Silver Phase Transistion

I'm not use to seeing the GS ratio < 50 (or even 60 or that matter). But I am completely confortable with it!

http://www.gold-eagle.com/editorials...eyb120310.html

The 3475% Gold Analysis Difference Between Pros And The Uninformed



-- Posted Monday, 6 December 2010 | Digg This ArticleDigg It! | Share this article | Source: GoldSeek.com

By Daniel R. Amerman, CFA
Introductory Quiz

Let's start with two quick questions for gold investors. We're going to assume, as will be illustrated in detail later in this article, that 10 to 15 years from now a dollar is worth a nickel, that after a tremendous bull market gold has returned to more or less its long-term average value in inflation-adjusted terms (meaning a far higher dollar price for gold than today), and that as governments struggle financially around the world, the future average marginal tax rate on gold profits is 50%.



Question One. If the future dollar is worth five cents, and gold is trading around its long-term historical real (inflation-adjusted) value, which would be $9,000 an ounce in future dollars, did you:



A) Make a killer investment that's really multiplied your net worth? Or,



B) Lose more than 80% of your net worth, with much of that going to the government?



Question Two For Extra Credit. Let's say that gold eventually returns to something close to its long-term historic average value, and we'll call that $450 an ounce. Which of the following scenarios gives you a higher after-inflation and after-tax net worth?



A) Gold is nominally at $9,000 an ounce but in inflation-adjusted terms is only worth $450 an ounce.



B) Gold goes straight from $1,350 an ounce down to $450 an ounce with no significant inflation.



The correct answers are B and B. If the dollar becomes worth five cents and gold eventually returns to its long term average value in real (inflation-adjusted) terms, then you lose over 80% of your net worth on an after-tax basis. Also, if gold is going to return to its long term inflation-adjusted value, you are almost three times better off if gold is selling for $450 an ounce, than if it was selling for a nominal $9,000 an ounce.



How did you score?



You may doubt the answers right now, but will come to understand them as we cover these questions in step by step, irrefutable detail. If you missed either correct answer, or if anything at all came as a surprise, let me suggest that it is very much in your long term financial interest to read this complete article, and then learn some of the professional grade tools that you will need to get ahead in real terms (after-inflation and after-tax). If you are a long-time reader, please also note that what is quite different in this article from my previous articles on gold, is that it addresses how gold asset deflation in purchasing power terms affects investors when they buy into a precious metals bull market that is followed by substantial monetary inflation.



Gold and silver can be superb investments for the current times, and when you use a professional level strategy – then a heavy precious metals weighting can be a key component in not only surviving the destruction of the value of currencies, but potentially building multigenerational wealth even after adjusting for the corrosive effects of inflation and taxes. Also please note that the principles illustrated herein are not dependent on the specific example of gold regressing to a long term valuation mean, but are even more important in a spectacular bull market where gold could hit the highest real valuations of our lifetimes. But whether we are looking at long term declining valuations or short term soaring valuations, to understand the difference between the gold investors who will be highly successful, and the gold investors who will lose most of what they have, we need to look at the difference between examining gold using professional level methodologies versus the alluring but deceptive surface level used by so many gold investors.
The 3475% Gold Performance Difference

For this reasonable illustration, let's start with you. We'll assume that you've been a gold investor for some time, because you've been looking at the irresponsible financial and monetary decisions of your government for many years, and you have concluded that the destruction of the dollar was the most likely result. Unfortunately for us all - you are turning out to be exactly right. Now you're seeing the madness that has officially consumed the Federal Reserve with QE2 and the creation of new money in an amount equal to 9% of the US economy. In other words, a thousand dollars per household per month, is being created directly out of the nothingness by the Federal Reserve and then used to purchase treasury bonds. You believe that the end of the dollar as we know it is indeed approaching, and you buy still more gold at the current market price of approximately $1,350 per ounce.



While we're making assumptions, we will assume that what I have been writing about for many years comes true, and in addition to the above, the government uses massive inflation (such as that so conveniently eventually caused by QE2, QE3 and QE4) to effectively meet the Social Security, Medicare and pension promises that would otherwise be impossible. For a nice round number we'll take the example developed in the article linked below, "Bailout Lies Threaten Your Savings", and assume that the bottom line is correct and the dollar becomes worth a nickel.



http://danielamerman.com/Video/BBL1B.htm



Now if gold is currently selling for $1,350 an ounce, and gold were to entirely keep up with inflation, (which it is likely to do and even exceed in the next few years), then gold would rise to 20 times its current value, which would be $27,000 an ounce. Which sounds spectacular, but keep in mind that when we adjust for inflation, the real (inflation-adjusted) value of our investment is merely constant at $1,350 an ounce in today's dollars.



However, for our example we are not assuming peak valuation (i.e. selling near the top) but rather a long term buy-and-hold strategy for an investor who truly believes in the wealth retention power of gold. So the peak of the crisis came and went some years ago, we're a more impoverished nation than we were, and this relative impoverishment is concentrated among the retirees and boomers whose savings, retirement accounts and investments were shredded in the Great Collapse. We'll assume that a new and poorer financial "normalcy" has returned, as some form of "normalcy" almost always does eventually, Zimbabwe notwithstanding. So we're looking 10 or 15 years out and saying that gold has returned to its long-term historic average value. Like it eventually did after the last great gold bull market of 30 years ago that accompanied the stagflation of the 70s and early 1980s.



The graph below tracks the long-term inflation-adjusted value of gold, using New York market prices from 1791 through 2009. There are difficulties involved with the calculation of long term inflation rates, and the numbers need to be taken as a ballpark range rather than being precise values. Therefore the average shown of $458 an ounce is likely more indicative of a valuation between, say, $433 an ounce and $483 an ounce. By coincidence, $450 an ounce, which is near the middle of the range, is precisely one third of today's price of about $1,350 an ounce, which makes illustration calculations easy to follow.





So let's take what the value of gold would be if it precisely kept up with inflation, $27,000 an ounce, and say that long after the crisis has passed, gold has "regressed to the mean" and returned to its average value in real terms over the last couple of centuries, and that's an inflation-adjusted $450 an ounce, which is one third of $1,350. So we take our $27,000 and we divide by three, which gives us a value of $9,000 an ounce. (We then check by multiplying by 5%, and it is indeed an inflation-adjusted value of $450 an ounce.)



While not quite as exciting as $27,000 an ounce, $9,000 an ounce sure does look a whole better than $1,350 an ounce, and indeed, when we divide $9,000 by $1,350, we come up with 667% of our starting investment value.



That is all well and good, except that there's a slight complication. When you eventually sell the gold to fund your lifestyle or redeploy the assets, the government compares the $9,000 sale price of gold versus the $1,350 you bought it for and sees a $7,650 profit. And the government says that we're in very difficult times (thanks to the mess it created years before) and we all need to pay our share, which is now 50%. (The idea the tax rate will "only" be 50% being a decidedly optimistic one perhaps.) So we take our $9,000, we pay the government the half it demands of the $7,650 book profit, which is $3,825, and we're left with $5,175. That's still not too bad as it is almost four times what we originally bought the gold for.



Except there's this second complication of our needing to adjust for a dollar only being worth a nickel. $5,175 times 5% is equal to $259. That's right, if we buy gold at $1,350 an ounce, and we sell at the long term average inflation-adjusted price for gold (about $9,000) when the dollar becomes worth a nickel, and we pay 50% in taxes on our "profits", then we're left with $259 an ounce in gold purchasing power after adjusting for both inflation and taxes. If we compare that $259 with the $1,350 we started with, we have only 19% percent of our net worth remaining on an after-inflation and after-tax basis. When we compare the 667% (or $9,000), which is the glittering surface that many investors would look to, to the 19% (or $259) in real purchasing power that investment professionals would see as being the end result, the difference is 3475% ($9,000/$259 = 3475%).





Let's quickly review the five columns:



We start with $1,350 an ounce gold;



A dollar becomes worth a nickel (monetary inflation), and gold exactly keeping up with inflation would mean $27,000 an ounce;



However, gold at $1,350 an ounce is roughly 3 times the long-term historic average, and if gold eventually returns to its long-term average real value in inflation-adjusted terms after 10-15 years, that would be about $9,000 an ounce (asset deflation in purchasing power terms);



The government taxes us heavily on the decline in purchasing power on our investment, because the tax code doesn't (usually) recognize inflation (inflation taxes), leaving us with $5,175 an ounce; and



When we finally multiply by 5% to account for a future dollar only being worth 5 cents in purchasing power compared to today, we are left with the tiny column on the far right, which is $259 an ounce in after-tax and after-inflation terms. It is the ultimate, spendable reality: what we can purchase after paying taxes.



As illustrated in this reasonable example, when we compare the $9,000 an ounce value in the "surface" column, and the $259 "real" value in the spending power column, let me suggest that there is a 3475% difference between looking at gold performance using professional analysis tools, and performance when measured with the simple surface approach.



The sources behind our going from an apparent huge gain to losing 81% of our real net worth are that (1) the value of money was destroyed (aka monetary or price inflation); (2) that gold eventually fell in real terms in a regression to the mean to its long term average value (aka asset deflation in purchasing power terms), and (3) that even partially keeping up with monetary inflation created a false income that was taxed by the government (aka inflation taxes). When all three parts work together, we take what on the surface looks to be the best investment decision of our life and we instead lose most of our net worth.



When (1) the Federal Reserve and European Central Bank are creating new money out of the nothingness on a massive basis; when (2) you are buying at the highest gold prices in real terms in almost 30 years; and when (3) your government is effectively bankrupt and highly likely to be raising tax rates in the future, let me suggest that what we just illustrated are three of the most important factors in your life when it comes to determining what your future standard of living will be for both yourself and your family.



We do not have to be helpless victims, however. Right now and the years coming up may indeed be some of the most advantageous times of our lifetimes to create wealth through purchasing gold and silver – but we've got to get there using a little different path than the simplest and most popular strategies.
The Risk Is Not What People Think

Gold investors are well aware that gold is trading at high prices relative to where it has been for most of the last 30 years, and that while we may have strong opinions about where investments are likely to go, we rarely have guarantees. Serious investors know that there is a risk in buying gold at current levels, that gold may return to previous levels, and that they could lose a good deal of money if that does happen.

Now, I happen to agree with the assessment that $1,350 an ounce is not bad at all given what the government is currently doing, in combination with the long term fiscal situation of the US government. It could even be called bargain basement when we consider that the US government is massively monetizing for the first time since the Civil War. And while I don't think $450 an ounce in nominal dollars is at all likely - the possibility can't be dismissed altogether, and indeed, explicitly considering the possibility that an investment will return to a long term average valuation should be one of the scenarios considered as a part of any responsible investment evaluation process. (Taking a good, long look at inflation-adjusted gold prices over the last couple of centuries as shown in the 1791-2009 graph can be quite compelling, when we consider the potential inflation-adjusted price of gold in the long-term future.)



