Short term sillver/gold predictions

[jim4silver]

Just wondering what everyone here believes the next month or two holds for the silver and gold situation?

I believe that locally the premiums are going to be much higher as supplies stay tight over the next 4 weeks (maybe longer?), as they are projected to be by a local coin dealer I spoke to this weekend who has been in the business for a long time. However, he (like the other coin dealers I spoke to locally over the past week or so) believes that they will NOT have a problem getting the metals on the dates they are promised by the wholesalers- which should be 4 weeks or so for silver generic bullion and longer for ASEs. I have no direct personal experience as a retail coin dealer, but I think these guys (the coin dealers) are going to be unpleasantly surprised in a month when things do not show up on time. Here's why I think they are going to be unpleasantly surprised, and why this time things might actually "be different".

For example, the difference between this spike down and the one in 2008 (where silver went from 21 to 9), is that in 2008 all the local coin dealers (I don't know about large wholesalers at that time) had lots of inventory on hand. They didn't want to sell that low so they jacked up premiums quite a bit in response to the relatively fast decline, but there was still product if you wanted to pay. I remember buying lots of wonderful Merry Christmas type bars and paying $2.50 or so over spot when the paper price was $9 something. I thought that was outrageous to pay such a premium for crappy bars like those but in hindsight it was a great buy for me.

Fast forward to now, and the prices are spiking down like in 2008, but today there is no real supply like last time. Even for people who want to pay $3.50 or more for buffalo generics here, they are having to pay now and wait 4 weeks. People are paying $6+ over spot for ASEs they won't see till June. I am sure some coin stores across the country have "reserves" on hand they are selling if they can get large premiums, maybe thinking that they will replace said inventory in a month or so at the lower prices.

One local store that had been maintaining decent supplies relatively speaking was pretty much out of any silver bullion or regular junk silver as of close of business Saturday, except for higher priced stuff like slabbed ASEs, coins and such. I got there early and grabbed a couple more Kilo Koalas (1.75 over spot) before they disappeared (they had 4 left after I got mine).

I think things are going to be interesting in the near term in gold and silver. At the right time I will put some money into a silver ETF. Probably if it breaks 20 and there is no physical around for a decent premium. I would not be surprised to see them push the paper price into the high teens before the prices start rising again.

We may witness this year the actual breaking of the physical and paper price for good (I would consider a situation where the premium is $6 over spot (26%) for junk silver as TreasurePirate observed in his area, to be a sign that such a breaking is starting to get underway. I predict that there will be a problem with wholesalers being able to obtain enough product to satisfy the current and future orders that will accumulate over the next few weeks in retail silver bullion markets across the country. This is not due to any malfeasance on the part of the wholesalers, but instead due to lack of sufficient retail product to meet the orders. I think this will last for at least the next month or two (maybe longer ?)but IF and only IF the prices stay low. If the prices rise significantly from here, things will balance out much faster.

Gold is still available at decent premiums although not all the different types of bullion/coins are available like usual. I don't plan on buying any gold for a while due to lack of extra cash, but now would be a great time to grab some if available at good premiums.

Just my opinion.

Jim

 

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[TreasurePirate69]

I see that no one else has taken you up on this topic. I have started to respond several times but have canceled my responses because I don't know that I really have anything intelligent to add. I guess the more I think about it the more I think that the idea that there is a "paper" price and a "physical" price is really not quite right in today's market.

I would say that there are really three (or more) different prices.

1. There is the paper price which is actually based partly on the futures market.

2. There is the large scale investor price which comes very close to the paper price. This is also close to the wholesale price that you see occasionally. In another post you talked about an LCS friend who gave you the wholesaler price of 18.1x face (around $25) which is significantly better than the current retail price of 21X face (around $28).

3. There is the small scale investor price which currently differs greatly from the paper price due to speculation and price gouging. This is the price that small scale investors pay to APMEX, Provident, and your typical LCS.

