Silver soars to 31-year high

[vector7]

Silver soars to 31-year high

Frank Tang

Published Thursday, Apr. 14, 2011 4:51PM EDT Last updated Thursday, Apr. 14, 2011 4:57PM EDT


Gold rose over 1 per cent to a near-record and silver surged Thursday as dollar weakness, inflation worries and a European debt crisis powered bullion to its biggest one-day gain in about seven weeks.

Silver futures soared to their highest since 1980, rising more than 4 per cent for their biggest one-day gain since November, as strong investment and speculative buying sent the gold/silver ratio to a low.

More related to this story

• Silver headed for $50, consultant says

Silver (SI-FT) 43.02 1.36 3.27%
As of Apr 15, 2011 5:12

Gold received a boost from inflation worries triggered by a crude oil rally and data showing rising U.S. core producer prices in March, and as higher-than-expected jobless claims knocked the dollar.

“The combination of higher oil prices, weaker dollar and the resurrection of discussions of Greek sovereign risk problems has galvanized the goldmarket. It’s particularly impressive because we ran into selling above the market yesterday,� said James Steel, chief commodity analyst at HSBC.

Spotgold rose 1.4 per cent to $1,474.30 an ounce by 4:02 p.m. ET, within striking distance of its record $1,476.21 set on Monday. U.S. gold futures (GC-FT1,487.8015.401.05%) for June delivery settled up $16.80 at $1,472.40 an ounce.

Investors grew jittery on talk of debt restructuring by Greece, the first euro zone member to receive a bailout a year ago in the crisis that has driven Ireland and Portugal to seek aid and forced draconian budget cuts in Spain.

The European debt crisis has boosted gold this year and also helped power the metal’s 30 per cent gain last year.

Bullion investors took heart as the dollar fell broadly, reaching a record low against the Swiss franc, with more weakness likely so long as U.S. Federal Reserve and European Central Bank policies continue to diverge.

The recent surge in oil prices is no prelude to broader price increases that would force the Fed to raise interest rates, top Fed officials said Thursday in what appeared to be the predominant view at the central bank.

Comments by the Fed officials strengthened expectations the central bank will stay on course with its $600-billion debt-buying program and not look to reverse its super-easy monetary policy any time soon.

Gold prices have almost doubled since the Fed cut interest rates to the bone in 2008 in an attempt to shock the economy back to life after the worst financial crisis since the Great Depression.

SILVER RATIO LOWEST IN NEARLY 3 DECADES
Silver (SI-FT43.021.363.25%) climbed 3.5 per cent to $42.03, having hit a 31-year high at $42.07 an ounce.

The spread between gold and silver – showing the relative strength between the two metals – has nearly halved since last August. The gold-to-silver ratio fell to just above 35, the lowest since the early 1980s.

“Silver continues to attract a very large speculative bid. Even though silver is far out-gaining gold, the reasons why precious metals rally are related to the financial factors that surround the gold market,� said Bill O’Neill, partner at commodities firm LOGIC Advisors.

Silver has rallied about 35 per cent year-to-date on talk of near-term supply tightness as a recovering global economy boosts demand for the industrial metal.

“There is still a lot of speculative, investment money coming into the gold market. Until there is a clear technical signal that the situation is reversed, the momentum of silver remains intact,� HSBC’s Steel said.

Platinum (PL-FT1,795.00-0.60-0.03%) gained 1.2 per cent to $1,791.24, while palladium (PA-FT770.00-4.25-0.55%) rose 1.4 per cent to $771.50.

[Malsua]

Heck, now I wish I'd bought more when it was $33! lol. I thought I was buying at a peak at the time, I just wanted to freshen up the pile a bit.

[samizdat]

Not a formal poll here, but I'd like # opinios here, especially vector's. I reckon he has an insider's view of econ.

I flunked out of econ 201, but I reckon silver will hit 60 this year. half of the increase will be closing the traditional gold/silver ratio to a normal proportion and the other half would be simply a dollar fiat failure- the usd index down. So silver may go "up" 5% against inflation while the real up of another 20-40// 40-60 will be principally in silver v. dollars. So people with yen pounds, rubles, reales & 4 other currencies that can buy gold & silver will profit.

[AGEUSAF]

I trade with a local in the jewel business (he has contacts built up for 30 years in that line of work). He is hearing 200 Ag/4000 Au is a top, all based on the dollar situation. What is the traditional GSR 16:1? I want to know what kind of country this is going to be like with 200 Ag? This is the sort of stuff that actually keeps me up at night and this is the sort of stuff that keeps DC/NY up at night, everything else is a side show the market is a beast of it's own. We are in one hell of a poker game right now.