Let's go back to the 2nd quiz question. On the one hand we have gold at $9,000 an ounce, which on an inflation-adjusted basis is equal to $450 an ounce. On the other hand we buy gold at $1,350 an ounce, and we could say that it works out that to everyone's great surprise - Bernanke really is the greatest economic genius in history. The economy does fully recover. The dollar maintains full value. Social security and Medicare pay in full without the value of the dollar falling, just like the politicians have promised us. (Again this is an illustration, not a prediction.) In this scenario, if we purchase gold at $1,350 an ounce and we sell it at $450, we would take a $900 per ounce loss. And let's assume that we generate a tax loss that is usable for us at the current collectibles rate of 30%.



Our $900 loss allows us to reduce our tax payments by $270 ($900 X 30%). If we take the $450 we got in sales proceeds and add the $270 tax loss benefit, we've got $720. This equals 53% of the $1,350 that we originally spent, meaning we took an after-tax and after-inflation loss of 47%.



We previously calculated that with a dollar being worth a nickel and gold going to $9,000 an ounce (which also returns us to the long term average inflation-adjusted value of $450), that we end up with $259 in after-tax and after-inflation terms. Which represented 19% of our original investment. If we compare ending up after-tax and after-inflation with 53% of our net worth intact, to having only 19% of our net worth intact, we see that selling gold at $450 an ounce can indeed leave us with almost 3 times the after-tax and after-inflation net worth that we would have if we sold gold at $9,000 an ounce under the assumptions shown. (Raising the tax rate from 30% to 50% to make the examples uniform would just increase the advantage to $450 gold).



This may seem to be highly counterintuitive, but it all comes back to what I have been educating investors about for years now, and that is about how simultaneous monetary inflation and asset deflation can work together in an environment of inflation taxes. When you have asset deflation (in purchasing power terms) in a time of overwhelming monetary inflation, no tax losses are generated, and instead you're paying substantial taxes on illusory income. Remove monetary inflation, and the same exact level of asset deflation leads to deductible losses you can (hopefully) use, with this tax write-off materially reducing the "hit" from the loss. This explains how you can do almost 3 times as well through selling gold at $450 an ounce and taking a $900 pretax loss, versus selling gold at $9,000 an ounce and taking a $7,650 profit - so long as the true (inflation-adjusted) value for gold is the same.



Rephrased, when real asset deflation is masked by monetary inflation, it is inflation taxes that can destroy nearly 2/3 of your real wealth, as opposed to a fully tax-deductible asset deflation loss with no monetary inflation.
Finding Professional Grade Opportunity

Last year, I was one of the six experts who participated in Jim Puplava's Great 'Flation Debate (along with Marc Faber, Peter Schiff, Robert Prechter, Harry Dent and Mish Shedlock), and in the aftermath of the debate I prepared the simple ten minute video tutorial "Can Theory & Jargon Destroy Your Net Worth?" (linked below). What the video teaches is just how radical the difference is between seeing the world in simplistic terms (inflation or deflation), versus using the tools of professional wealth management to see what was illustrated herein: simultaneous monetary inflation and asset deflation in an environment of inflation taxes.



http://danielamerman.com/Video/Jargon.htm



Avoiding mistakes, such as accidentally losing 80% of one's net worth in real terms, is a very good reason to learn and understand these concepts. Monetary inflation, asset deflation and inflation taxes are three powerhouse wealth destroyers - and the investor who is unaware of how these fundamental forces work is the investor who is most vulnerable to their destructive onslaught. Conversely, if one learns not only of their existence, but studies how these destructive forces work in close detail (the financial application of "hold your friends close and your enemies closer"), then you can do something quite fascinating: turn each one of them to your advantage.



Extraordinary peril can be turned into extraordinary opportunity when we understand that each one of these powerful forces are in fact not universal wealth destroyers, but rather each acts to redistribute wealth between individuals. Monetary inflation redistributes wealth from some people to other people. The ending implications of asset deflation powerfully redistribute wealth from some people to other people. Inflation taxes powerfully redistribute wealth from unknowing investors to government.



As a redistribution - each one of these can be reversed! That is, an individual through his or her actions has the ability to change their personal financial profile so that all three wealth destroyers act to redistribute wealth to them, rather than slashing their wealth.



As an example, some of the strategies illustrated in detail in my Gold Out Of The Box DVDs start with a potentially heavy precious metals weighting, but there are more components than just metals, and the strategies are designed from Day One to allow one to shift in the four stages of crisis: the ramp up to crisis, the peak of the crisis, the immediate aftermath, and the longer-term aftermath. Having multiple components that are designed from the very beginning to potentially shift over time may seem a bit complex - but there is a professional grade reason for that: the opportunities and perils with monetary inflation and asset inflation/deflation shift at each stage.



Unfortunately, it is not quite as "easy" as merely shifting investments for changing monetary inflation and asset deflation points of opportunity over the four stages. The problem is that selling assets typically causes a taxation event, and in an environment of high inflation the "haircuts" associated with paying multiple rounds of confiscatory inflation taxes each time assets are redeployed, can cripple an otherwise brilliantly executed investment strategy. Even partially reversing inflation taxes is not an easy challenge, and if you wait until you are ready to sell an asset that is carrying a fat inflation-based "profit" - it is probably too late. If you are going to redeploy assets in multiple stages, or pull monetary inflation and/or asset deflation profits out during stages three or four when you need that money to support your future standard of living - without handing everything you have over to the government - you had better have your eyes wide open and be carefully planning for these redeployments and cashing out events from Day One.



The difference between "accidentally" losing 80% of your net worth, and turning three perils into three profit opportunities as you potentially multiply your real net worth, comes down to a matter of vision. It comes down to seeing with perfect clarity the 3475% difference in vision illustrated in this article. It means seeing the problems so well that you can also see the opportunities within each problem.



To gain that vision there is a first step and it isn't something anyone else can do for you. The first step is education.
Additional Reading

1. This article, "Hidden Gold Taxes: The Secret Weapon Of Bankrupt Governments", removes the complexity of asset deflation, and provides a simpler, step by step overview of gold, inflation and inflation taxes.



http://danielamerman.com/articles/GoldTaxes1.htm



2. This two minute video, "Deadly Danger Of Dow 50,000", takes a very quick look at how simultaneous monetary inflation, asset deflation and inflation taxes could devastate stock investors in the same inflation/tax environment shown herein.



http://danielamerman.com/articles/DeadlyDow.htm



3. A free book, the "Turning Inflation Into Wealth Mini-Course" can be received in installments via e-mail subscription through the website below. It covers the essentials of developing your inflation vision, analyzes a historically successful inflation fighting strategy, and illustrates an inflation tax reversal strategy in detail.



http://danielamerman.com/



Do you know how to Turn Inflation Into Wealth? To position yourself so that inflation will redistribute real wealth to you, and the higher the rate of inflation – the more your after-inflation net worth grows? Do you know how to achieve these gains on a long-term and tax-advantaged basis? Do you know how to potentially triple your after-tax and after-inflation returns through Reversing The Inflation Tax? So that instead of paying real taxes on illusionary income, you are paying illusionary taxes on real increases in net worth? These are among the many topics covered in the free “Turning Inflation Into Wealth” Mini-Course. Starting simple, this course delivers a series of 10-15 minute readings, with each reading building on the knowledge and information contained in previous readings. More information on the course is available at DanielAmerman.com or InflationIntoWealth.com.http://news.goldseek.com/GoldSeek/1291658348.php

Reuters) - Silver rose above $30 an ounce for the first time since 1980 on Monday as gold set a record high, but thin volume for both metals could indicate near-term weakness as some investors stayed on the sidelines ahead of the year end.

Gold and silver rose in a safe-haven play on the back of speculation U.S. authorities will extend monetary easing and lingering worries over euro zone debt, analysts said.

While gold has grabbed investors' attention this year with its rally to record highs above $1,420 an ounce, silver has quietly outpaced those gains. A $100 investment in silver on January 1 would now be worth about $180, versus a gold investment's $130.

"The (silver) market is extremely well bid. The funds are obviously adding the support underneath the market," said Frank McGhee, head precious metals trader of Integrated Brokerage Services LLC in Chicago.

"You've got dwindling above-ground stocks, you've got tremendous interest in the market, you've got the Fed now talking about QE3," McGhee said. He added silver has been playing catch-up to gold's rally.

Spot silver rose 2.5 percent to $30.08 an ounce, having earlier hit a 30-year high at $30.25.

Spot gold rose 0.4 percent to $1,419.65 an ounce. It climbed to an all-time high at $1,427.01 an ounce late in the U.S. session. U.S. gold futures for December delivery settled up $9.90 at $1,416.10 an ounce.

COMEX silver futures volume at 81,000 lots, almost 70 percent below their 250-day average, while gold volume was at 140,000 contracts, more than 40 percent below its 30-day average, as some trading desks and funds have already closed their books ahead of the year end.

"It seems like there are less players in the market, and that only seem to accentuate the trend because there is less volume...That's how you see a move in silver much grander than gold right now," said Mihir Dange, COMEX gold floor trader.

However, one analyst said that dwindling turnover for silver futures could signal price decline in the near term.

"Volume is key, and the low volume is suggesting this is a temporary, short-term top for silver," said David Morgan, founder of Silver-Investor.com.

The rally in silver -- up nearly 80 percent this year versus gold's 30 percent gain -- has narrowed the gold-to-silver ratio to less than 48, its lowest level since the first quarter of 2007 and a point at which more analysts were beginning to call silver overvalued.

Net long positions in U.S. silver futures held by speculators rose by 12 percent in the week ended November 30, as momentum traders jumped back into a market that has since then rallied to a 30-year high, according to the Commodity Futures Trading Commission data.

At over $30 an ounce, silver is at its highest level since 1980 when a physical squeeze briefly sent it above $50 an ounce in the Hunt Brothers' infamous attempt to corner the market. The Hunts were later convicted of conspiring to manipulate the market.

BERNANKE: COULD BUY MORE THAN $600 BLNhttp://www.reuters.com/article/idUSTRE6A80F320101206?pageNumber=2

Silver above $30, gold hits record but volume thin

By Frank Tang

NEW YORK | Mon Dec 6, 2010 5:14pm EST

For gold, its strength can be seen against currencies across the board, as gold hit record highs in U.S. dollar, sterling and euro terms, and Japanese yen-denominated bullion hit its highest since early 1983.