The paper price is highly dependent upon the large scale investor price. This is because the large scale investor can simply buy futures and then demand delivery at the futures price. This gives them an avenue to purchase physicals very close to the paper price. This means that the paper price really can't deviate too far from the large scale investor price because if it does, those investors will demand delivery causing the paper price to climb again. Now the reality is that these large scale investors do not want to take delivery unless the spread between what they can sell the physical for and what they can just take their cash gains at is above a certain amount. Otherwise, it is a losing endeavor.

Now I know what you are thinking: "but there isn't enough silver on the COMEX to cover all of the paper contracts". This is absolutely true. But there doesn't have to be. Unless there is a major event that causes many large investors to demand delivery then the system continues to work. Remember, the world isn't black and white. There will be very few large scale investors taking delivery because it is just too cumbersome and costly. So the natural tendency is to just take the cash. This doesn't mean that a panic couldn't occur that crashes the entire futures market. But it would take a little more than a couple of investors demanding delivery.

This brings us to the small investor. Big investors don't buy from places like APMEX or eBay. But small investors do. Right now there is quite a bit of speculation by small investors rushing in hoping to cash in on the latest drop. Perhaps they think this is the last time they can buy at these prices (and maybe so). But the reality is that they are paying way more than what large investors and industrials are paying for silver. Some pundits look at this and claim that demand for silver is at an all time high. This may be true for small investors but may not be true for large investors. If even 10% of all of the small investors out there ran out and bought silver at any price then you would see what we are seeing now. The actual amount of silver in the market aimed at the small investor is actually quite small compared to the amounts available to industry and the large investor. So it is not unreasonable to see these types of shortages even though the price is still going down. But this doesn't mean that overall demand is at an all time high.

So in the end I think the "paper" price is much closer to what the true large scale investor and industrial price currently is. I also think the small scale investor demand has created a scenario of shortages of small scale investor silver and high prices. But industries and large scale investors are not having to pay these prices. Therefore, I think these premiums will start to fall within the next two months.

This of course all assumes that the price of silver stays roughly the same or even drops a bit.

 

[TheCoinKid]

Please continue the good work guys. I very much enjoy your well-reasoned, non-confrontational, and often opposing opinions and perspectives.

TKC

 

[Marchas45]

Your right on the paper game but I see it falling apart and I also see the physical price taking over and the premiums going sky high compared to the paper spot price. Keep Stacking.

 

[hannahgodfrey]

I would not like to predict or go with anybody’s prediction because of the current uncertainty in economic and monetary situation. The financial markets are extremely difficult to predict.

 

[vanguard]

vanguard

The market of gold is always subjected to the speculation as are other markets with the use of futures , contracts and derivatives. The industry of gold is always infamously unpredictable.Investors buy the gold as a protect or harbour against the governmental , public and cost-effective smooth forex problems.

 

[TheCoinKid]

My gut tells me that silver prices are headed for a further sell-off, and a steep one at that. I'm thinking down to something in the $10 range. No solid facts to back up the prediction, just a feel based on current and historical trends and expectations about the economy.

For me, it's mixed emotions regarding the expected drop. I have my share of ASEs and 90%ers and hate to see them decrease in value. On the other hand, I long for the days where I can again accumulate at the prices most of my investment was bought at. Most of my silver was acquired in 2001 and 2002. In those days, you could have a roll of walkers delivered to you house for around $60, and buy all of the ASE's you wanted for less than $9 each.

Long-term, I have to guess silver will continue to grow in value, but I don't expect to see record price levels again anytime soon. Like everyone else, if I really knew what the future held, I'd have something better to do with my time than lurk on these forums. One thing I'm fairly certain of, and statisticians/historians will back me up on this, is that all charts, no matter the subject, when viewed over the full cycle, tend to follow the same general pattern, continuing to accelerate at an ever-increasing rate, until ultimately dropping to zero.


