$5,000 Gold & $300 Silver in the Future???

Discussion in 'Money, Investing & Precious Metals' started by IrritatedWithUS, Apr 21, 2011.

  1. IrritatedWithUS

    IrritatedWithUS Well-Known Member

    ....makes you think.....and wish

    Q: What do CNBC, George Soros, Warren Buffet and every other mainstream investment commentator on the price of gold have in common for the last ten years?

    A: They are all wrong.

    All the time, every year, ten out of ten years in a row. If you continue to pay attention to such disinformation, you will lose money. Definitely. No question. Guaranteed.

    Each and every year, their vapid comments on the future gold price prove to be complete bollocks, yet year after year, and day after day, millions of readers watchers and listeners tune in for another dose of horribly incorrect information.

    These days, the number of perpetually inaccurate predictions forecasting an end to the gold boom are thoroughly drowned out by the now multitudinous voices screaming from the rooftops for gold to go much higher. About 90 percent of that is the herd mentality at work. Early predictions for $1,000 gold, which seemed extreme and outlandish just two years ago, turned out to be very conservative. So its easy now to lay claim to being “the one who predicted the gold bull market”.

    Bandwagon riders aside, there are compelling reasons to support a much higher gold price, and more importantly, a narrowing of the ratio between the gold price and the silver price. One year ago, the silver to gold ratio was 63 ounces of silver for every ounce of gold. Today that ratio is 35:1. Its fallen by nearly half in one year.

    In terms of pure performance, whereas gold has delivered a solid gain of 26.51% in the course of the last year, silver has outshone gold spectacularly, turning in a gain of 123.55%, making it the commodity trade of the year by far. The effect of that performance is to dramatically alter the perception of investors in terms of its desirability as a precious metal. Its long been a psychological barrier to silver’s progress, in my opinion, that a precious metal could be had so cheap.

    But as the prices of both monetary metals grows, and their price differentials narrow, investors want an idea of where the future is heading in terms of these prices. Can they continue to grow so dramatically in price, or is there a point at which their price appreciation curve will level out and become more incremental? Or, is there a point at this the upward price curves will plunge steeply downward? And at what point, if every, will the price curves of silver and gold converge? What exactly is the appropriate ratio of gold versus silver? Do we buy bullion, coins, ETF’s, Gold Funds, Senior Miners or Junior Explorers? Which is safest? Which is riskiest?

    First lets consider the ratio question. If the ratio suggested in the title were to become reality, that would mean a ratio of only ten ounces of silver to buy one ounce of gold. If the ratio curve were to continue climbing in favor silver at the present rate, it would approach 10:1 within another year.

    But if the ratio were to reflect numbers pegged to certain fundamental realities, then perhaps we could deduce a more rational price differential with better certainty. According to John Stephenson’s Little Book of Commodity Investing, there is 16 times more silver in the earth’s crust than gold.

    So on that basis alone, the correct price ratio is arguably 16:1. Silver bulls like to point out that silver is unique among monetary metals because of its wide ranging industrial applications, as well as in photography and jewelry. As the silver price continues to consolidate its price differential with gold, it is likely that process modification and substitution will occur wherever possible in the manufacturing supply chain to replace silver, which will dampen industrial demand. Thanks to silver’s unique chemical attributes, however, that effect will be muted.

    2009 statistics from the Silver Institute show that global supply of silver was more or less equal to the global demand for silver from all classes including manufacturing and bullion minting. Government stocks of silver are estimated to have fallen by 13.7 million ounces over the course of 2009, to reach their lowest levels in more than a decade. Russia again accounted for the bulk of government sales, with China and India essentially absent from the market in 2009. Regarding China, Gold Fields Mineral Services states that after years of heavy sales, its silver stocks have been reduced significantly.

    If the silver ratio is heading to 16:1, that implies a near term price range of $90 - $100 per ounce.

    If gold goes to $5,000 an ounce, and the silver/gold price ratio remains 16:1, there’s silver at $312.50 per ounce.

    And what, pray tell, is coming down the pike to support a gold price of $5,000?

    First and foremost, the United States dollar.

    The whole global financial system is trapped in a situation whereby we have no choice but to permit the United States to continue counterfeiting money. There is no single political force or voice or even prospect with the knowledge and the power to put a stop to the insanity into which we continue to spiral on a daily basis. That means, despite the unanimous chorus from the financial media mainstream, which anesthetizes the human race in an effort to thwart violent protest by design, the fabrication of electronic dollars will continue apace. For years.

    In terms of strict nominal value, that implies a proportional increase in the prices of, well, everything. Inflation is the direct outcome of monetary expansion in the absence of economic growth. Therefore, gold and silver will be direct beneficiaries of such policy.

    At the same time, sovereign and large capital pool (LCP) investors in U.S. debt are seeking to exit their holdings of U.S. dollars, The world’s largest bond fund, PIMCO, and its acerbic chief Bill Gross, are now shorting the U.S. dollar. China has stated repeatedly that it will reduce its holdings of U.S. debt. This is sending a signal to the rest of the sovereign wealth and LCPs that the U.S. dollar should be abandoned. That means, when the convulsions that seize the global financial system, such as that of 2008, manifest themselves, investors will flee less and less to the U.S. dollar, and more and more to other currencies – especially gold and silver.

    So not only does the price of gold appreciate in strictly nominal terms, but demand for it is growing even as it grows exponentially in price. That’s why, given this illogical yet nevertheless existing stupidity, the more expensive gold and silver get, the greater will be their demand as a replacement for U.S. dollar denominated safe haven asset classes.