Gold benefited as a hedge against inflation after Federal Reserve Chairman Ben Bernanke said on Sunday the bank could buy more than the $600 billion in U.S. government bonds it has committed to purchase.

The euro snapped a three-day advance versus the dollar on Monday and selling pressure is likely to continue as doubts grew that European officials would find a common approach to ease the region's debt crisis.

Platinum slipped 0.3 percent to $1,720.50 an ounce, while palladium fell 0.4 percent to $755.47.

(Additional reporting by Jan Harvey in London;editing by Sofina Mirza-Reid)

http://watch.bnn.ca/#clip387082

http://www.youtube.com/user/stellaco.../0/ukjOZq2INOM

thanks goes to plastic for the bears are BACK

http://www.youtube.com/watch?v=uPg4q...layer_embedded

Silver Market Update



By: Clive Maund




-- Posted 24 December, 2010

You can consider this Silver Market update to be gift wrapped. As I am unable to get presents to each and every reader this year for logistical reasons, these Gold and Silver Market updates are going to have to suffice, which is perfectly reasonable given how bullish they are.

Many traders are starting to get edgy about silver because its steep uptrend has been in force for quite a while now, and when silver breaks down from an uptrend it has a nasty tendency to drop like a rock. This is understandable, but according to our interpretation of the charts, rather than suddenly break down, silver is instead about break higher and embark on another upleg that will take it to new highs.

On its 6-month chart we can see how the fine uptrend in silver remains in force, although it is clearly at an important juncture, as it must get moving shortly to avert the risk of a breakdown. While gold has reacted back somewhat in recent weeks, silver, which has outperformed gold significantly for months, has instead moved sideways in a small triangular trading range that is interpreted as a continuation pattern, meaning that we think it will break out upside to commence another upleg, and as the Triangle is rapidly closing up, it is clear that it should break out upside soon - and it doesn't look like it will wait until the New Year to do so - it looks set to happen next week. As with gold, the pronounced Falling Wedge that has developed in the PM stocks indices this month is a powerful circumstantial indication that both gold and silver are set to break out upside.



We are aware that this steep uptrend cannot continue forever, especially as silver has now opened up a very large gap with its 200-day moving average, so we may look to lock in some profits as the anticipated upleg completes, depending of course on how it pans out. The recent outperformance of silver relative to gold may be in part due to J P Morgan being "hauled over the coals" re its huge silver short position. If they decide to finally "throw in the towel" we could see a really dramatic spike in silver soon, which will of course be highly amusing to those who are not exactly friends of this company.

http://news.silverseek.com/CliveMaund/1293211216.php

Paper, Plastic, or Silver

By: Michael "Woody" O'Brien ChFC


http://news.silverseek.com/SilverSeek/1293213212.php

-- Posted 24 December, 2010


My lovely wife enjoys shopping, but not as much when I’m shopping with her.

In the past her angst was limited to me prodding her NOT to buy made in China, but to instead make every purchase a hard-target search to buy American - especially online.

(see: http://www.americansworking.com/index.html).

Then her eyes rolled when I refused to have anything I purchased put into a plastic shopping bag. I've told 1000 retail clerks, "plastic comes from oil, that causes wars, that kill innocent people, and I won’t be a part of that global crime spree."

However, now my wife must endure my new retail teachable moment. I now ask businesses at which we shop if they want to be paid in worthless paper dollars or real silver money, while holding up a new, 1 troy ounce silver round.

The reaction of most people who have never eyeballed (or even held) a pure ounce of precious metals in their hand is enlightening. People’s eyes light up like a Christmas tree when offered payment in silver.

Many small, owner-run local, small businesses are THRILLED to be asked to take silver as payment for services. I have had my Hummer serviced, bought hunting equipment, food direct from an organic farmer, and even a solar power generator paid with precious metals.

Just as important, I am conditioning these same merchants to look at me as a preferred, hard-money customer – especially when the dollar falls.

"Where did you get that silver, and how can I get some?" is also a very common question. Apmex.com and eBay is my standard reply.

Why is offering people you do business with the option to pay in silver so important?

It's actually quite simple. If you are in a movie theater, and 3 people walk out, you will barely notice it. But if 10 people dash out, the rest of the crowd will start to think they know something and head for the exits.

People who own silver know the reasons why it keeps going up, but they are not usually very chatty about telling others. For the bull market in precious metals to power forward to the next level, it's in the enlightened self interest of every bullion investor to start offering to pay others in metals.

One man named John Chapman, aka: Johnny Appleseed, made eating apples mainstream in America in under 20 years.

Imagine what 1 million silver bullion owners can do in 12 months trying to mainstream silver as payment for goods and services.

Try tipping a waiter with a ½ ounce silver round or silver war nickels and explain why. Give silver bullion Christmas, birthday, graduation and thank you gifts. My clients LOVE getting silver rounds as my thank you for their referral of new gold stock mutual fund clients.

The allure of precious metals is thousands of years old; it's nearly in our DNA. If you have never seen the way people's eyes light up when holding a real silver round, try it. You will be shocked by what you witness.

With the vast majority of Americans having never held a 1 ounce, of any precious matal in their hand, there is much work to do. There are hundreds of millions of teachable opportunities in the lives of bullion owners that NEED to be seized.

Consider this your marching orders from Silver General Woody O’Brien: get off your silver ASSets and stop JUST accumulating silver, and start giving and spending it as money. Start letting others feel silver as indestructible tender in their hands.

Become a silver enabler. Help people reconnect with that precious metals DNA in all of us that craves real money in the palm of our hand.

Max Keiser’s prediction of $500 silver can come to pass, and crush bankster criminals like JP Morgan like a bug on a windshield, if just one thing happens:

Current owners of bullion treat silver as the proverbial candle of Matthew in verse 5:15:

"Neither do men light a candle and put it under a bushel, but upon a candlestick, that it may shine to all that are in the house".

At this moment in history, Silver can do more than just save your wealth and others you teach about it. Silver (and gold) can save the world from more decades of bankster war and debt slavery.

The protesters in Europe and Alex Jones are on point: the world faces a choice between the banksters or us. Choose!

I vote we keep the guillotines in storage and bankrupt the banksters with silver rounds before jailing them (the real terrorists) at Gitmo!

Michael "Woody" O'Brien ChFC

It is moving up a little.........

GOLD 12/27/2010 22:38

1390.40 1391.40
+6.30

+0.46%

SILVER 12/27/2010 22:38

29.52 29.54
+0.24

+0.82%


PLATINUM

12/27/2010 22:37

1743.00 1747.00
+8.00

+0.46%

PALLADIUM 12/27/2010 22:01

770.00 776.00
+3.00

+0.39%

The Collapse of Price Fixing Will Keep Silver Prices Rising

By: Peter Cooper



Reliable market estimates suggest that there around two billion ounces of gold held above ground in bullion, and only one billion ounces of silver.

Over time there has been far more silver mined than gold, say around 45 billion ounces, but it has almost all been consumed by industry. Much more of the five million ounces of gold mined by mankind remains.

Undervaluation

At current prices then the total silver market is worth $30.6 billion and gold $2.8 trillion. Any investor ought to spot the undervaluation there. That is what happens when a commodity trades at a lower price than three decades ago.

It is as though silver has been kept in some kind of communist, controlled economy. And indeed, that essentially is what happened after the 1980 silver price crash. Several banks colluded to keep the silver price locked down and in a world of its own, trading silver to profit their own books.

Earlier this year the bank’s position finally became untenable. Regulators began to publicly acknowledge a legion of complaints from investors and found them impossible to deny any longer. And the banks, fearing action largely liquidated their short positions over the quiet summer months.

Price fundamentals change

Silver prices have jumped from $17 to $30 since then. However, while this kind of price spike is always vulnerable to sudden corrections, there is a change in price fundamentals here.

The real lesson is that the artificial price fixing regime is over. Communism has collapsed and price controls are off. The logic is actually for very much higher market prices, not a retracement as some now expect.

History shows that once price fixing regimes collapse prices quickly inflate, and they then never go back to former levels. The gold rush of the 2000s is going to be nothing to the silver rush of the 2010s.

The silver market is incredibly small to absorb the scale of investment likely to come its way as other asset classes lose their appeal thanks to rising inflation and interest rates. For the gold-to-silver price ratio to get back to its historic average then silver prices must treble; and that will be on top of the rise to come by following the gold price up and up.

Market psychology
http://news.silverseek.com/SilverSeek/1293778920.php
And while precious metals have been growing in investor appeal for the past decade, there has been nothing yet like the over confidence of the late phase of an investment bubble. We saw that in dot-com stocks and later in residential housing.

At the moment many investors in gold do so out of fear and with little enthusiasm, and they hardly touch silver. Only when the broad masses get the bug and greed over powers this market will it be time to get out. That hardly seems to be the case right now.

Wall Street Journal Aids Silver Price Suppression

By: Jason Hommel, Silver Stock Report


-- Posted 30 December, 2010 | Share this article | Discuss This Article - Comments: 3 Source: SilverSeek.com

(Through misinformation, lies and omission! Plus, the year in review, and price predictions for 2011)

I'm called upon by my regular readers to refute, rebut, and rebuke this bad article on silver from the Wall Street Journal.

Price of Silver Soaring
Investor-Fueled 74% Gains Dwarf Gold; Race to Open Mines
By CAROLYN CUI And ROBERT GUY MATTHEWS
DECEMBER 26, 2010

Regarding (RE) the WSJ comment: "unexpected surge in investor demand."

Really? Unexpected, you say? But precious metals bulls have been predicting explosions in the price for ten years based on irrefutable fundamentals and unsustainable market manipulation!

How can investor demand be unexpected when the price of precious metals has been going up continuously for ten years now since the year 2000? Don't investors like to buy things that are rising in price? Don't investors also try to predict things that will rise in price, and buy them before they really rise? Does the WSJ know anything at all about investing?

Unexpected? Really? When the numbers of silver Eagle 1 oz. coins produced by the US Mint has been increasing steadily for the past 3-4 years, up from 10 million oz. to nearly 40 million oz. this year? How can a single year's investor demand be unexpected, when its increase is already a steady trend?

Regarding the WSJ comment: "Prices are rising despite oversupply."

What oversupply? What do you even mean by oversupply?

Here is the dictionary definition of oversupply:
http://www.thefreedictionary.com/oversupply
"A supply in excess of what is appropriate or required."

Ah, the WSJ is no longer reporting fact, but throwing out opinion now.

There is no oversupply, and can never be any oversupply of things such as gold and silver, since they have the least diminishing marginal utility of all things on earth, since they are money. Nobody ever complained that they had too much money.

