worldwide printing money to prop up a financial system overwhelmed by debt it’s probably a very safe bet that the price of silver will continue to increase in price.

Since 2000 investors have bought over a quarter of a billion silver eagle bullion coins with a current estimated value of over $5.7 billion.  The U.S. Mint American Eagle bullion coin program has been one of the most successful mint products ever produced.

The Price Has Crashed; it’s Time To Buy Silver

silver-eaglesA Fun Look at Silver’s Looong Correction and a Positive Look Ahead

By:  Joe (Silverheels) Paulson

I remember it like it was yesterday…

It was the spring of 2011.  It was exceptionally warm and glorious. All was right with the world.   The air was sweeter, the sky bluer, the birds and bees were birdier and buzzier… it was all beautiful, man!  Why? Because those were the weeks that found me becoming wealthier by the day.  All of that bulky, heavy silver that I had purchased over the previous 10 years was turning me into an investing genius.  There was a different look in my wife’s eye.  What was it?…  Joy?  No… Love?  Yeah, sure, of course, but there was something else… it was more like… respect.  I was no longer the crazy man who hoarded silver metal.  I was now that wise investor who was making our family rich… well, rich-er, at least.

 As those weeks passed, and I did my mental calculations several times a day in front of the computer, or CNBC, or anywhere else I could get my quote, I realized that price was going vertical and that it would be wise to sell a portion of my stack because I, and everyone else in the world, knew that the correction was coming. (pause for reflection and dramatic effect here)  I won’t go into how or why I didn’t sell some of our precious, and I won’t say it’s been the most pleasant two years of silver holding.  I will say, though, that the look in my wife’s eye is long gone.  In case you haven’t been following the silver news, price has experienced a bit of a setback.  “How much of a setback?” you ask.  Well, (mumbling) it went from almost $50 to $18 or so.  “What’s that you say?  You’re mumbling.  Speak up, please.”  I say it crashed from $50 to $18.  (pause here)  When you are finished laughing and wiping your eyes I tell you that now is the time to buy.  (yet another pause) When you get up from the floor from your ROTFLMAO’ing and you catch your breath you ask me how I can say that.  Why is now the time to buy?  I reply it’s because the price crashed from $50 to $18.

Maybe you’ve heard this one before, but there’s an old saying that goes “Buy low; sell high.”  Well, my friends, relatively speaking, the price is low.  Doesn’t that mean it’s time to buy? Well, the thing about that saying is that it’s not very clear how high is “high” or how low is “low.”  Could the price go lower?  Sure it could; in fact, it might.  But if it does, it probably won’t go much lower.  And even if it does, it’s gonna’ go up, and up, and up.  How do I know?  Well, I am not a financial advisor.  I am not a silver salesman.  I am merely looking around at this world of ours; at the shaky governments and economies; at the bail outs and imminent bail ins; at the real inflation around us (not the inflation rate that the government offers us); at the incessant printing of dollars and euros and most all currencies world-wide, and I know that we cannot continue like this.  There are some rough times a’comin’ and when there is instability, people seek stability.  In financial-speak, that means precious metals – silver and gold.

If my “gut instinct” isn’t enough for you.  Check out just about any article written about the fundamentals of silver written over the last 10 years.  Review some of the excellent articles written on the Gold and Silver Blog.  When you look at them, ask yourself what has changed?  I’ll tell you the one thing that has changed:  The price of silver has gone down.  That means that it’s even more of a screaming buy than it was back in 2011.  If that’s not enough (and it probably shouldn’t be), here’s some more for you (in case you’ve forgotten):

  • The demand for silver is high and growing every day; at the same time silver stockpiles are being depleted and there is much talk about an imminent financial and industrial silver shortage
  • Silver is a very small market; when a few “big players” get involved, price will move rapidly upwards
  • Silver typically follows gold;  and the fundamentals for gold are outstanding right now
  • Many countries around the world, including China and India, are importing large quantities of silver and gold
  • The silver/gold ratio is abnormally high (~60:1); it’s more traditional level is more like 15:1.  That means that silver is probably a much better investment compared to gold right now.  (But they’re both going to go up!)
  • Many silver analysts are claiming that the bottom is in for this correction.  Many claim that the next stop is in the $60 range; after that comes the $100 range.  Some even claim that if our government keeps printing $85 billion every month, we may even see four-figure silver.

And If that’s not enough for you to go out right now and buy some silver, then I encourage you to stop for a moment, check the news, and do some more research; breathe for a minute and listen to your gut.  The signs are all around us that challenging times lie ahead.  Even if you’re not convinced, purchasing at least a little bit of silver or gold – maybe 5%-10% of your savings – would probably be a good idea.  Personally, I’m looking forward to seeing that look in my wife’s eye once again… soon.