[vector7]

In other news:

A Golden Tipping Point: University of Texas Takes Delivery Of $1 Billion In Physical Gold

Submitted by Tyler Durden on 04/16/2011 19:59 -0400

• Black Swan
• Central Banks
• Kyle Bass
• Precious Metals
• Reality

Tipping points are funny: for years, decades, even centuries, the conditions for an event to occur may be ripe yet nothing happens.

Then, in an instant, a shift occurs, whether its is due a change in conventional wisdom, due to an exogenous event or due to something completely inexplicable. That event, colloquially called a black swan in recent years, changes the prevalent perception of reality in a moment.

This past week, we were seeing the effect of a tipping point in process, with gold prices rising to new all time highs day after day, and the price of silver literally moving in a parabolic fashion. What was missing was the cause. We now know what it is: per Bloomberg:

"The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board."

And so, the game theory of a nearly 100 year old system of monetary exchange has seen its first defector, but most certainly not last. With an entity as large as the University of Texas calling the bluff of the Comex, the Chairman, and fiat in general in roughly that order, virtually every other asset manager is now sure to follow, considering there is not nearly enough physical gold to satisfy all paper gold in existence by a factor of about 100x. The proverbial Nash equilibrium has just been broken. From Bloomberg:

The fund, whose $19.9 billion in assets ranked it behind Harvard University’s endowment as of August, according to the National Association of College and University Business Officers, added about $500 million in gold investments to an existing stake last year, said Bruce Zimmerman, the endowment’s chief executive officer. The holdings are worth about $987 million, based on yesterday’s closing price of $1,486 an ounce for Comex futures.

Years from now, when historians attempt to define who may have started it all, one name may emerge...

The decision to turn the fund’s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment’s board, Zimmerman said at its annual meeting on April 14. Bass made $500 million on the U.S. subprime-mortgage collapse.

“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,� Bass said yesterday in a telephone interview. “I look at gold as just another currency that they can’t print any more of.�

In summary - the fiat tide is now going out. And among those who will first be observed swimming naked are the very same people whose fate has been so very intrinsically linked to the perpetuation of a flawed regime (and who coined this very saying). In the meantime, hold on to your hats: should a scramble for delivery ensue, the recent parabolic move in various precious metals will seem like a dress rehearsal for what is about to transpire.

The only open question is who was the broker with enough gold to deliver to the UofT. We hope to find out soon enough. We also hope that the UofT is smart enough, and that Kyle Bass advised it, that if they are getting "delivery" in a Comex vault in New York, the gold has likely already been leased out at least several times to various entities demanding paper allocations...

[samizdat]

Hey, Vector- are you saying that "paper gold" might be worthless? That gold brokers are sort of like the Treasury dept.? hmmm.

Hey...if people all try to sell their gold- like they did with mortgages...the price will dip...50-70%% will get shafted with nothing. Then gold will be worth nothing- since it's all in vaults

[vector7]

In this market...physical is safer than paper.

S&P REVISES US OUTLOOK TO NEGATIVE


Submitted by Tyler Durden on 04/18/2011 09:02 -0400

You read that right: S&P just revised its US outlook to negative. EURUSD surges on what can be seen as revolutionary news...



From S&P:

Overview

We have affirmed our 'AAA/A-1+' sovereign credit rating on the United States of America.

• The economy of the U.S. is flexible and highly diversified, the country's effective monetary policies have supported output growth while containing inflationary pressures, and a consistent global preference for the U.S. dollar over all other currencies gives the country unique external liquidity.
• Because the U.S. has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable.
• We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer 'AAA' sovereigns.

Rating Action

On April 18, 2011, Standard & Poor's Ratings Services affirmed its 'AAA' long-term and 'A-1+' short-term sovereign credit ratings on the United States of America and revised its outlook on the long-term rating to negative from stable.

Rationale

Our ratings on the U.S. rest on its high-income, highly diversified, and flexible economy, backed by a strong track record of prudent and credible monetary policy. The ratings also reflect our view of the unique advantages stemming from the dollar's preeminent place among world currencies.

Although we believe these strengths currently outweigh what we consider to be the U.S.'s meaningful economic and fiscal risks and large external debtor position, we now believe that they might not fully offset the credit risks over the next two years at the 'AAA' level.

The U.S. is among the most flexible high-income nations, with both adaptable labor markets and a long track record of openness to capital flows. In addition, its public sector uses a smaller share of national income than those of most 'AAA' rated countries--including its closest peers, the U.K., France, Germany, and Canada (all AAA/Stable/A-1+)--which implies greater revenue flexibility.