But what does the WSJ mean by oversupply?

The supply & demand numbers produced by such surveys as http://www.silverinstitute.org/ who the WSJ quotes as a source, have "sum up" categories called "Implied Net Disinvestment" and "Implied Net Investment".

http://www.silverinstitute.org/supply_demand.php

When investors are buying, this is often called a surplus, or as the WSJ says, an "oversupply", and when investors are selling, that is called a deficit.

So, apparently, the WSJ is saying that when investors are buying silver that's "oversupply". And thus, when they describe that action as an "oversupply", they are really saying that silver purchases by investors are "inappropriate". Thus, they reveal their bias, with one word.

RE: "Many analysts expected those factors would keep a lid on prices in 2010."

But most silver analysts are employed by LBMA bullion banks who have a vested interest in manipulating silver prices downward, since silver is the Achilles heel, or arch enemy, of the banking system. Thus, "mainstream" silver analysts have never gotten a single year's prediction correct in the last ten years of the bull market in silver and gold. They always "predict" prices for next year that are within about 5% of current prices, and never any higher. Meanwhile, silver prices have risen from $4.15/oz. in 2003 to $30.60 now in 2010, which is a cumulative return of 637%, which, over 7 years, is an average annual gain of 33%. They never come close to predicting such gains.

Check my math, here:
http://www.smartmoney.com/compoundcalc/

Have any of the mainstream analysts predicted a silver price gain of 33%, for the following year, or even close, in the last 7 years? Never. Thus, they are worse than useless, they are purposefully deceiving, or willfully ignorant, as is this WSJ article. That should be no surprise, and neither should silver's price rise.

RE: "What they didn't expect was an overwhelming flow of money into the market from investors eager to ride a commodities rally."

Overwhelming flow of money into silver? Really? Let's see, there is $14,000 billion to $18,000 billion of paper dollars in the US banking system, which does not count dollars in overseas banks, and the rest of the world is printing up paper money like crazy for competitive devaluations. Meanwhile, the US government has an annual deficit of $1500 billion or more, depending on how you count, if you count off budget items, it could be as high as $3000 billion depending on who you read. Meanwhile, a tiny $3 billion pours into silver, which is a paltry 2% of 1% of the money in the US banking system, and a mere 10% of 1% (or 1/1000th) of new US money creation.

I wouldn't call that an overwhelming flow of money into silver. I'd say that's only a tiny trickle, wouldn't you say?

RE: "This is a story almost entirely about investment," says Stephen Briggs, senior metals strategist at BNP Paribas.

Well, the silver story, in the future, will be almost entirely about investment, but today, investors are still buying only a tiny fraction of new silver mine supply, with the rest being consumed by industrial applications of all sorts, from fabrication, to photography, to jewelry, silverware, and coins and medals.

From the silverinstitute.org:

2009 mine production: 709.6 million oz.
2009 Implied Net Investment: 136.9 million oz. (oversupply, or investor buying)

But let's pause here, and examine the numbers more closely.

Sprott wrote an excellent silver report that reveals that ETF silver demand is not counted in the "demand" numbers for silver!!!
http://www.industrymailout.com/Indus...678qz%3D3f9465

Fraudulent supply/demand numbers, omitting investor demand, or calling it a "surplus", is part of the manipulation of silver prices.

But this implies a few other things, too.

Either the exchange traded funds are not actually going out into the market to buy silver which means they are mostly all fraudulent, or, their net purchases are more than offset by investors or refiners dumping 1000 oz. silver bars (the only acceptable form of ETF silver) to dealers who sell it directly to LBMA banks. We've never had to dump any silver bars in the last 2 years of our precious metals business.

RE: Investors from the U.S. to China turned to "hard" assets such as copper and other commodities in part as a hedge against inflation worries.

No, copper has never been a key inflation hedge. Gold and silver are. In fact, recent reports show that JP Morgan has been buying all the world's warehouse copper, up to 90% of it. So, JP Morgan owns the copper, not investors, so this statement is just a bald faced lie.

RE: Exchange-traded funds backed with silver have enabled investors to invest in a market that traditionally was harder to participate in.

I don't know what's so hard about buying $15,000 worth of silver at $30/oz. It's only 500 troy ounces, which only weighs 35 pounds, and comes in a box the size of 9 inches by 9 inches by 3 inches high. Even 60 year old ladies carry such boxes out of our store all the time. That's one of the world's easiest commodities to buy. Contrast with WSJ's beloved copper, at $4.40/pound, which means $15,000 of it would weigh a staggering 3409 pounds! That's why copper is not remotely a viable inflation hedge, and has never been used as commodity money, but only as token money. Even 1 troy oz. of copper, at $4.40/oz. divided by 14.8 troy oz/pound is only worth 29 cents per troy oz., but would cost you about $4 each for minting costs and distribution, and perhaps $5-10 each for widespread marketing via MLM plans.

RE: In recent months, concerns about inflation, the European debt crisis and the U.S. Federal Reserve's recent moves to boost the economy have driven investors to hard assets, also benefiting silver prices.

Really? I agree. But then, why was silver's move so "unexpected" as the WSJ first wrote, to most analysts? Shouldn't this have been easily foreseen?

RE: The craze has reached the coin market.

Craze? Craze you say? What do you mean, craze?

http://www.thefreedictionary.com/craze
1. A short-lived popular fashion; a fad.
2. A fine crack in a surface or glaze.

Ah, only two definitions for the noun form. Clearly, they don't mean the second. Ah, they imply silver demand by investors is not only inappropriate, but will be short lived, and that it's now popular.

Wait, when only 1/1000th of new money is moving into silver, why and how is that popular? When only 2% of 1% of actual money in the banks, or, less than $2 out of every $10,000 sitting in banks is being invested into silver, how can that be accurately described as popular? No, silver is very unpopular now, still.

Let's be honest. If even 1% of paper money in US only banks, were to be invested into silver, it would be 50 times greater than the investment demand today, which would be as much as $180 billion dollars, moving into the silver market that only produces 700 million new oz. by the mines each year. $180 billion divided by 700 million implies no silver buying from anywhere else in the entire world, and no silver buying from any kind of industrial application, which implies a lowest possible price of $257/oz., at this "1% demand" level, which would still be, long, long before silver ever gets to be "popular".

That's a shamefully inaccurate description, calling silver coin buying a "craze", which also implies things such as:

verb: 1. To cause to become mentally deranged or obsessed; make insane.
verb, intr. 1. To become mentally deranged or obsessed; go insane.

The reason why that word "craze" is particularly objectionable to me is that silver buyers are returning to rational thought. People who think used, dirty, printed paper is valuable are the ones who have lost their minds.

RE: "Silver's reliance on investors to prop up the price could cause it to tumble suddenly."

"Silver's reliance on investors"? No, Investors rely on silver!

But seriously, I agree, silver's price is increasingly reliant upon investors who sell paper money for silver, and at some point that will ultimately halt completely. For example, after silver hits $1 million per ounce, the price could suddenly tumble to either $900,000 per oz., or it could simply stop trading in terms of paper money altogether, as paper money might just not buy anything at all at some point. It is far more true to say that paper money's value relies more on confidence than silver.

But really, the main point with silver is that today's value is certainly not dependent on investors, but rather, industrial demand, which is far larger, and more stable. As China alone continues to develop and surpass the total consumption level of Western nations, their population will consume silver as does the western world. That would be 6 tenths of an oz. of silver, per year, per person, because silver is an essential part of switches in electronic devices. If China consumed that much silver, times 1.3 billion people, that's 780 million ounces, which is more silver than is currently produced annually by all silver mines in the world. If the world is going to ever run out of things like cheap oil, or copper, it will certainly run out of cheap silver, first.

RE: "He forecasts an average price of $30.10 per troy ounce next year "

Yes, the analysts never predict a price 33% greater, which, as I calculated above, is the average annual gain in silver so far in this bull market. Next year's "average" is always today's price, and always paired with a warning about silver moving down. In less than two days, next year's average price was exceeded this year!

RE: "But he cautions, "The number is only going to be achievable as long as fresh money keeps moving in."

And why wouldn't it? We know that the USA alone will print from $3000 billion to $4000 billion next year. So why wouldn't at least $4.5 billion move into silver next year? Perhaps it's more likely that $400 billion will move into silver next year, and silver's price will be $1000/oz.? Well, maybe not, but a more conservative estimate might be about $10-20 billion, which could drive silver to $50-100/oz., as that's how this trend is developing.

RE: "Silver's all-time high was set in January 1980 at $48.70 an ounce, or $129.32 when adjusted for inflation."

Perhaps the worst lies of all. What do they mean by "inflation"? The CPI index that does not count food, fuel, housing, tuition, or medical expenses? What does CPI count these days? What's left? Imported clothing, goods made in China, and computers?

Instead, if we count inflation as the monetary base, as M3, which is no longer published, we might observe that M3 was $1.8 trillion in 1980, and nearly $18 trillion today, an increase of ten times as much, thus, the true inflation adjusted high is not $129.32/oz., but rather $500/oz.!!!
http://news.silverseek.com/GoldIsMoney/1293724137.php

cont........
See, another part of the lie is the false specificity of that .32 at the end of their $129.32, to make it sound so official and supremely accurate, but it's not remotely accurate.

And neither is my estimate of $500/oz. That's a low ball figure. Is money M3? What is M3? M3 included short term bonds. Well most of the bond market is now all "short term" bonds, given that they stopped selling the 30 year bond, and given that interest rates are all so low, all bonds are priced at the near equivalent of actual dollars. And the bond market is far larger than the $18 trillion estimate of M3. The bond market could be $25 trillion to $35 trillion, who knows? Data on that is hard to find.

Much of the bond market is as fraudulent as the paper promises in the silver market. A lot of people don't buy bonds anymore, they just place bets on the direction of interest rates, by buying futures on bonds, or options on bonds, which is an even more fixed and rigged game than the silver price.

Which brings us to derivatives, the bets on bonds, called "interest rate derivatives", which are estimated to be as high as $400 trillion or more.

If that is money, then the inflation that has taken place since 1980 is just off the charts, and will ultimately drive silver prices to far higher than $500/oz.

RE: "This year investors are expected to pile a record $4.5 billion into the silver market, accounting for 24% of the world's total demand, says GFMS Ltd., a metals consulting firm in London. That's the highest level, in dollar terms, in decades. Silver's relatively small market size�$19 billion compared with $170 billion for gold�has also played a role in amplifying the impact of investors, according to GFMS."

Silver's price is moving so fast, it was up nearly $1/oz. in the few days since this WSJ article. Silver's market size, at 700 million oz., times $30/oz., is already $21 billion, not $19 billion, but this is a tiny quibble of a fact.