Joe (Silverheels) Paulson is a husband, father, teacher, and an avid silver follower and investor (for over 30 years – !)  You can click here to find out more about different types of silver investing.  Get more of his unique and fun perspective on silver investing at tobuyandsellsilver.com.

Silver Market Incredibly Oversold – Technicals Flashing Buy Signal

silverBy: GE Christenson

For the umpteenth time (actually the 3rd since June 2012), silver has given a buy signal according to my reading of the technical indicators.

Problem: How valuable is technical analysis (moving averages, oscillators, over-sold conditions, etc.) when the silver and gold markets are dominated by computers (High Frequency Trading – HFT) and not human beings?

GATA had this to say: “Technical analysis of a manipulated market like gold has been tedious nonsense for years, but these days, with virtually infinite paper dropped on the gold futures market at illiquid times to drive the price down even as the physical market remains strong, technical analysis has become insulting.

The only analysis worth anything anymore is the identification of the source of all the paper.

The suspects are obvious — Western central banks.”

Gold and silver bottomed in June of 2012, dollar printing moved into high-gear, and the metals “should” have rallied from there. Instead, they did a brief rally and fell to extraordinary lows in April 2013 and even lower lows in June of 2013.

How Extraordinary?

Technical indicators are still somewhat valid (in my opinion) at indicating how much a market is over-bought or over-sold, even if those indicators are less useful (thanks to HFT) at indicating future moves and timing.

Silver RSI (Relative Strength Indicator – 14 period): On a weekly basis, it is the lowest in 40 years of data and nearly that low on a daily basis. This timing indicator suggests that silver is extremely over-sold on both a daily and weekly basis. Gold is similarly oversold.

Gold stocks % bullish Index ($DPGBM): This indicates the % of gold stocks above their 200 day moving average. It currently ranks at zero – gold stocks have been hammered. This indicates gold stocks are very low and hopefully ready to rally. Sentiment toward gold among independent financial advisors, as reported by The Hulbert Financial Digest, is at all-time lows. Prices usually rebound after such lows in sentiment.

COT Net long: The Commitment of Traders data provided by the CFTC indicates the long and short positions of the non-commercials and commercials. Yes, I know, the data is somewhat suspect, but it still has value. Take the net of non-commercial longs less shorts and the net of commercial longs less shorts. Then subtract the net commercial longs from the net non-commercial longs. This difference correlates quite well over a long period of time with the price of silver. When the net long difference (as described above) is low, silver is low and due to rally. As of Friday, June 28, 2013 that net long difference was the LOWEST since the beginning of my data in January 2001 and probably for several decades. This indicates that the large bullion banks (JPM, etc.) are in a position to profit from a rally in the silver (and gold) markets.

The weekly TDI – Trade Signal Line (a technical oscillator) for silver as of June 28, 2013 registered the lowest reading since my data began in 1974. On a daily basis, the April reading was the lowest since 1980, and the June low was only slightly higher. Silver is ready to rally.
My risk/reward index is a weighted blend of COT data, moving averages, relative strength timing oscillators, and disparity between the current price and a long-term moving average. This weekly index has been quite accurate at indicating bottoms in the silver market. What it cannot do is indicate if a lower low is coming in another few months or if the current low is likely to indicate a multi-year bottom. This indicator is currently the most oversold since the beginning of my data in January 2001 and is even more oversold than at the bottom after the 2008 crash in the silver market. The indicator is currently suggesting a major rally is ahead for the silver market – perhaps a multi-year continuation of the bull market. Please examine the graph of silver prices and this risk/reward index.
silver-risk-reward-june

There are many other technical indicators, oscillators, and sentiment measures that suggest a similar story. For all practical purposes, it appears that the large bullion banks and traders (the JPMs, etc.) are now net long in gold and probably net long in silver. The stage is set for a JPM managed rally to take advantage of their net long position, having dumped their shorts in the last two engineered declines in gold and silver.

However, it is possible that their agenda is to generate further support for the dollar and additional declines in gold and silver. With essentially unlimited financial backing, their ability to create and sell huge quantities of PAPER silver and gold and a “free pass” from the regulators, they are the elephants in the room, and they can overwhelm technical indicators, oversold conditions, and sentiment if they so choose. That would not be the case if we had an honest physical market where a company has to have physical product to sell it.