Furthermore, the U.S. dollar is the world's most used currency, which provides the U.S. with unique external flexibility; the vast majority of U.S. trade flows and external liabilities are denominated in its own dollars. Recent depreciation of the currency has not materially affected this position, and we do not expect this to change in the medium term (see "Après Le Déluge, The U.S. Dollar Remains The Key International Currency," March 10, 2010, RatingsDirect).

Despite these exceptional strengths, we note the U.S.'s fiscal profile has deteriorated steadily during the past decade and, in our view, has worsened further as a result of the recent financial crisis and ensuing recession. Moreover, more than two years after the beginning of the recent crisis, U.S. policymakers have still not agreed on a strategy to reverse recent fiscal deterioration or address longer-term fiscal pressures.

In 2003-2008, the U.S.'s general (total) government deficit fluctuated between 2% and 5% of GDP. Already noticeably larger than that of most 'AAA' rated sovereigns, it ballooned to more than 11% in 2009 and has yet to recover.

On April 13, President Barack Obama laid out his Administration's medium-term fiscal consolidation plan, aimed at reducing the cumulative unified federal deficit by US$4 trillion in 12 years or less. A key component of the Administration's strategy is to work with Congressional leaders over the next two months to develop a commonly agreed upon program to reach this target. The President's proposals envision reducing the deficit via both spending cuts and revenue increases, and the adoption of a "debt failsafe" legislative mechanism that would trigger an across-the-board spending reduction if, by 2014, budget projections show that federal debt to GDP has not yet stabilized and is not expected to decline in the second half of the current decade.

The Obama Administration's proposed spending cuts include reducing non-security discretionary spending to levels similar to those proposed by the Fiscal Commission in December 2010, holding growth in base security (excluding war expenditure) spending below inflation, and further cost-control measures related to health care programs. Revenue would be increased via both tax reform and allowing the 2001 and 2003 income and estate tax cuts to expire in 2012 as currently scheduled--though only for high-income households. We note that the President advocated the latter proposal last year before agreeing with Republicans to extend the cuts beyond their previously scheduled 2011 expiration. The compromise agreed upon in December likely provides short-term support for the economic recovery, but we believe it also weakens the U.S.'s fiscal outlook and, in our view, reduces the likelihood that Congress will allow these tax cuts to expire in the near future. We also note that previously enacted legislative mechanisms meant to enforce budgetary discipline on future Congresses have not always succeeded.

Key members in the U.S. House of Representatives have also advocated fiscal tightening of a similar magnitude, US$4.4 trillion, during the coming 10 years, but via different methods. House Budget Committee Chairman Paul Ryan's plan seeks to balance the federal budget by 2040, in part by cutting non-defense spending. The plan also includes significantly reducing the scope of Medicare and Medicaid, while bringing top individual and corporate tax rates lower than those under the 2001 and 2003 tax cuts.

We view President Obama's and Congressman Ryan's proposals as the starting point of a process aimed at broader engagement, which could result in substantial and lasting U.S. government fiscal consolidation. That said, we see the path to agreement as challenging because the gap between the parties remains wide. We believe there is a significant risk that Congressional negotiations could result in no agreement on a medium-term fiscal strategy until after the fall 2012 Congressional and Presidential elections. If so, the first budget proposal that could include related measures would be Budget 2014 (for the fiscal year beginning Oct. 1, 2013), and we believe a delay beyond that time is possible.

Standard & Poor's takes no position on the mix of spending and revenue measures the Congress and the Administration might conclude are appropriate. But for any plan to be credible, we believe that it would need to secure support from a cross-section of leaders in both political parties.

If U.S. policymakers do agree on a fiscal consolidation strategy, we believe the experience of other countries highlights that implementation could take time. It could also generate significant political controversy, not just within Congress or between Congress and the Administration, but throughout the country. We therefore think that, assuming an agreement between Congress and the President, there is a reasonable chance that it would still take a number of years before the government reaches a fiscal position that stabilizes its debt burden. In addition, even if such measures are eventually put in place, the initiating policymakers or subsequently elected ones could decide to at least partially reverse fiscal consolidation.

In our baseline macroeconomic scenario of near 3% annual real growth, we expect the general government deficit to decline gradually but remain slightly higher than 6% of GDP in 2013. As a result, net general government debt would reach 84% of GDP by 2013. In our macroeconomic forecast's optimistic scenario (assuming near 4% annual real growth), the fiscal deficit would fall to 4.6% of GDP by 2013, but the U.S.'s net general government debt would still rise to almost 80% of GDP by 2013. In our pessimistic scenario (a mild, one-year double-dip recession in 2012), the deficit would be 9.1%, while net debt would surpass 90% by 2013. Even in our optimistic scenario, we believe the U.S.'s fiscal profile would be less robust than those of other 'AAA' rated sovereigns by 2013. (For all of the assumptions underpinning our three forecast scenarios, see "U.S. Risks To The Forecast: Oil We Have to Fear Is…," March 15, 2011, RatingsDirect.

