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.
Steve St. Angelo wrote, in my humble opinion, one of the best precious metals related articles in recent memory. He really hits hard the driving fundamental factors why silver will reach new heights and focuses on the key technical reasons to expect the upcoming paradigm shift.
The most striking element of his article is his comparison of asset bubbles that occurred in the not-so-distant past. He shows graphs reminding us that in 2007, Citigroup’s stock price was $551/share, and is now piddling at $30. AIG’s stock reached an astounding range of $1,400 for several years before crashing down to its death throe wailing of 20- some odd dollars.
These insane metrics, as we would later find out, were due to manipulated numbers, over-leveraged positions, and a whole slew of financial chicanery, yet at that time (pre-2008 crash), nobody questioned 4-digit share prices for AIG and the good times were a-rollin’!
The question, therefore, is what’s the big fuss about $100 silver amongst the investment community? When you study the fundamentals, there is EVERY reason to believe that, at a minimum, a low triple digit price for silver should be considered the norm. Apple is trading around $400 a share and nobody’s batting an eyelash. Sure, they make great products, but will life end if they stopped making ipods?
My conclusion is that there are too many uses, too much demand, and too little supply to continue this facade that is known as the spot price of silver.
A paradigm shift in silver? It’s here already…the rest of the world just doesn’t know it yet!
Yep you are spot on. I know the new silver paradigm is already here but yes the rest of the world has to catch up. I feel this would be epic on the largest of scales. Keep stacking!
The text of the article is convincing, but I can’t quite help feel that there are some gaps in the substantiation of the potential price of silver. Yes supply may be short, and yes silver has industrial uses (so does gold – it’s rust-proof); but what about the fact that silver used to be used as currency maybe until around 150 years ago when the ratio between gold and silver changed?
Silver is now a poor man’s gold and thus easier to invest in with small doses on a regular and consistent basis – gold is too large of an up-front outlay for the small scale investor – thus silver will be in higher demand when equities are depressed and/or under threat, or when the fear factor is unrealistically elevated
Can silver increase in value relative to gold if gold is over priced? And silver is still at $15/ounce and it’s now 2015; but gold is still descending – but gold just looks like it’s descending faster – silver is just cheaper and more readily accessible. If and when silver hits $5/ounce I’ll start buying again, but not yet
And, gold I won’t touch for now because it might need to hit $500-800/ounce before it is realistically priced. If there’s another bubble bursting of course then safer bets will be more attractive, but who can predict those? Some can but not me.