For years, silver bulls have lamented the metal’s failure to significantly outperform gold in this precious metals bull market. They look at the statistics: silver’s dwindling warehouse inventories, only a fraction of what they were a few decades ago; no huge government stockpiles of silver overhanging the market; stagnant production with increasing demand; announcements of new uses released almost daily; annual sales of the American Silver Eagle, which is only one silver investment vehicle available, now exceeding yearly U.S. domestic silver production; the US a net importer silver as domestic production meets only about one third of demand.
Why, silver bulls ask, has the price of silver not outstripped the price of gold? In past bull markets, most notably the 1973-1980 bull market, the price of silver shot up 25 times while the price of gold rose only seven to eight times. Significant in the 1970s precious metals bull market was the “Hunt Brothers” factor; this bull market does not have such a recognized development. Still, in other bull markets of shorter duration, silver significantly outperformed gold. So, why not now?
Steve St. Angelo provides some of the answers in his article The Coming Paradigm Shift in Silver.
A paradigm shift comes with a radical change in the thinking of a large number of people. It is a mass psychology phenomenon. The housing boom is a perfect example. The perception was that home prices would rise forever; the price paid was not important as prices would be higher next year. Of course, the thinking was fallacious as the housing boom turned into a bubble, which crippled the world’s financial structure.
In making his point for a coming paradigm shift in silver, St. Angelo gives historical background on gold and fractional reserve banking in the United States. It is an excellent discussion of where US banking used to be versus where it is today.
St. Angelo ratchets up his warning by noting Eric Sprott’s assertion that “The financial system is a farce.” Eric Sprott is CEO of Sprott Asset Management, a Toronto financial adviser with more than $10 billion under management. Sprott has some forty years experience in the financial market and is a frequent guest on KingWorldNews, which carries interviews with some of the world’s best know financial experts.
I’m in Sprott’s camp. I have noted many times on KWN’s Weekly Metals Market Wrap, today’s money is the worst ever devised by mankind. It is worse than paper, which can be burned for warmth after becoming worthless as money. Today’s money is nothing more than electronic impulses on silicon bubbles. Not intrinsic value at all. None. Zilch.
The Coming Paradigm Shift in Silver is an excellent read, well worth the time. The thing to keep in mind–if St. Angelo’s reasoning appeals to you–is that after a paradigm shift in silver it will be too late to take advantage of the shift. Silver positions must be taken before the shift, not afterwards.