Conclusio

  • The stage is set for the large bullion banks to profit from a rally. Expect a rally.
  • The silver and gold markets are deeply oversold and sentiment in both markets is very low. Are silver and gold investors currently disgusted and disappointed or happy and excited? Right! Rallies occur when practically everyone is disappointed, disgusted, or frightened out of the market. It was the same with the S&P (March 2009, October 1987) and crude oil (December 2008) and gold (October 2008).
  • Now is a time to buy gold and silver, not sell them.
  • Listen to the national media and consider doing the opposite.
  • Silver and gold sentiment and indicators are at multi-year, multi-decade, or all-time lows. The indicators and sentiment suggest the high probability of a substantial rally ahead.
  • The cash markets are strong. Individuals and central banks are buying gold and silver in Russia, China, India, and other Asian countries. Individuals who see the big picture are also buying in Europe and the US.

Does a certificate of deposit paying 1%, gold, or silver look more safe and rewarding at this point in time?

Read:
Silver Cycles: What Next?
Back to Basics – Gold, Silver, and the Economy

GE Christenson
aka Deviant Investor

Has The Price of Silver Already Discounted Weak Investment and Industrial Demand?

american-silver-eaglePrecious metals analyst Suki Coper at Barclays takes a look at the silver market in an interview with Bloomberg Television.

Silver investors have endured a brutal year as the price of silver declined by $12.20 or 39.5% since  the beginning of the year.   Will the price of silver quickly recover as it did after the 2008 collapse or have the fundamentals changed so significantly that a price recovery may be years away?

Suki Coper notes that silver is struggling to find support from both industrial and investment demand which has turned “quite weak.”  Markets are a discounting mechanism and weak demand seems to already be reflected in the price of silver.  The next price move in silver may hinge on whether or not silver demand recovers from this point or continues to decline.

Ms. Coper notes that imports of silver by China, which had been an area of price support, are at the lowest level since January 2006.  The recent slowdown in economic growth in China along with a looming banking crisis does not bode well for a pickup of industrial demand for silver.

The influence of the Federal Reserve on silver could also be negative if the Fed gets more hawkish in its monetary policies.

Will Silver Plunge Below $15 or Rally Back Over $50?

1881-CC-Morgan-DollarBy: GE Christenson

Silver prices peaked in April 2011 and dropped about 60% over the next 25 months. Sentiment by almost any measure is currently terrible. Few are interested in silver; most have lost money (on paper) if they bought in the last two and one half years, and the emotional pain seems considerable. It reminds me of the years after the NASDAQ crash in 2000.

So will silver drop under $15 or rally back above $50?

To help answer that question, I examined the chart of silver for the last 25 years and identified several long-term cycles. Then I constructed a spreadsheet that attempted to model the price of weekly silver based on those cycles and a few assumptions.

Assumptions

  • Use only long-term cycles – a year or longer.
  • The weight assigned to each cycle is approximately proportional to its length. A 200-week cycle should be approximately twice as heavily weighted as a 100-week cycle.
  • This is NOT a trading vehicle but a long-term indication of reasonable price projections based on past relationships. Those past relationships may or may not continue, even if they have been valid for over 20 years.
  • Keep it simple. Do not over-complicate the model or aggressively “curve-fit” it.
  • Prices are assumed to rise more slowly than they fall, so 62% of the cycle is related to the rising portion of the cycle, and 38% of the cycle is related to the falling portion of the cycle.

Data

Low-to-Low cycles: 65 weeks, 72 weeks, and 234 weeks
High-to-High cycles: 102 weeks
Exponential growth: 1/1/1990 – 6/30/2002: no growth – 0.0%/year
6/30/2002 – present: 21% per year, calculated weekly

Process

Find the beginning dates (lows) for the 65, 72, and 234 week cycles, and assign those beginning dates an index value of -1.0. Proportionally increase those index values from -1.0 to +1.0, and then reduce those index values from +1.0 to – 1.0, and repeat for each low-to-low cycle. Use the beginning index value on the 102-week high to high cycle as + 1.0. Extend the proportional increases on all time cycles from -1.0 to + 1.0 so that period takes 62% of the cycle length.

Assign each cycle a weight approximately proportional to the cycle length. Use a beginning value and calculate the exponential increase (0% or 21% per year) for each week, and then add or subtract the percentage changes for each weekly time cycle. Adjust the cycle index weights to obtain the best visual fit on a graph of actual silver prices versus the calculated price of silver.

What Could Go Wrong?

  • The exponential increase might not continue from 2013 forward. I doubt it, but it is possible.
  • The cycles, although relevant for over 20 years, might be less relevant from 2013 forward.
  • The calculated price was “curve-fit” to the actual prices, and that “curve-fit” result might be less accurate from 2013 forward.