Additional fiscal risks we see for the U.S. include the potential for further extraordinary official assistance to large players in the U.S. financial or other sectors, along with outlays related to various federal credit programs. We estimate that it could cost the U.S. government as much as 3.5% of GDP to appropriately capitalize and relaunch Fannie Mae and Freddie Mac, two financial institutions now under federal control, in addition to the 1% of GDP already invested (see "U.S. Government Cost To Resolve And Relaunch Fannie Mae And Freddie Mac Could Approach $700 Billion," Nov. 4, 2010, RatingsDirect). The potential for losses on federal direct and guaranteed loans (such as student loans) is another material fiscal risk, in our view.

Most importantly, we believe the risks from the U.S. financial sector are higher than we considered them to be before 2008, as our downward revisions of our Banking Industry Country Risk Assessment (BICRA) on the U.S. to Group 3 from Group 2 in December 2009 and to Group 2 from Group 1 in December 2008 reflect (see "Banking Industry Country Risk Assessments," March 8, 2011, and "Banking Industry Country Risk Assessment: United States of America," Feb. 1, 2010, both on RatingsDirect). In line with these views, we now estimate the maximum aggregate, up-front fiscal cost to the U.S. government of resolving potential financial sector asset impairment in a stress scenario at 34% of GDP compared with our estimate of 26% in 2007.

Beyond the short- and medium-term fiscal challenges, we view the U.S.'s unfunded entitlement programs (such as Social Security, Medicare, and Medicaid) to be the main source of long-term fiscal pressure. These entitlements already account for almost half of federal spending (an estimated 42% in fiscal-year 2011), and we project that percentage to continue increasing as long as these entitlement programs remain as they currently exist (see "Global Aging 2010: In The U.S., Going Gray Will Cost A Lot More Green," Oct. 25, 2010, RatingsDirect). In addition, the U.S.'s net external debt level (as we narrowly define it), approaching 300% of current account receipts in 2011, demonstrates a high reliance on foreign financing. The U.S.'s external indebtedness by this measure is one of the highest of all the sovereigns we rate.

While thus far U.S. policymakers have been unable to agree on a fiscal consolidation strategy, the U.S.'s closest 'AAA' rated peers have already begun implementing theirs. The U.K., for example, suffered a recession almost twice as severe as that in the U.S. (U.K. GDP declined 4.9% in real terms in 2009, while the U.S.'s dropped 2.6%). In addition, the U.K.'s net general government indebtedness has risen in tandem with that of the U.S. since 2007. In June 2010, the U.K. began to implement a fiscal consolidation plan that we believe credibly sets the country's general government deficit on a medium-term downward path, retreating below 5% of GDP by 2013.

We also expect that by 2013, France's austerity program, which it is already implementing, will reduce that country's deficit, which never rose to the levels of the U.S. or U.K. during the recent recession, to slightly below the U.K. deficit. Germany, which suffered a recession of similar magnitude to that in the U.K. (but has enjoyed a much stronger recovery), enacted a constitutional limit on fiscal deficits in 2009 and we believe its general government deficit was already at 3% of GDP last year and will likely decrease further. Meanwhile, Canada, the only sovereign of the peer group to suffer no major financial institution failures requiring direct government assistance during the crisis, enjoys by far the lowest net general government debt of the five peers (we estimate it at 34% of GDP this year), largely because of an unbroken string of balanced-or-better general government budgetary outturns from 1997 through 2008. Canada's general government deficit never exceeded 4% of GDP during the recent recession, and we believe it will likely return to less than 0.5% of GDP by 2013.

Outlook

The negative outlook on our rating on the U.S. sovereign signals that we believe there is at least a one-in-three likelihood that we could lower our long-term rating on the U.S. within two years. The outlook reflects our view of the increased risk that the political negotiations over when and how to address both the medium- and long-term fiscal challenges will persist until at least after national elections in 2012.

Some compromise that achieves agreement on a comprehensive budgetary consolidation program--containing deficit reduction measures in amounts near those recently proposed, and combined with meaningful steps toward implementation by 2013--is our baseline assumption and could lead us to revise the outlook back to stable. Alternatively, the lack of such an agreement or a significant further fiscal deterioration for any reason could lead us to lower the rating.