The point is that $20 billion, or even $4.5 billion, in a world where $3000 billion of new money is being printed annually by the USA alone, and perhaps as high as $8000 billion worldwide, is really, really, really small, even if it's a record number. But the WSJ article never makes comparisons like this, it just warns that $4.5 billion is a lot, "the highest level in decades", and the word billion is a lot, in terms of real things, but it's not a lot in terms of dollars, which are not real things.

RE: "The strength in silver prices has prompted a flurry of development around the globe and pushed anticipated production in 2010 to 733.2 million ounces, up 3.3% from 2009 levels, and up 14% since 2006."

Ah, did you think they said that new silver mine supply will increase 3.3%? No, that's anticipated production. It may be less! They write as if this 3.3% increase is a lot and will act to reduce prices. However, new paper money in the USA alone is about 3 Trillion / 15 Trillion, or 20%! And world population growth is about 1.1%.

RE: "The market is set to see a surplus of 64.4 million ounces in 2010, says Barclays Capital, which could curb prices."

Wait, wait, wait. Silverinstitute.org says the 2009 "surplus" is 137 million oz. of implied net investment, while Barclays says the 2010 surplus will be 64.4 million oz.? Ok, if investors were buying 137 million oz. in 2009, and even more in 2010 to explain the current rise, how will 64.4 million be enough to satisfy them, without the price moving up?

Less silver certainly won't curb prices, unless, by using the word "curb" Barclays is implying a chart formation that looks like a straight line up before leveling off, somewhat like a curb on the side of a road. But Barclays is not implying that, for sure.

The article notes that a few silver mines will be increasing production. No mention is made of any mines that will be decreasing production, or closing altogether, which, of course, happens all the time in the mining business. Mines are depleting assets, and run dry.

That sums up what I needed to refute in the article.

The article makes no mention of any of the following of this year's major news items in silver:

THE YEAR IN REVIEW

1. No mention of the fact that JP Morgan was sued by at least 25 firms for manipulating the silver market. (A new lawsuit against JP Morgan on behalf of SLV investors was just filed, two days after the WSJ article). http://news.silverseek.com/SilverSeek/1293546686.php
2. No mention of the BIS reports showing that world banks have a net derivatives exposure of $137 billion of "over the counter" "other preciouse metals" liability, which is a short position, mostly in silver. Links:
http://www.bis.org/statistics/derstats.htm
http://www.bis.org/statistics/otcder/dt21c22a.pdf
3. No mention that the BIS changed their own reports, reducing the number for June, 2009, from $203 billion, down $100 billion, to $93 billion, after the US Justice department said it was investigating JP Morgan for silver manipulation.
4. No mention that JP Morgan admitted to being short silver, and wanted to placate internet criticism by attempting to cover their silver.
http://silverstockreport.com/2010/jp...ver-short.html
5. No mention that the CFTC's Bart Chilton admitted that one large trader had 40% of the silver market at the COMEX.
6. No mention that the CFTC has been investigating silver manipulation for over two years.
7. No mention that the CFTC just delayed imposing position limits on silver.
http://silverstockreport.com/2010/cftc-delay.html
8. No mention of the recent rumor that JP Morgan has two of the CFTC commissioners on their payroll.
http://www.youtube.com/watch?v=uPg4qTNTP-E&sns=fb
9. No mention of Andrew McGuire's CFTC testimony of a prediction in advance of a JP Morgan silver manipulation.
10. No mention of Jeff Christion's CFTC admission that the LBMA is leveraged 100 to one with nearly zero actual physical metal backing up most "physical" accounts.
http://www.bullionbullscanada.com/in...ary&Itemid=131

MY PRICE PREDICTION FOR SILVER: At least a high of $40/oz. by next year, 33% higher than $30 this year.

If the past seven years is any guide, silver's price should continue at pace, if not outperform, the past seven year's average gains of 33% per year. Someday, silver could really blow up much faster than that. Frauds do collapse suddenly. The dollar is fraud. Fractional reserve banking is fraud. Fractional reserve banking in silver is fraud. Most of the financial world is fraud today. Silver is not a fraud and is the opposite of fraud. Silver is not a promise to pay, silver in your hand is evidence that you have been paid in full.

=====

But let's assume, for the benefit of the doubt, that Carolyn Cui is just a very bad researcher on silver, and was not intentionally omitting all the major news items on silver in the past year.

How honest is she? Or the WSJ for that matter?

Here's a WSJ article on silver from May, 2008.

Fundamentals Begin to Weigh On Silver
New Mines' Output, Economic Weakness Could Crimp Prices
By CAROLYN CUI May, 2008.
http://online.wsj.com/article/SB121098087701600147.html

Ah, not very accurate, and not a very good warning. The WSJ should have warned that the dollar would fall, and that people could protect their purchasing power by buying silver. Did they? Sadly, no. They have never gotten it right on silver in this entire bull market, and are as woefully wrong today, as they were two years ago.

Excerpt: Barclays analyst Suki Cooper, who targets silver's average price at $15.20. "Silver's fundamentals look less compelling this year and are more likely to push prices lower," she wrote in a research note.

Laughable! Exactly as I predicted, these buffoons always predict "same as last year" prices, and are never bullish.

Excerpt: CPM Group, a New York-based commodities research firm, expects demand for silver to hold up this year, and its price to average $18.25.

=====

I've seen better reports on silver from CAROLYN CUI. I've even written to her a time or two. So I can conclude that she is not ignorant, but willfully ignorant, or being misleading on purpose. Perhaps if she does not "toe the line" she will be out of a job, but if your job involves lying, you should probably quit.

So, what should we conclude, and what should we do, in the order of most importance?

1. Buy silver. Buy real silver that you have carried, lifted, and stored in your own vault.
2. Do not trust the Wall Street Journal, or CAROLYN CUI or ROBERT GUY MATTHEWS ever again.
3. Cancel your subscriptions to the Wall Street Journal.
4. Write nasty letters to the WSJ's advertisers, and boycott them (just kidding, don't waste your time).
5. Subscribe to the free newsletter at the Silver Stock Report.
6. Share this report in your own blogs online, or on facebook.
7. Write your own refutations of future mainstream hit pieces on silver, exposing their intentional lies and misinformation, and lack of information.
8. Write to Write to Carolyn Cui at carolyn.cui@wsj.com and Robert Guy Matthews at robertguy.matthews@wsj.com and ask them for their honest answers and justifications to the accurate information presented here, just for the fun of watching them squirm.

Rick Rule Very Bullish On Silver For 2011

By: Peter J. Cooper



The perennial star of the Agora Financial Forum held each year in Vancouver (click here), veteran stock broker Rick Rule came out strongly in defense of silver as a top pick for 2011 in an interview on King World News.

Asked whether silver shortages would continue he said: ‘I suspect it’s true. One of the things that happens at least in the near-term, shortages and the price rises that they cause ironically exacerbate shortages. Meaning that more people are attracted to speculations in silver as the price goes up. The price of course has gone up because of that attraction.

ETF buying

Specifically the amounts of silver that have been bought by the ETF’s and by Sprott Physical Silver, have driven up prices. But the silver they have taken off of the market has not been as easily available to mints that have themselves faced increased demand from retail coin buyers. It’s been very aggressive buying demand that’s really changed the price of silver.’

Then this veteran precious metal watcher turned to pricing: ‘Gold and silver are in some senses unlike other markets in that they are driven by both of the primary investment motivators in the world, that is greed and fear.

The fear buyer buys gold and silver as a consequence of his or her fear about economic conditions, and the resulting price momentum encourages the greed buyer. The greed buyer’s buying in the short-term validates the suspicion of the fear buyer, and you have what are called echo bull markets. I think what you have now is a classic example in silver of an echo bull market.

If you remember the markets in the late ’70’s, the 1977 to 1980 bull market, these echo, or hyperbolic bull markets can continue for an amazingly long period of time.’

Of the prospects for a big spike for sliver he concluded: ‘If past is prologue, that’s very possible. The other interesting thing about silver is on the supply side. So little silver is produced as a consequence of silver mines, that is primary silver mines. So much more of it is produced as an adjunct of the mining of other metals, lead, zinc, copper, gold and things like that. What’s interesting about that is that increases in the silver price do not necessarily result in an increase in supply of silver because their production is tied to other metals.

Base metal connection

Now, it’s also true that the price of base metals are also up, and in a normal market we would see as a consequence of that increased base metals production. What’s interesting about the market that we are in is that we are still credit constrained. Meaning that although the banks have ample liquidity for short-term lending as a consequence of quantitative easing, they don’t have enough on their books to make long-term project loans.

These are the types of loans necessary to build great big base metals mines which would increase the amount of base metals and hence increase the supply of silver. So we are in a very interesting supply/demand situation where near-term demand is strong, but the fact that the demand is strong and the fact that the price of silver is rising has not and may not for a while increase supplies. It’s a very, very imbalanced market in my view.’

ArabianMoney notes that our leading local commentator in Dubai, Jeff Rhodes, CEO of International Assets has also made silver his pick of 2011 as he explained to listeners of Dubai Eye. Jeff is a veteran precious metals trader and claims to have made the last trade in gold at its previous all-time high in 1980.

He is nervous about tensions in the Korean peninsula and points to a complete distrust of paper currencies, particularly the dollar and euro. His view is that even with a 74 per cent increase in 2011 silver is still incredibly undervalued

http://news.silverseek.com/SilverSeek/1293458683.php

http://jessescrossroadscafe.blogspot.com/

James Turk has alerted King World News that silver is in backwardation. Turk spoke with KWN saying, “Silver is in backwardation which is an extremely important development. Most are aware that when backwardation occurs, the spot price is higher than the futures price. Backwardation happens regularly in most commodities, but it is rare in the precious metals.”

January 21, 2011

James Turk - Silver in Backwardation, Set to Explode
Silver is in backwardation not just in the short-term, this time it is extending twelve months forward!


The last time this happened Eric was in January of 2009. Over the next few weeks silver rose from about $10.50 to $14.50, a roughly a 40% move higher. The key to understanding backwardation is that the price must rise to entice holders of physical metal to sell and accept a national currency in return. I think we can expect a similar event to repeat over the next few weeks.


A similar type of move would clearly put silver well above its previous high. What this backwardation shows is that there is a disconnect between the physical and the paper markets in silver. As I said previously, the silver shorts simply cannot hold the paper price down here any longer without seriously discrediting the paper silver market as a price discovery mechanism.


Gold is not in backwardation, nevertheless the demand for physical gold is extremely intense. With the sentiment indicators at very low levels, it suggests we are about to see a stunning short covering rally in gold.”