FWIW,

TCK

 

[jim4silver]

My gut tells me that silver prices are headed for a further sell-off, and a steep one at that. I'm thinking down to something in the $10 range. No solid facts to back up the prediction, just a feel based on current and historical trends and expectations about the economy.

For me, it's mixed emotions regarding the expected drop. I have my share of ASEs and 90%ers and hate to see them decrease in value. On the other hand, I long for the days where I can again accumulate at the prices most of my investment was bought at. Most of my silver was acquired in 2001 and 2002. In those days, you could have a roll of walkers delivered to you house for around $60, and buy all of the ASE's you wanted for less than $9 each.

Long-term, I have to guess silver will continue to grow in value, but I don't expect to see record price levels again anytime soon. Like everyone else, if I really knew what the future held, I'd have something better to do with my time than lurk on these forums. One thing I'm fairly certain of, and statisticians/historians will back me up on this, is that all charts, no matter the subject, when viewed over the full cycle, tend to follow the same general pattern, continuing to accelerate at an ever-increasing rate, until ultimately dropping to zero.


FWIW,

TCK

As far as going to zero, I believe that with respect to stocks and other paper based assets. But commodities have some intrinsic value no matter what. Will oil ever be free, sugar, wheat, gold, silver, etc. History shows hard assets do well in times of currency or gov breakdowns. I don't know what the future holds, but what is going on now and the condition we are in financially as a country tells me that there will be more problems on the horizon like a TBTF failing and NOT being bailed out, that is not with gov or tax dollars. Maybe be bailed out with some other source of funds?

I guess if someone believes everything is going well now in the US and things will be even better, then there should be no real use for PMs as investments. However, right now there are many countries literally existing on "borrowed" (think QE and such) time (yes pun intended). Is that healthy or does it show promise for the future financially? If yes, then don't get PMs.

I guess they can push the paper price to zero, but good luck buying any bullion at that price. I hope my worries about what could happen turn out to be wrong, but I want to be properly hedged either way.

PS One good thing to do for a PM holder who is worried about falling prices is to hedge via an inverse silver or gold ETF with a small position just to help keep one's sanity if the price falls. They even have leveraged ones which can be great but watch out for "time decay" where the value of your shares can fall over time even if the price stays flat.

Just my opinion.

Jim

 

[TheCoinKid]

As far as going to zero, I believe that with respect to stocks and other paper based assets. But commodities have some intrinsic value no matter what. Will oil ever be free, sugar, wheat, gold, silver, etc. History shows hard assets do well in times of currency or gov breakdowns.

Agreed. My "dropping to zero comment" was intended to be more tongue-in-cheek than anything, being much broader in scale than just financial markets. In college, I had a biology professor, and then later a statistics professor, discuss the concept that virtually all historical charts, not matter the subject (populations, etc..), will follow the same general pattern over the long-haul, rapidly increasing the slope of acceleration until completely falling off a cliff. My related reference was esoteric, at best, and not intended suggest that the price of silver would reach zero during any forum member's lifetime.

Getting back on topic, I guess I have a bit more faith in our government and free market economy (or, at least what's left of the free market), than some others on this forum, given that it has served me well over the years. Having said that, I can't disagree with the warnings signs, and, as such, continue to hedge my bet. It just so happens that investing in silver acts as such a hedge and fits well with my coin collecting passion.

Regards,

TCK

 

[Marchas45]

For me, I'm forever optimistic and see the prices starting to the upside in the near future. If that doesn't happen then my kids will have a lot of silver to play with. Keep Stacking

 

[vanguard]

When the price of gold is hanging in the upper stratosphere , investors start falling back in love with the coins. Prices are subject to change can reflect current market conditions.*

 

[Marchas45]

The Paper Spot Price does not reflect current Physical Market conditions. Mmmmmmm I wonder why? I guess it doesn't matter.

 

[vanguard]

Vanguard

I guess all dynamics are out the window, whatever that means.* The gov is involved in the greatest manipulation of all: the price of money.It is the threat of default by the precious metal exchanges that keeps large investors from investing at all.*