Standard & Poor's will hold a global teleconference call and Web cast today--April 18, 2011--at 11:30 a.m. New York time (4:30 p.m. London time). For dial-in and streaming audio details, please go to www.standardandpoors.com/cmlive.

[vector7]

Not a formal poll here, but I'd like # opinios here, especially vector's. I reckon he has an insider's view of econ.

The Rising Cost of Everything


Glenn Beck-04/18/11-A



Glenn Beck-04/18/11-B




Glenn Beck-04/18/11-C

[vector7]

"Expect The Gold To Silver Ratio To Hit Single Digits"

Submitted by Tyler Durden on 04/20/2011 10:40 -0400

From Eric Sprott and Andrew Morris

Follow The Money
You know silver’s doing well when the commentators start giving it the ‘gold’ treatment. Silver’s recent rise has been so spectacular that it’s caught many investors off guard. It’s natural to be skeptical when you don’t know the fundamentals driving strong performance, and many pundits and commentators have been quick to downplay it as a result - much like they do towards gold when it enjoys a run. Silver is also an awkward metal for them to categorize. Is it a commodity, a monetary metal, or both? And which side is driving demand? If it’s industrial demand, that’s ok, because that’s bullish. But if it’s investment demand for silver as ‘money’, well then that’s sort of bearish, isn’t it? The fact remains that most commentators have failed to grasp the monetary shifts that silver is signaling today, and in doing so they’ve failed to appreciate just how high it could actually go.

The financial media’s failure to grasp the benefits of precious metals ownership continues to perplex us, and it’s not just the commentators who are prone to perpetual disbelief. The sell side analysts are equally as irresolute. According to Bloomberg, the ‘expert’ consensus silver price forecast for 2011 is $29.50, representing a 31% discount from the current spot price. This same group of analysts also predicts prices will decline another 25% in 2012 and a further 9% in 2013 to $20 an ounce. When you consider that the silver price has appreciated by over 21% annually over the past 10 years, these forecasts suggest a very dramatic change in the long-term trend. Will this reversal come true? Probably not. These were the same analysts who predicted that spot silver prices would average $18.65 this year - so they’ve missed the mark by over 100% thus far.

We don’t mean to bash the silver analyst community, and there are several whom we highly respect, but it is important for silver investors to appreciate that these price forecasts are being plugged into financial models that dictate equity valuations. These models are used by traders, bankers, analysts, and portfolio managers to derive valuations for silver stocks and create asset allocations for portfolios. To anyone questioning current silver equity valuations, we would ask: what price assumptions are you using? Of course we as allocators of capital are thankful for this phenomenon, as it allows us to buy our favourite silver stocks on the cheap, knowing full well that the herd will be following behind in due course as those backward-looking forecasts get ratcheted higher.

How can we be so confident that the price of silver will continue on its upward trajectory? Our thesis is premised on the most rudimentary of economic principles – supply and demand.

One of the key indicators that we’ve been monitoring is the gold/silver ratio. Much has been written about the ratio of late, and we won’t go into great detail on the subject, other than to note that the last time money was synonymous with defined amounts of gold and silver, the ratio was set at 16-to-one. In fact, for most of the past millennium, one ounce of gold would have been convertible to somewhere between 10 and 16 ounces of silver - an amount roughly in line with the relative occurrence of each mineral within the earth’s crust.¹ For the better part of the past century, due to the world’s abandonment of bimetallism and then the gold standard, the gold/silver ratio has fluctuated widely, twice reaching lows near the 15-to-one mark and a high of 100-to-one back in the early 1990’s. The most recent high reached in the latter part of 2009 was nearly 80-to-one.

Since then the ratio has been tumbling to where it stands now at 35-to-one – which reflects the incredible outperformance of silver over that time period. In our opinion, this ratio will continue to move lower, driven by nothing more than basic supply/demand fundamentals.

The US Mint, which is the world’s largest silver and gold coin manufacturer, recently reported that it had sold 13 million ounces of silver coins and 370 thousand ounces of gold coins on a year-to-date basis.² This means that the US Mint is now selling roughly equal amounts of silver and gold in dollars so far this year. Furthermore, bullion dealers like Sprott Money and GoldMoney have confirmed with us that they are now selling more silver than gold in dollar terms. For additional confirmation of this investment trend, just look at the flows for the two largest gold and silver ETFs.