Weakness in the metals can end as quickly as it began. When the metals turn, this next move should be breathtaking.

http://kingworldnews.com/kingworldne...o_Explode.html

The Value Case for Silver

By: Dr. Jeffrey Lewis


-- Posted 21 January, 2011 | Share this article | Discuss This Article - Comments: 1 Source: SilverSeek.com

The prices for commodities can change quickly and wildly, and in many cases, investors can hold commodities for years without any realization of profits.



The wild cyclicality is what has kept many out of the commodities markets, and it is the reason why so many value investors choose to ignore commodities as a broad investment alternative. In respectful disagreement, making the case for a value investment in silver is a cakewalk at worst.



Securities and Commodities



Stocks and commodities are nothing alike, except when they are. The world's most popular and most highly regarded value investors (many of whom don't have a favorable opinion of commodities) have laid down investment traits that, contrary to their viewpoints on silver, make it a very attractive value investment.



Among the basic tenets of value investing are that companies are boring and operate in boring industries. Ideally, value investing companies are those that many people take objection to, and that very few investors own.



Rumors are excellent, even preferred, and it would be best if the investment were in a low-growth industry. It has to be a product that people will keep buying indefinitely, and under the best case scenario, the company is buying itself back through share purchases.



Drawing Comparisons



Compare the above commonly adopted value-investing tenets to silver.



Silver is not only boring, but mining silver is a pretty dull exercise. Most investors still take objection to silver, and few, despite the recent surge, own physical metals. There isn't a single industry with more rumors than metals production, and in fact, several organizations are dedicated to uncovering such hidden evidence of backroom deals and price manipulation.



People will continue to buy silver indefinitely, as it is in every electronic known to man, as well as prized for its beauty. While silver ounces cannot buy back other silver ounces, it is safe to say that the supply of silver is being depleted, just as shares of stock are depleted in buybacks.



Silver is the ultimate value investment because it always has intrinsic value, even if it has no intrinsic price. And where even the most unlevered companies can go belly up when the markets turn, silver can't go to zero, nor can it disappear. Where executives, auditors, and others have violated the public's trust in making their companies appear more valuable, all evidence in the silver market points to lies intended to make silver less valuable.



Commodity Similarities and Differences



Silver's commodity cousins are what keep it in check. While the world can produce a near infinite amount of corn, wheat, sugar, etc., all the silver (and gold…don't forget about gold!) is already on earth. No more can be produced, and eventually, the only silver that will be left is that which we can economically recover.



The take home here is that silver is a value play. The metal virtually defines what the world “intrinsic” really means, both in and out of the financial world. Very few own it, everyone uses it, and it is very, very limited in supply. Whether it goes to $5,000 or $25,000 per ounce isn't important. Understanding that it will not lose value in the long-term is what is important.



Dr. Jeffrey Lewis

http://news.silverseek.com/SilverSeek/1295593200.php

Last weekend`s Silver Market update turned out to be pretty much correct as while silver did drop to new lows for this correction it ended the week with a strong blast of upside energy that is believed to mark a reversal to the upside.

On our 8-month chart we can see that following failure of support at the $28 level, silver worked its way lower but certainly did not collapse and then, after making a new low in the early trade on Friday, it suddenly surged to close at the high for the week, leaving behind a pair of candlesticks on Thursday and Friday that are together known as a "Bullish Engulfing Pattern" and which noramlly signify an upside reversal. During the week it became clear that there are a lot of buy orders clustered around the $25 level, which is kind of sad really, as Friday's action suggests that it won't drop back to that level and that therefore these would be buyers will be left on the station watching as the train pulls out without them. The breach of the $28 level just over a week ago is thought to have been the handiwork of The Cartel seeking to shake people out the better to cover their shorts - they didn't fool us though as we had this gambit flagged in last week's update. Before leaving this chart a final point to note is that silver is now quite heavily oversold as made clear by the MACD indicator at the bottom of the chart.



Another important development last week was a further significant reduction in the Commercial short and Large Spec long positions that we can see on our COT chart below, so that they are now well below the levels prevailing last July that preceded the massive Fall rally in silver. What does this mean? - first of all it makes further significant declines in the silver price highly unlikely and secondly it makes another thumping great rally very possible and it is likely to get underway very soon..



The conclusion to all this is that anyone with a sizeable silver short position is probably going to find themselves in a very unenviable predicament before much longer.




http://news.silverseek.com/CliveMaund/1296414902.php

By Adrian Douglas



On September 21, 2010 I published an article entitled “More Forensic Evidence of Gold & Silver Price Manipulation”. In that article I showed how silver from 2003 to 2010 had never traded freely at all; I showed that silver was algorithmically traded with gold and there was a very clear relationship between the price of gold and the price of silver. For those who haven’t read the previous article the following figure 1 (figure 4 in the previous article) demonstrates the inter-relationship.

Figure 1 Cross-plot of Silver versus Gold 2003-2010


Figure 1 is a cross-plot of the price of gold against the price of silver for every trading day from June 2003 to September 2010. There are two linear relationships, one is pre-2008 (black line) and the second is post 2008 (green line). The best fit equations for the two data sets are also given on the chart.

The stunning revelation from the data analysis was that if on any day I knew what the price of gold was I would be able to calculate the silver price from the equation of the relationship! How is that possible in a free market? It simply is not possible and so the conclusion is that silver is not in a free market but is manipulated to move algorithmically with the price of gold. I have written many articles that show that gold is itself manipulated and suppressed (for example, see Gold Market is not “Fixed”, it’s Rigged)

I have updated the chart of Figure 1 which is shown in Figure 2.

Figure 2 Cross-plot of Silver versus Gold 2003-2011

Since September 2010 silver has broken its golden shackles. The algorithmic trading that kept the price of silver subdued for seven years has been completely annihilated.

On Friday silver closed in complete backwardation on the Comex. Spot silver closed at $29.075/oz while FEB 2011 closed at $29.064/oz and DEC 2015 closed at $29.026/oz. I believe this is the first time in history that this has happened. Silver traded in backwardation between the spot price and futures contract up to one year out during the blatantly manipulative precious metals bashing of January, but now the entire futures structure is in backwardation. This is a sure sign there are shortages of silver because it means that buyers will pay a premium for silver delivered sooner rather than later.

Signs of shortages have also been apparent from a shrinking silver inventory on the Comex in the face of rising prices. The registered inventory stands at a paltry 43 Mozs. In addition there is lots of anecdotal evidence that there are tight supplies everywhere. There are reports of refineries refusing to take new orders due to insufficient silver feedstock.

News out of China recently showed that China's net imports of silver quadrupled in 2010 to 3,500 tonnes (112 Million ozs). China has traditionally been a silver exporter. For example, in 2005 China made net exports of 3,000 tonnes of silver.

The US mint reported last week a record month in silver eagle sales in January of 6.4 million ozs.

This update of my previous work adds more fuel to the fire that the dynamics of the silver market have dramatically changed. Because silver has been suppressed for so long we do not know what its free market price should be, but we are going to find out soon and I strongly suspect it will be many multiples of the current price.

Adrian Douglas
Editor of Market Force Analysis
Board Member of GATA

February 5, 2011

www.marketforceanalysis.com

Serpro

I need to bump your last post from Adrian Douglas.

This is significant.

Thanks

So is this........


http://www.youtube.com/watch?v=h66R4U-Eybs

At the peak of the last precious metal bull market in January 1980, it took 17.4 ounces of silver to buy one ounce of gold. Thereafter, the ratio turned and started climbing higher. By February 1991, 101.8 ounces of silver were needed to exchange for one ounce of gold. Silver was trading at only $3.50 per ounce, down 93% from its previous bull market peak.

Silver back then was “dirt cheap”, but it would not get any cheaper. Silver turned the corner as value oriented buyers recognized a bargain. Since then the price of silver has been generally rising, and has been doing so faster than the spectacular rise in the price of gold. The result is a long-term downtrend in gold/silver ratio. In other words, since 1991, silver has outperformed gold.

Last week, the ratio touched 45.0 and ended Friday at 45.3. It was the lowest daily and weekly close for the ratio since February 1998, which is a significant date. That is the month Warren Buffett announced that he had acquired 130 million ounces of silver. His footprint is visible on the above chart.

We know from his disclosures that he began buying silver around $4 in July 1997. The ratio then was in the mid-70s. But note what happened to the ratio as Buffett accumulated his hoard over the next several months, culminating with the announcement of his purchase. The gold/silver ratio fell by nearly 50%, so that only 41.3 ounces of silver were needed to buy one ounce of gold. Silver was clearly outperforming gold, just like it has been doing over the last several months – as shown in the above chart by the remarkable drop in the ratio.

The ratio has now reached an important point. It is breaking through support, which is illustrated by the lower red line on the above chart.

Several previous attempts to break through support have failed, with the result that for many years the ratio has continued marking time within a trading range bounded by the parallel red lines. That trading range now looks mature and ‘ripe for picking’.

One never knows of course how the markets will unfold in the future. But I expect that the ratio will finally break through support, which is an event that I have been looking and waiting for patiently over many years.

If I am right and the ratio knifes through the low 40s and below the Buffett point, there is no clear short-term target. Given the momentum evident in the above chart and the bullish fundamental factors impacting silver at present – like its unprecedented backwardation – a drop to at least the low 30s seems highly likely, but I don’t rule out the possibility of the ratio falling even lower.

My long-term target for the ratio is 17. It is approximately the average level at which the two precious metals were exchanged for hundreds of years prior to the arrival of fiat currencies in 1971. It has been my view that a 17-to-1 ratio is attainable by 2013-2015, but given what seems to be shaping up, we probably won’t need to wait that long.

The unprecedented backwardation in silver has one clear signal. The potential for a massive short squeeze is building. If one occurs – as I believe is becoming increasingly likely – there is no telling how quickly a 17-to-1 ratio could be achieved.

http://www.fgmr.com/watch-the-gold-silver-ratio.html

http://kingworldnews.com/kingworldne...ohn_Embry.html

From its $50 high in January 1980 to its $3.50 low in February 1991, the weak hands were shaken out. At that point, the accumulation by strong hands – who were buying because the recognized that silver was an exceptional bargain – became the dominant force. Their buying power was stronger than the selling pressure of the weak hands, and the price of silver responded by starting to climb. It was classic stage one action, but here’s the important point.

Silver is still in stage one. It won’t advance into stage two until $50 is exceeded, just like gold did not enter stage two until its previous high of $850 was hurdled.

I expect that silver will exceed $50 this year, which is a point of view I first mentioned in my outlook for 2010.