    The third major factor that is going to drive gold to $5,000 and silver through $300 is related to the first two. Governments, always reactive and never proactive, will eventually start to ratify gold and silver as official currency alternatives as a result of public pressure.

    James West
  2. Immolatus

    Immolatus Just getting started. Always.

    "2009 statistics from the Silver Institute show that global supply of silver was more or less equal to the global demand for silver from all classes including manufacturing and bullion minting."

    I saw this on their site and thought "That doesnt make sense". If demand = supply, then the price wouldnt be changing.
    As for predictions, who knows. There has to be a crash/correction in the markets at some point, but given all of the news about US debt, it seems less and less likely.

  3. IrritatedWithUS

    IrritatedWithUS Well-Known Member

    This is what I think too. Oil keeps on rising and China announced late today after the markets closed that they will no longer be exporting any oil, there's new news on the declining U.S. dollar, and the war in Libya. All this just fuels gold and silver prices.
  4. Immolatus

    Immolatus Just getting started. Always.

    Kitco breaks down the changes in prices due to both:
    1)weakening of the dollar
    2)'normal' (difference between supply and demand, at least in trades) trading
  5. BillM

    BillM BillM


    There is plenty of profit to be made on silver.
    Silver will continue to chase gold until it reaches 1/15th the price of gold .
    at the current price of gold , silver should be $100.00 per oz
    The closing price on spot was 47.00 per oz.

  6. IrritatedWithUS

    IrritatedWithUS Well-Known Member

    un-effing believable....

    Silver was $49.35! Can't wait for opening morning Monday!

    Gold went up $13.00 as well. Just a lil bit of current stuff on gold:
    1 gram gold bar $48.43
    2.5 gram gold bar $121.08
    5 gram gold bar $242.17
    10 gram gold bar $484.35
    20 gram gold bar $968.70

    And that was yesterday's value
  7. nj_m715

    nj_m715 www.veggear.blogspot.com

  8. lotsoflead

    lotsoflead Well-Known Member

    just think of the rising prices of gold,silver and gas as the dollar going in the tank.
  9. swede

    swede Member

    Another factor in the rising prices, apart from inflation, is that fact that the prices of both gold and silver have been severely manipulated downward.

    The problem for the manipulators is that they can't fool the physical market forever.

    When you print "paper silver" eventually people are going to start asking for their metal!
  10. BillM

    BillM BillM


    Comex increased the margin on silver to 30 precent. This is an attempt to foster less margin trading thus holding the price down . With the dollar falling in value and the price of Gold rising, this is an impossable task . J P Morgan has over sold silver and has only a fraction of phisical on hand . If there is a run on silver Comex doesn't have it to ship. I have started taking part of my profits in phisical metal on every trade. when the run comes they won't be able to deliver. J P Morgan has put themselves in this position to try to prop up the dollar . They are running with their pants around their anckles.
  11. Woody

    Woody Woodchuck

    Two questions for those in the know on all the PM things.

    Why would folks buy something that they know does not exist? Meaning why would someone buy paper silver knowing that there is no actual silver to back it up? Sounds like an underhanded thing to do.

    Isn’t it slightly illegal to sell something you do not have? If I have one vehicle I cannot sell two of them so why can the dealers sell 1,000 ounces of silver when they actually only have 100 ounces?
  12. nj_m715

    nj_m715 www.veggear.blogspot.com

    For the same reason the bank can loan out money it doesn't have. Read up on fractional banking. It's the same for PM's. The idea is that not everyone will ask for their money or PM at the same time. Trading paper is easier that physical if you are "day trading". Also many people don't realize their PM's are not really there. I bet they think there is a shelf with their name on it, in some basement somewhere. How many people think "their" money is in the bank waiting for them to withdrawl it?
  13. Immolatus

    Immolatus Just getting started. Always.

    Its not that they 'know it doesnt exist', although for a pure speculator, they may. For most, I assume, they have 'faith' that if the time comes it will actually exist, and those who are in control will make it happen, no matter what. Most who are buying paper silver are probably wall streeters, who know the deal.
    If it comes down to it, and people actually demanded the silver (and just like the CBOE stock option market) which will most likely not happen, there would be a huge run up in the price as they scramble to fill the orders, or they run off to South America with the proceeds.
  14. swede

    swede Member

    To quote Mr. Spock from Star Trek VI:

    "To hunt a species to extinction is not logical."

    Does that answer your first question?

    As for your second question, it's not illegal to promise to honor a contract requiring you to produce gold.

    It only becomes illegal when you can't do it.
  15. Woody

    Woody Woodchuck

    Thanks folks. I understand our fiat money system, just didn't think it went to PM's also.

    "As for your second question, it's not illegal to promise to honor a contract requiring you to produce gold.

    It only becomes illegal when you can't do it."

    So, nothing is illegal if you don't get caught, sounds like what I feel Wall Street is all about. - Thanks for the replies!
  16. BillS

    BillS Well-Known Member

    I say that gold has no ceiling when priced in dollars. The federal government has trillion dollar deficits as far ahead as the eye can see. They have no recourse but to print money. Drastic cuts in spending would be too politically unpopular. In Germany in the 1920s in the span of just a few years they went from buying a dollar with 4 Marks to buying a dollar with a billion Marks.
  17. Meerkat

    Meerkat Seeking The Truth

    Hate to bust the golden'bubble'but since its up for debate.

    I'd sell before the bottom falls out.Gold has been violated like everything else too,some gold bars are not gold.

    If the gov plan is to make us share even our very basics,why do we think they will let us keep our gold?:confused:.

    But I'm no pro on this just an 'ex middle class' housewife.

    If I had gold,I'd sell and buy me a nice little hideout if there is such a thing.