Investors have withdrawn approximately $3 billion from the GLD so far this year while the SLV has seen net inflows of $370 million over the same period. Dollar for dollar, investors are allocating as much if not more money to silver than to gold. And why shouldn’t they? Silver is much more of a "precious" metal than the current ratio of 35-to-one would suggest.
To explain, we must first address mine supply. In 2010, the world mined approximately 736 million ounces of silver and 85 million ounces of gold.³

The world also produced an additional 215 million ounces of silver and 53 million ounces of gold from recycled scrap.⁴ Adding both together brings us 951 million ounces of silver and 139 million ounces of gold supply, for a ratio of nine ounces of silver to one ounce of gold.

Interestingly, this 9-to-one ratio is very similar to the ratio of available in-situ silver and gold reserves. The U.S. Geological Survey estimates that there are current in-situ reserves of approximately 16.4 billion ounces of silver versus 1.6 billion ounces for gold, or about a 10-to-one ratio.⁵

The case for silver is even more compelling when one considers the ramifications of its dual role as both an investment and industrial metal.

Last year, non-investment demand for silver (which includes industrial, photographic, and silverware demand) totaled approximately 610 million ounces.⁶ This represents approximately 64% of primary supply, leaving approximately 341 million ounces to satisfy investment demand.⁷ On the gold side, industrial usage totaled 13 million ounces, or about 10% of primary supply, leaving approximately 125 million ounces left over for investment demand.8 So, after netting out the industrial usage the primary supply left over for investment demand is about 2.7 times that for gold.

However, if we convert those ounces to dollars at current prices, we’re left with $15 billion worth of silver available for investment versus $186 billion worth of gold, or a one-to-13 ratio of silver to gold! This means that in terms of primary supply, silver only has 8% of the capacity for investment that gold does despite having equal if not more dollars flowing into it.

Now, it’s true that another potential source of supply is the very silver that investors already own - and at the right silver price these inventories of silver and gold bullion may be sold into the market to supplement any supply shortfalls. As we’ve noted previously, however, due to decades of underinvestment, the amount of silver bullion inventories are actually extremely small, even compared to those of gold.9 Recent estimates suggest that reported silver bullion inventories stand at roughly 1.2 billion ounces versus 2.2 billion ounces of gold bullion, or roughly a 0.5-to-one ratio.¹⁰ To put that amount in perspective, consider that at present there is only $52 billion worth of silver bullion/coins and over $3.3 trillion worth of gold in inventory which could potentially be recirculated into the market.

Converting this to a ratio, you get a one-to-63 ratio of silver to gold inventories. So how is silver still priced at 35-to-one?!

All indications lead us to believe that there is now roughly an equal amount of investment flowing into silver and gold on a dollar-for-dollar basis. And although the price ratio of silver to gold has fallen substantially since the highs of 2009, our analysis strongly suggests that this ratio must move lower to restore a fundamental balance between supply and demand. Only time will tell how much lower it will go, but we would not be surprised to see it hit single digits before settling into a more sustainable equilibrium.

What the so-called silver ‘experts’ neglect to account for in their models and projections is that the fiat money experiment has failed. And in this context, we believe the Market has assigned world reserve currency status to gold - not USD, not EUR, and not JPY. In our opinion, gold’s continued appreciation vis-Ã*-vis every currency is assured because the great flight from fiat has only just begun. Like gold, silver also has a long monetary history, and as such, investors are now also buying silver as protection from the ravages of fiat currency debasement. Yet, when compared to gold, it is silver that offers the most attractive value proposition by virtue of the gross mispricing of its scarcity, which, we might add, has existed for many years. Thus, in our opinion, as this new bimetallic standard takes root, silver investors will continue to be justly rewarded with marked outperformance. We truly believe that this is the investment opportunity of a lifetime, and increasingly so, others are taking heed. What is clear to us is that with equal investment dollars now flowing into silver and gold, the current 35-to-one ratio is unsustainable and has only one direction to go: lower.

[vector7]

Values for Coins Composed of Silver Explode

April 22, 2011 by Darrin Lee Unser · Leave a Comment



Silver coins have been under a microscope of sorts lately, as their values continue to soar to astonishing levels.

A person does not have to be a collector or an investor to know that the silver market has experienced tremendous gains. Even the mainstream media has captured the picture of silver prices surging almost daily to fresh 31-year highs and striving for an all-time record atop $50 an ounce.
As silver topped $46 an ounce on Thursday, not so terribly old U.S. coins that were once worth nickels, dimes and four bits now have coin melt values ranging from several to well more than a dozen dollars.

That has led many to take another look at buying or selling coins the United States Mint produced for circulation prior to 1965. Since all of these coins are composed of 90% silver, their intrinsic or melt values are worth much more than their face values -- even for common and worn out coins.