Results

Statistical correlation over the last 20 years is about 0.95. The calculated silver price is generally consistent with the actual silver price, even though occasional large variations are clearly evident.

Click on image to enlarge.

Highlights

Calculated low: 2/4/05 at $4.96
Actual low: 5/7/04 at $5.60

Calculated high: 3/17/06 at $13.33
Actual high: 5/12/06 at $14.24

Calculated high: 5/4/07 at $18.13
Actual high: 3/14/08 at $20.66

Calculated low: 12/12/08 at $8.15
Actual low: 10/24/08 at $9.30

Calculated high: 3/2/12 at $42.98
Actual high: 4/29/11 at $48.59

Calculated low: 5/10/13 at $23.32
Actual low: 5/17/13 at $22.25 (actual weekly low, so far)

The Future

This simple model, which uses only four cycles and an exponential increase, indicates that a low in the silver price was expected approximately February – July 2013 and that the next high is expected approximately Mar – October 2014 in the $50 – $60 range. Further, the model suggests that a silver price of $90 – $110 is possible in the September 2015 – March 2016 time period.

Caveats!

There are many. This is not a prediction, it is simply a projection based on the entirely reasonable, but possibly incorrect, assumption that silver prices will continue to rise about 20% per year, on average, and that these four cycles will push actual prices well above and below that exponential growth trend.

Why will silver prices continue to increase? Our current monetary system depends upon an exponentially increasing debt and money supply. It seems likely that the US government will continue to run massive budget deficits and thereby increase total debt. In addition, the central banks of Japan, the EU, and the US will continue to monetize debt and increase the money supply to promote asset inflation and to overwhelm the deflationary forces in their respective economies. Silver supply increases slowly, the demand increases much more rapidly, while each Dollar, Euro, & Yen purchase less, on average, each year. It seems quite reasonable to expect that silver (and gold) prices will increase substantially from their current low level. Read: Silver – A Bipolar Roller Coaster.

Timing

The model was basically correct (over the last decade) on timing and price with some large variations. Clearly there are more factors driving the price of silver than four simple cycles. Those political, emotional, and economic factors will push the price higher or lower, sooner or later, than the model indicates. Regardless, it has some value indicating the approximate price and timing for long-term highs and lows in the price of silver.

Use it while appreciating its limitations. Read: Back To Basics: Gold, Silver, and the Economy.

GE Christenson
aka Deviant Investor

Should Silver Investors Go “All In”?

Silver BarsBy:  GE Christenson

Unfortunately, there is not, that I can see, a simple pattern that predicts the next high or low in the price of silver. Markets seldom make it that easy. However, there are patterns that provide valuable information to help illuminate the “big picture” perspective of where the current price of silver lies in the up-down-up-down cycle of prices.

Process

  • Examine monthly prices since 1972 – over 40 years. Use monthly prices to see only the “big picture” with important lows and highs.
  • List the dates for important lows, and determine the number of months between adjacent lows.
  • Look for simple patterns.
  • Group One Lows: 8/77, 6/82, 5/86, 2/91, 3/95, 8/98, 5/04, 10/08, 4/13. They are separated by the following number of months: 58, 47, 57, 49, 41, 69, 53, 54. (average 53.5)
  • Group Two Lows: 2/93, 7/97, 11/01, and they are separated by 53 and 52 months.

Significant lows are separated by approximately 4.5 years, with rather wide variations. I doubt you can trade this; but, if you are investing for the long term, this indicates that buying aggressively approximately every four to five years should work out fairly well. April 2013 looks like it is at or near a multi-year low.

Big Picture Summary

    • Governments spend in excess of their revenues and create ever-increasing debts.
    • Central banks create the digital to keep the debt machines running, thereby increasing the supply and inevitably increasing prices.
    • Do you remember gasoline at $0.15 along with other goods and services at similarly “unbelievable” prices? Those days disappeared with the huge increase in the number of dollars in circulation, particularly after Nixon severed the link between gold and the dollar in August 1971.
    • Silver prices fall until there are few sellers left, rise until there are few buyers remaining, and repeat the cycle.
    • Each low to high to low cycle takes roughly 4.5 years. At price peaks, the silver bulls are euphoric, while they are depressed and worried at the lows.
  • Ask yourself, “Does now feel like a low or a high in the silver price?”
  • About 4.5 years ago there was an important low in the silver price – October 2008.
  • About 4.5 years before that, there was another important low in the silver price – May 2004.
  • Highs follow lows.

For additional information, read Silver – Keep it Simple! and Silver – A Bipolar Roller Coaster.

GE Christenson
aka Deviant Investor