Admittedly, I was a little early with my forecast about when gold would enter stage two. So perhaps I will again be early by forecasting that silver will enter stage two of its bull market this year. Regardless of the accuracy of my timing, one thing is clear. Because it is still in stage one, silver remains good value.

http://www.fgmr.com/silver-approachi...ll-market.html

IMO...the only way we're going to hit a 17:1 ratio is if PM's are priced to the moon. Over $200/oz of silver.

There have been numerous reports of bullion shortages in many parts around the world, along with rising premiums. And the two explanations – we’re running out of gold! and, it’s just a manufacturing bottleneck – are at odds with one another. So, who’s right?


First, the data. The following has been reported since New Year’s eve horn-blowers were put away:

Report from China: “…premiums for gold bars jumped to their highest level in two years.”

A director at Cheong Gold Dealers in Hong Kong: "I don't have any gold. Premiums are very high. Some say they have no stocks on hand."
A dealer in Singapore: "There's a sudden surge in demand. Demand from China is very strong and they are paying very high premiums. Refiners can't meet the demand.”

World Gold Council report: “…gold imports by India likely reached a record last year due to increased investment demand. Imports will probably be the highest for India in its history.”

Nigel Moffatt, treasurer of the Perth Mint: “…demand for gold bullion has been unrelenting since gold dropped below $1,400 an ounce. At the moment demand is such that we cannot meet all the enquiries we are getting. Demand for our coins and medallions is strong, but the biggest demand is coming from banks and traders looking for kilo bars.”

Eric Sprott, chief investment officer of Sprott Asset Management, after having difficulty locating enough bullion for their new silver fund: "Frankly, we are concerned about the illiquidity in the physical silver market. We believe the delays involved in the delivery of physical silver to the Trust highlight the disconnect that exists between the paper and physical markets for silver."

2010 gold Buffalo coins are largely unavailable from dealers.

Sales of silver Eagles set a new record in January – by the 19th of the month. Already, 4.6 million coins have been sold, an all-time monthly high since the coin's release in 1986.


Based on this data alone, you might come to the conclusion that yes, we’re running low on bullion supply. But most industry execs I spoke to insist this is a “bottleneck” issue: current demand is greater than current stock on hand, or is coming in faster than mints can produce. In other words, it’s a fabrication issue, not a supply deficit. A Treasury rep said as much.


You’ll recall from 2008 how supply was difficult to come by and premiums were roughly double what they are now. Some think it will be “lesson learned” this time around; mints now know how to prepare for another spike in demand. Many have added workers, shifts, and facilities. The U.S. Mint stopped producing the less popular coins and now focuses on those that are most in demand.


To a large extent, I believe the bottleneck argument is exactly what’s happening. It’s no different than the store that sells old-fashioned wooden rocking chairs suddenly getting swamped with customers when an antique dealer declares they’ll be valuable collectibles in the future. Collectors rush to buy, and the store doesn’t have enough rocking chairs in its warehouse. But they’re not running out of wood. And they’ll likely be better prepared when they hear the dealer is coming out with a book.


It’s true there’s only so much gold coming to market every year (total 2010 supply is estimated to have been about 115 million ounces), but in the big picture, there’s been enough. It’s also true that orders from the 2008 rush were eventually filled. However, I think the “bottleneck” and “we’re running out” arguments miss the point, because they both focus on supply.


Demand is what I’m concerned about. Now try this data:

According to International Strategy and Investment Group, gold ownership currently represents 0.6% of total financial assets. If it rose to just 1.2% – still less than half its 1980 level – it would require an additional 917.1 million ounces, or 16% of aggregate gold worldwide. This amount is equal to about 10 years of current global production.

Investment demand represented 53% of all gold demand in 1979; today, it represents just 32%. Coin demand represented 37% of all demand in 1979; today it’s less than 14%.

Gold and gold mining stocks represented 26% of all global assets in 1981 (high inflation), and 20% in 1932 (high deflation). Today, gold and gold mining shares represent about 1% of global assets.

The market cap of the entire gold industry is about the size of Microsoft, is less than Exxon Mobil, and is 10 times smaller than the banking industry. The whole of the silver industry is smaller than Starbucks.

Silver mine production is insufficient to meet current demand. The only way silver needs are fulfilled is from scrap coming to market. Miners don’t produce enough on their own.

There are approximately 40% more earthlings right now than there are ounces of gold that have ever been mined. That includes every ounce used in jewelry, electronics, and dental. Further, if every ounce of supply last year were made into coins and bars for investment purchase, it would amount to less than two one-hundredths of an ounce, or about half a gram, for every man, woman, and child on earth. This means 0.018% of the global population – about one in every 55 people – could buy a one-ounce gold coin this year.


Yes, there is a bottleneck. But with this recent spike in demand, it appears some mints still aren’t equipped to keep up. Are we nearing a tipping point where in spite of the increased efficiency and preparedness, requests from buyers will outweigh available supply? Imagine demand continuing to accelerate, and you can see where this might be headed. I think this is the side of the equation to watch.


Andy Schectman of bullion dealer Miles Franklin told me last summer that, “Based on what I know, it’s my opinion that if 5% of this country put 5% of their money into gold, there would be nothing left tomorrow morning.” In other words, even if supply is sufficient at present, what happens if demand, say, doubles, as the above data show is possible?


Right now in North America you can still get bullion, but we’re clearly on a path where demand could overwhelm the system, making purchases very difficult. When that point arrives, many investors will wish they hadn’t worried so much about price.


Imagine Doug Casey is right about the future value of the dollar: zero. Imagine how high inflation would rocket in such a scenario.


Bottleneck, meet desperation.


[The Chinese and other governments are gobbling up gold as fast as they can, adding vast amounts to their already large holdings. Because they know something many mainstream investors don’t: the U.S. dollar is on its last leg. To find out how to protect yourself – and to profit – watch this free video.]

-- Posted Friday, 18 February 2011

http://news.goldseek.com/GoldSeek/1298012940.php

Quote:

---

Originally Posted by undgrd

IMO...the only way we're going to hit a 17:1 ratio is if PM's are priced to the moon. Over $200/oz of silver.

---

As opposed to being priced under the moon..........haha

This ratio chart from earlier post....

Silver now below 45 mark at this exact time around 43.5 ratio.

Now (next day ) ratio is 42.8

I believe we will see silver at G/S ratio of 38 (low of 98), as gold tangents it's all time high of $1430, thus a silver price of around $37, if gold continues up above 1430 , G/S ratio could continue go down below that. If gold turns at 1430 the G/S ratio will go up, I am leaning towards that. I do think that the G/S ratio of the past 25-30 years will be looked at by historians as an anomaly, that is underway of getting corrected now. Probably people will think it was weird Silver was so incredibly cheap. Stories about people putting out monster boxes at the curb and the garbage collectors refusing to take it, etc... ;D

This is an extremely important chart.
1) After yesterday, you could have expected a soft opening. You didn't get it.
2) The CME raised margins. In December, silver dropped 10% in 2 days following a similar announcement. Today, price vaulted higher.
3) Understand this. Silver went down into the close as speculators who piled into the March contract over the past 48 hours liquidated and took profits rather than hold over the three-day weekend and meet their margin calls. This is totally, 100% natural and not significant in any way.
4) At around 2:00, Blythe may or may not have tried a raid. Its impossible to know for sure. Either way, the new support level of 32.30 held.
5) AND THIS IS BIG...On a Friday, heading into a 3-day weekend, from 2:30 through the Globex close, we rallied about $0.35. HUGE. SIGNIFICANT. RALLY. This tells me that our BoS...those that are standing for delivery in two weeks, seized the opportunity presented them by the weak-handed longs that sold into the close. The BoS BOUGHT. They are resolute. Margins don't matter. They are not afraid. They are ready for next week.
http://tfmetalsreport.blogspot.com/

this chart also at link if too small....

Good live chart ,for gold or silver or ratio,plus



http://goldprice.org/spot-gold.html

http://4.bp.blogspot.com/-naUTJzQocl...apshot-454.png

On the Verge of a Gigantic Move Higher!
http://news.goldseek.com/GoldSeek/1298828100.php

SILVER

Ya never know with Clive....

By: Clive Maund


After last week's update called for a near-term top in silver we got one more up day, thanks to the antics of the Libyan "fruitcake" digging his heels in and resisting being swept away. After that silver did indeed start to correct back although it ended the week with an up day.

On its 8-month chart we can see that silver backed off after hitting an adjusted "bullhorn" target - in last week's update we had targetted it at a trendline drawn across the early and late December peaks, but it exceeded that, so we then found that it had actually stopped at the trendline drawn from the November high. Now it is very overbought, as is evident from the intermediate MACD indicator at the bottom of the chart, so if the situation in the Mid East starts to cool, we could very easily see a substantial reaction shortly. However, we should remain aware that this situation is very fluid and if the problems in the Mid East intensify, leading to gold breaking out to new highs, then silver could break above the restraining trendline shown which would be expected to lead to a very steep ascent, but as set out in the Gold Market update, price and volume action in stocks is portending a correction that could be severe.



http://news.silverseek.com/CliveMaund/1298839367.php

http://traderdannorcini.blogspot.com/

Silver still looks good. I sold off a small amount when silver was close to $37, glad now I didn't sell more. It has had a healthy pullback to mid 33, I think we will see it go up towards $40 within the next 2 weeks. However there are some external uncertainties, like meltdown in Japan and escalation of the Libyan war... Not sure though what short term effects these may have on POS...

Chart on G/S ratio

http://3.bp.blogspot.com/-ayTBUOeIes.../s1600/GSR.JPG


Silver Review and Outlook

By: Theodore Butler
http://news.silverseek.com/SilverSeek/1300983928.php



Silver Review and Outlook

By: Theodore Butler




-- Posted 24 March, 2011 |

CAMBRIDGE HOUSE PHOENIX SILVER CONFERENCE
February 18, 2011
Theodore Butler’s Speech


Good afternoon and thank you all for coming out today. I’d like to thank Joe Martin for inviting me and arranging this conference. This is my third Phoenix Silver Conference, so I thought I might review the silver market by first recapping the highlights of my first two speeches here and then cover what has transpired over the past year.

In February 2009, we had just come off that rotten year for silver that 2008 will be remembered for, when the price fell from over $20 to under $9. As it turned out, that rotten performance in 2008 was also the basis for the slew of civil lawsuits that emerged late last year, alleging JPMorgan and others of manipulating the price of silver back then. When I spoke in 2009, the price had risen back to $14 and would subsequently rise to $19 later in the year. The theme of my speech two years ago was “Silver’s Past, Present and Future.”