Silver Coin Values

Silver Coins	Issue Year	Melt Values
Jefferson War Nickels	1942-1945	$2.60
Mercury Dimes	1916-1945	$3.35
Roosevelt Dimes	1946-1964	$3.35
Washington Quarters	1932-1964	$8.37
Walking Liberty Half Dollars	1916-1947	$16.73
Franklin Half Dollars	1948-1963	$16.73
Kennedy Half Dollars	1964	$16.73
Kennedy Half Dollar	1965-1970	$6.84
Morgan Dollars	1878-1921	$35.78
Peace Dollars	1921-1935	$35.78
Eisenhower Dollars	1971-1976	$46.26

Silver coins that have little or no meaning to coin collectors because they are too abundant or are in too poor of condition are often called "Junk Silver Coins."

Those owning junk silver coins can either use them for transactions at face value, or (and definitely the better option) hold or sell them based on their intrinsic melt value. This melt value is based on how much silver each coin would contain if it were to be melted down. For example, Washington quarters dated between 1932 and 1964 each contained 0.18084 ounces of silver when they were first produced. Calculating that against the recent price of silver ($46.26 an ounce) finds that each one of these quarters could be worth as much as $8.37, as shown in the chart above.

It is not too surprising to find that the number of junk silver coin transactions in the secondary market has increased. Looking at the online auction site eBay for last week finds a total of 1,029 listings based on the generic search term of "junk silver coins." This compares to 821 listings during approximately the same time frame last month and only 530 during a one-week period in January. Going back further to April of last year found only 94 listings fitting the "junk silver coins" criteria.

Fine-tuning the search to get more specific details resulted in more interesting information. The chart below shows one-week comparisons for eBay listings including the term "$10 Junk Silver." The term is a valid search as junk silver coins are typically sold in 90% silver coin bags based on the face value of the coins within. As the United States struck these older silver coins with a proportionate amount of silver in them, each $10 face value bag would contain approximately 7.15 ounces of the precious metal no matter what combination of silver coins the bag contained.

$10 Junk Silver Coins Listings

Date Range	# of eBay Listings
April 19, 2010 - April 25, 2010	14
January 11, 2011 - January 16, 2011	25
March 14, 2011 - March 20, 2011	45
March 20, 2011 - April 17, 2011	61

As shown in the chart, listings of $10 bags of junk silver has more than quadrupled in the last year.

It should be noted that junk silver coins were typically sold in $1000 face value bags, but as the price of the precious metal has increased, sellers have been offering bags in much smaller denominations to allow for smaller purchase prices. Otherwise, anyone interested in obtaining a junk silver coin bag with a $1000 face value would be looking at an investment of over $33,000 based on the recent price of the precious metal.

Related Silver or Coin News:

1. Pre-1965 Silver Coin Melt Values Hit 30-Year Highs
2. Silver Coin Melt Values at Fresh Highs
3. US Silver Coin Values Go Ballistic

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http://www.kitco.com/images/live/silver.gif

I smell soros in this scoping. shorts, dips, potholes, and bumps.

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The fed (greatful dead) can short silver, but not gold. Need plenty of gold for 4stars. Both will eventually blowout with the new IMU- intl monetary units. Need plenty of gold for 4stars. China & Britain can short gold...just b4 the $$bust.

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http://www.cmegroup.com/tools-inform...hadv11-149.pdf

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"Bernanke also said the first step in tightening interest-rate policy could occur when the Fed stops reinvesting the proceeds of its bond holdings."

Duh?... I think Ben had a few tips on freebasing before crack became popular.

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http://seekingalpha.com/article/2662...recious-metals

The China Daily, citing another newspaper, the New Century Weekly, says that the Chinese government will diversify its massive $3 trillion dollar foreign reserve stockpiles into investment funds designed to invest in precious metals and oil. New Century says that it got this information from confidential sources inside the Chinese central bank, which is concerned about the continued devaluation of the U.S. dollar and wants to preserve the future buying power of its reserves.

Because a large part of China’s economy is based upon exports, it has been engaged in years of currency debasement of the yuan against the dollar. Successive U.S. administrations, both Democrat and Republican, have uniformly demanded an end to artificial support of the dollar against the yuan and, apparently, the demand has finally been accepted. People really need to be careful what they wish for.

It was, of course, inevitable that the Chinese would wean themselves from over-dependence on exporting to the West. There is no reason to impoverish your own people and restrict their purchasing power for years while using the consequent cheap labor to import technology and know-how, if you never intend to use it.

Ben Bernanke’s bid to out-debase the Chinese has finally borne fruit. China has taken delivery of most of the technology and know-how it is going to get. It is already the factory of the world, producing everything from Barbie dolls to sophisticated automobiles and computers. The remaining technology it would like to import from the West is classified by the military, and America and Europe won’t share it with the Chinese.

China apparently has weighed the alternatives and decided to strike out on its own. It will do everything that it can to become more dependent upon internal, rather than external, demand. It will allow the yuan to rise against the dollar in order to slow down inflation imported from America, and it will make an attempt to salvage whatever value it can from dollar reserves before they become worthless. The plan will come as a surprise for many in the West who assumed that China would not and could not get rid of its dollars, and we do not doubt that many will be in denial until the impact of China’s next move becomes crystal clear.

If China's central bank starts to buy gold, silver, platinum, and palladium on the world market with even a small fraction of its dollar reserves, the impact will be enormous. It means that the demand for U.S. Treasuries as well as European sovereign bonds issuances will fall. That means the U.S. dollar and the euro are going to be deeply declining in their buying power. It also means that the demand for oil and precious metals is going to skyrocket.

Let’s say that China uses 10% of its $3 trillion worth of currency reserves to buy gold. That’s $300 billion. It will buy over 6,000 metric tons of gold at $1540 per ounce. It is interesting to note that, with the gold it already has, plus about 7,000 metric tons more, Chinese gold reserves would equal those of the United States of America.

But the price of gold won’t stay at $1,540 per ounce if the Chinese enter the market in a big way. Nor will the price of silver, platinum and palladium stand still. They will all rise astronomically. Tiny supplies of platinum and palladium, and the fact that both have always been more popular in Far Eastern jewelry than in the West, will conspire to explode those prices if even a small portion of that $300 billion is spent on them.

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Hong Kong Mercantile Exchange to launch silver futures on July 22

Mon Jul 18, 2011

SINGAPORE, July 18 (Reuters) - The Hong Kong Mercantile Exchange (HKMEx) said on Monday it will start trading a dollar-denominated silver futures contract on July 22, hoping to tap into the growing demand for the metal in China.

The silver contract will trade in lots of 1,000 troy ounces and be delivered in Hong Kong, the exchange said in a statement.

Silver demand rose 67 percent in China and 17 percent globally between 2008 and 2010, the exchange said, citing market data it has compiled.

"The new contract will enable buyers and sellers in China to trade effectively with their counterparts across the world, while at the same time, allowing investors to gain exposure to silver price movements and broaden their investment portfolio," said HKMEx president Albert Helmig in the statement.

The exchange rolled out a dollar-denominated gold futures contract in May.

The exchange also plans to launch yuan-priced gold and silver futures to capitalise on growing investor demand for China's strengthening currency, with further ambition for products in base metals, energy and agriculture, Helmig told Reuters earlier this month.

Spot silver traded at $39.89 an ounce by 0707 GMT, down 19 percent from a record of $49.51 hit on April 28. The metal, notorious for price volatility, surged 60 percent earlier this year to the peak before dropping 33 percent over six sessions in early May.

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I'm not savvy about $$, & or investments, the mechanics, forex, banksters, fed reserve even less comex etc. Perhaps someone can call BS on silver for instance as a hot riser, precious commodity underpriced historically by ratio & in high demand and manipulated low until "it's time" (to make $$, rise....dip, dive, sky etc. Silver for example just shot up &&& down $1.50 in about a nanosecond.

What's the real deal on the agit-prop ie. (Pan Asia Gold Exchange)June 2012...Hong Kong Mercantile Exchange?

I will post the two articles below separately which lead me to wonder about this situation, fyi.








Sorry. I could not copy the articles as they are copywrited.

What one perceives from the info, which I don't know is reliable is that big US$ like MorganStanley kept silver low to gain on their borrowed shorts...and they'll likely do the reverse pretty soon. Much inference is made of a triad collusion w/ trans asian axis sellout of the USD by bama-geithner & Bben and a "correction" of the supply-demand curve on pms w/ Hong Kong & Pan-asian performing a "shanghai" on the cmex.

http://www.marketoracle.co.uk/Article326....

http://moneymappress.com/video/mmp/mmr/m....
or video... click off the page & choose remain on page to just read the text.

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INFLATION TEMPORARY. Bernanke noted that higher gas prices have pushed up inflation: "But we expect that to pass through the system, and assuming no new shocks in the oil sector, inflation ought to moderate to about 2 percent later this year." The Fed's preferred inflation measure shows that prices rose 2.3 percent in the 12 months that ended in February.

...false presumption?

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silver looks very tempting at 27.5, will it dip to 25?