I described how I caught the silver fever, more than 25 years ago, when a brokerage customer first challenged me to explain how the world could be consuming more silver than it was producing for year after year without prices increasing. That challenge by Izzy Friedman, who would later become a good friend and my silver mentor, changed my life, although not necessarily for the better until many years later. At first, it was more like a curse. After much thought and study, I did find the answer to Izzy’s challenge, which set my life on an unanticipated course. The answer to the question of how could you consume more of a commodity than was produced for a long time without prices rising was, you couldn’t. It was impossible under our understanding of the law of supply and demand. Yet the impossible was occurring. Here’s the qualifier – it was impossible in a “free market.” You could only have a situation where consumption was greater than production in a market where the price wasn’t free. You could only have a situation where you consumed more of a commodity than you were producing, eating up inventories all the while, if the price was fixed or controlled, like a government mandated price control during a war or emergency. But this was back in 1985, after silver had run from a few dollars per ounce to $50 during the Hunt Bros episode and back to $5. There was no obvious silver price controls in place, as silver was the most volatile commodity of them all. Then what the heck could explain how prices were now stuck at $5 with an obvious consumption deficit in place?

The answer, I discovered, was that the price of silver was artificially depressed to a very low level by excessive and concentrated short selling on the world’s leading precious metals exchange, the COMEX. I have to tell you that when the light bulb went off in my head, it was exhilarating. It was a true Eureka moment. It was a blinding flash of truth and knowledge. Then reality set in. Please remember, this is still 1985, 26 years ago. Armed with what I was convinced was an incredible new insight, all I had to do was explain it to everyone. I thought that would be the easy part and the more than a year that it took me to solve the problem in the first place was the hard part. There’s a line from a great Rod Stewart song that goes, “look how wrong you can be.” That doesn’t come close to describing how wrong I was in assuming I could explain how silver was manipulated by concentrated short selling. It would take me years to fully explain it even to Izzy, and he was the smartest person I knew and had given me the challenge in the first place.

I did try to take the high road and went first to those in the industry, including the COMEX itself and the other big silver exchange at the time, the Chicago Board of Trade and the federal regulator, the CFTC, to not only explain the problem but how to fix it with position limits. I also wrote to and met with silver miners and industry analysts. I honestly thought it would be a relatively simple matter of explaining the situation to anyone connected to silver and everyone would understand it and rush to fix the problem. I got nowhere. In reality, I got less than nowhere and in more ways than I care to remember it came to have a negative impact on my life. Nobody wanted to hear that silver was manipulated in price. Many still don’t want to hear that. As a result, I entered into a sort of self-imposed exile from what had been my profession for a good number of years. What I had underestimated was the difficulty in explaining my discovery due to the complex nature of the issue and the natural reluctance on the part of others. I didn’t fully appreciate how the exchange and the CFTC wouldn’t want to hear about a manipulation they should have caught themselves and would fight me on every contention I made. I was even more amazed how those in the industry, but not responsible for regulation, openly scoffed at suggestions that the price of silver may have been manipulated to the downside. I think this was because we all had some belief that we had free markets and my suggestion to the contrary clashed with those core beliefs. Whatever the reasons, I got nowhere.

One good thing that developed out of all this was that I developed a deep knowledge of silver and the silver market. I heard every counter argument possible about why I was full of hooey about silver being openly manipulated in price, that strictly for self-defense against embarrassment I forced myself to learn everything possible about silver. I read everything about silver that was available and thought about it constantly. I wasn’t looking to be a know it all; I just wanted to be sure I was correct about something important that I discovered that needed to be fixed. Fast forward ten or fifteen years and I became exposed to the Internet and began to read and write about silver on that medium. Please remember I had not been professionally involved with silver during this time, I just kept up with it privately. Quite accidently, I formed a relationship with Jim Cook, the president of Investment Rarities, in late 2000, when he asked me to write about silver for his firm’s customers. This enabled me to write and think about silver full-time. This was like a ghetto kid who shot hoops all day long getting a scholarship or a professional basketball contract. I delved into silver with a new vigor.

Today, the allegations of a silver manipulation are not received with the universal rejection of 25 years ago. Of course, not everyone accepts the silver manipulation argument. Certainly, the COMEX and their new owner, the CME Group, continues to look the other way and tries to ignore the growing awareness of a crime in progress. The CFTC, under Chairman Gary Gensler, seems to be coming around, but is still ham-strung by past denials of a silver manipulation. And those who strongly denied a silver manipulation existed in the past are loathe to change their minds due to having to admit to being wrong. But more people seem to grasp the issue daily.

The very best thing about my allegations of manipulation in silver being ignored for almost 20 years is that the manipulation continued in force. Why this was so good was because the artificial low price did two things. It allowed regular investors to buy silver at bargain prices and it caused world inventories to be depleted because we continued to consume more silver than we were producing until 2006. The law of supply and demand is governed by price. Too high of a price and supply gets increased and demand is curtailed. Too low of a price and supply is restricted and demand gets increased. This is the basic cornerstone of any free economic system. Since the silver manipulation resulted in an artificially low price, we consumed way too much silver and produced less than we would have had the price not been depressed. While it was extremely frustrating for me to watch this evolve over the years, since I knew the price was manipulated but was unable to convince the regulators; I also knew, that the law of supply and demand would ultimately result in a shortage and soaring silver prices.

Since I knew that those investing in silver would be richly rewarded, I held nothing back in my promotion of silver. Since I was convinced about the facts and that the manipulation continued and still continues to this day, I concentrated on convincing people to buy silver. Thanks to the many hundreds of articles that Investment Rarities sent to their clients and published on the Internet, the word got out and people bought silver, quite literally by the ton. This has turned out to be the greatest win-win story in history. You have to remember that not only was silver not promoted by traditional investment advisors, they openly discouraged its purchase. Despite the naysayers, over the past five and ten years silver has been the best practical investment anyone could have bought. Silver is up more than seven times from the lows. Based upon everything that I study, silver should continue to be the best investment going forward. Someday, it will be time to sell silver, but that day is not here.

Two years ago, I talked about the giant elephant in this room that represented the silver manipulation, and how too many industry observers pretended it didn’t exist. To a great extent, that is changing. As more evidence rolls in that silver has been subject to a long-term price manipulation, it will be harder for that manipulation to continue. Even if the growing evidence was not enough to end the manipulation, I pointed out last year that the manipulation would end due to an inevitable shortage. There are numerous signs that silver is experiencing a shortage in physical supply. The key takeaway here is that according to the immutable law of supply and demand, if a price of anything is suppressed low enough and long enough, a shortage must result at some point. It looks increasingly clear that silver is close to that point of shortage.

In both my previous speeches here, I highlighted the differences between gold and silver; about how, over the past 70 years, the world’s above ground inventory of silver bullion had fallen by almost 10 billion ounces to one billion ounces today. And how, over that same 70 years, the world inventory of gold had doubled to 5 billion ounces. This was an almost unbelievable transformation - from a situation where world silver inventories were much larger than gold, to a circumstance where gold is much more plentiful than silver. I made the key point that less than one tenth of one percent of the world’s investors were aware that silver was rarer than gold, and as the true facts came to be known, it would be reflected in silver outperforming gold tremendously. That outperformance of silver compared to gold appears to be kicking in.

On my last two appearances here, the gold/silver ratio was around 70 to 1. Today, that ratio has tightened in to 45 to 1. The ratio movement can be misleading, as I try to regularly remind subscribers. The best way of fully comprehending the changes in the gold/silver ratio is by looking at it in ways that measure how well an investment in each would have turned out. If one would have put $10,000 into gold two years ago, at $985/oz, it would be worth $14,000 up almost 40%. But had someone invested in silver instead, at $14.40, the $10,000 would be worth over $21,000, up 112%. You would have made almost three times more by investing in silver than in gold. I believe that will continue to be the case.

If an investor had unlimited funds to be deployed, I would just say buy silver. But because investable funds are most usually not unlimited, I have been suggesting for the last ten years that those investors light on investable funds but heavily invested in gold, to switch some gold holdings into silver. To use gold as a source of funds, if need be, in order to buy silver. The facts argue that silver should do better than gold. For one thing, basic common sense should tell you that a commodity on the verge of a shortage should go up faster and stronger in price than a commodity not indicating signs of a shortage. I don’t want to state categorically that gold is unlikely to ever go into a shortage scenario because you never want to say never. But because gold is not heavily consumed industrially, it makes a shortage in gold unlikely. That’s not to say gold can’t or won’t go up in price, just that it won’t likely be in a shortage. Silver is very likely to go into a shortage and that’s a big plus for silver.

Plus, silver is much more under-owned than gold. Most of the big hedge funds, for instance, have bought gold in a pretty big way and very few have bought silver. That sets the stage for them buying silver at some point. Certainly, they won’t be selling silver until they first buy it. The main reason silver should continue to outperform gold is there is much less silver available for purchase, both from existing inventories and as a function of new production being available. For example, the world needs to absorb about $70 to $75 billion of net new gold for investment purposes each year, while the number in silver is something like $4 or $5 billion. Because of that, it wouldn’t take a big increase in investment buying greatly impacting the price to the upside.

Finally, last year I had some very good things to say about the new chairman of the CFTC, Gary Gensler. I have been asked if I have finally given up on Gensler doing anything about the silver manipulation and the enactment of legitimate speculative position limits. In a word – no, I have not given up on him. The pace to legitimate position limits in silver has been agonizingly slow. But, at least there is a pace, something that was lacking until he became chairman less than 2 years ago. Yes, there is an ongoing silver investigation by the Enforcement Division of the CFTC, now in its third calendar year and that is shameful. But you have to put things in perspective. A manipulation that has persisted for decades must be given time to end. I sense Gensler is on the right path. Also, I must acknowledge the courageous role of Commissioner Bart Chilton over the recent past. There is no doubt in my mind that Gensler and Chilton are dedicated public servants whose primary interest is in making our markets more transparent and fair. But they won’t succeed without out help.

Next week, I will publish my comments to the CFTC on the issue of position limits. I will ask you do the same. At first, I was tempted to skip writing to the Commission, yet again, on the matter of position limits. After all, many thousands of public comments had already been submitted in the past. But a number of things changed my mind. First, I heard from independent legal counsel who emphasized just how important it was to reply to this particular comment period. I also heard the same thing from a trusted source within the CFTC. Yes, there are some very honorable people within the Commission.

But the deciding influence was a thought given to me by my son, Ross. In discussing the momentous developments in Egypt and the Middle East, he pointed out the courage and conviction of the people demonstrating in the street and what they appear to be accomplishing. Compared to what they have endured, he asked how hard is it to write to the Commission on a matter of importance to those involved. Please keep that in mind when it comes time to write to the Commission on position limits.
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