SILVER

[jerpy]

Checkout goldprice.org

 

http://goldprice.org/gold-silver-ratio.html

 

Click on "Live Gold Price". You can then choose from "Instruments"... and overlay gold silver prices etc.

 

Ah thanks, forgot about them, monitored their ebay guides before.

[romans holiday]

I don't think it's outside the realms of possibility for silver to visit $16... at which point I'd be backing up the truck.

 

 

[G0ldfinger]

I don't think it's outside the realms of possibility for silver to visit $16... at which point I'd be backing up the truck.

...

I think it could as well visit $26, and never look back, at which point some will wish they'd backed up the truck.

[Pixel8r]

I don't think it's outside the realms of possibility for silver to visit $16... at which point I'd be backing up the truck.

The time to back your truck up was in October 08 in the height of the JPM manipulation after their inheritance of the Bear Sterns short position. I think the price of silver is just about to be rapidly heading higher to somewhere around $25 by christmas.

 

The was talk last night on LeMetropoleCafe about China and India buying in London and that causing the surge into options expiry, which is a very unusual occurrence. Imagine all that silver that has been sold short (100 to 1) now about to be called for delivery, there is no way the price of silver is about to go down to $16.

 

If rather than focusing so much on your deflationary prognosis you focused a bit on the massive market manipulation in the gold and more so silver, you would be able to better forecast the price movements.

[Pixel8r]

Silver only just held below $19 this option expiry.

 

From:

[romans holiday]

If rather than focusing so much on your deflationary prognosis you focused a bit on the massive market manipulation in the gold and more so silver, you would be able to better forecast the price movements.

Well, I predicted silver would underperform gold which it has. I also thought it would remain volatile and wouldn't really go anywhere to the upside for a while, and that the price is vulnerable to a the double dip, which is still threatening. This is all still relevant to silver, and looking at the chart $16 is very feasible on a sell-off

 

According to some, silver was supposed to explode to the upside at any time over the last few years... but the reason it hasn't is due to market manipulation. It makes just as much sense by that logic to say that silver won't explode to the upside beause of market manipulation.

 

Silver should do well in the end, even if it has to be dragged up by gold, which will do better. It would probably only get down to $16 if gold sold off a bit.

[romans holiday]

I think it could as well visit $26, and never look back, at which point some will wish they'd backed up the truck.

Sure, could do. But this doesn't concern me much as my core bullion holding is in gold.

 

Even if silver did spike to a new level, it would most probably stay volatile and dip back to where it currently spikes.

 

 

[Pixel8r]

Well, I predicted silver would underperform gold which it has. I also thought it would remain volatile and wouldn't really go anywhere to the upside for a while, and that the price is vulnerable to a the double dip, which is still threatening. This is all still relevant to silver, and looking at the chart $16 is very feasible on a sell-off

 

According to some, silver was supposed to explode to the upside at any time over the last few years... but the reason it hasn't is due to market manipulation. It makes just as much sense by that logic to say that silver won't explode to the upside beause of market manipulation.

 

Silver should do well in the end, even if it has to be dragged up by gold, which will do better. It would probably only get down to $16 if gold sold off a bit.

Silver has outperformed gold over the last year by 1.93%, so you weren't right on that. I bet you wish you held on to the silver you sold at around $16 I seem to remember, you are now saying you would "back up the truck" at $16.

 

Gold 26/08/09 PM Fix = $940.50

Gold 26/08/10 PM Fix = $1237.00

 

1237.00 - 940.50 / 940.50 x 100 = +31.52%

 

Silver 26/08/09 Fix = $14.32

Silver 26/08/10 Fix = $19.11

 

19.11 - 14.32 /14.32 x 100 = +33.45%

 

The trouble with manipulation is that it can only go on for a certain amount of time, then when it comes on top the price explodes. I CFTC position limits will come in over the next year and the likes of JPM will have to reduce their shorts. Also the likes of the Chinese and Arabs are calling their bluff currently, silver can only be sold short at 100 to 1 ratio if no one calls for delivery, things soon unwind when they do.

 

I also showed you yesterday that your other "safe haven" was out performed by both gold and silver, but you failed to respond.

 

Gold AM fix 1/2/10 = $1082

Gold AM fix 25/8/10 = $1237.50

 

$1237.50 - $1082 / $1082 x 100 = +14.37% (Value - Cost / Cost X 100 = gain/loss %)

 

I am very glad that I bought gold over dollars as a safe haven investment, a 14% return over the fiat "safe haven" is an extremely good return.

 

Silver Fix 1/2/10 = $16.23

Silver Fix 25/8/10 = $18.63

 

$18.63 - $16.23 / $16.23 x 100 = +14.78%

 

Even better from silver, which doesn't make sense as it was supposed to deflate.

[romans holiday]

Silver has outperformed gold over the last year by 1.93%, so you weren't right on that. I bet you wish you held on to the silver you sold at around $16 I seem to remember, you are now saying you would "back up the truck" at $16.

Nope, perfectly happy I swapped most my silver for gold. Gold's price has proved to be a lot "stickier" to the upside than silver. Don't see how you can argue with this if you looked at the charts

 

Gold 26/08/09 PM Fix = $940.50

Gold 26/08/10 PM Fix = $1237.00

 

1237.00 - 940.50 / 940.50 x 100 = +31.52%

 

Silver 26/08/09 Fix = $14.32

Silver 26/08/10 Fix = $19.11

 

19.11 - 14.32 /14.32 x 100 = +33.45%

The fun hasn't even started yet. The price of silver has shown to be a lot more vulnerable when markets start cratering. Once again look at the longer term charts. Try not to focus too much on momentary nominal figures, and arbitrary time frames, and look at the bigger picture instead [by the time you'd worked out your calculations and posted, the silver price was already back below $19 ].

 

 

I also showed you yesterday that your other "safe haven" was out performed by both gold and silver, but you failed to respond.

By having a decent position in US dollars one can take advantage of deleveraging when it occurs. Because of a deflationary dynamic, the dollar will strengthen when markets tank. That will be the time to buy silver. In the short/ medium term, dollars are worth holding for trade.

 

 

[Pixel8r]

By having a decent position in US dollars one can take advantage of deleveraging when it occurs. Because of a deflationary dynamic, the dollar when strengthen when markets tank. That will be the time to buy silver. In the short/ medium term, dollars are worth holding for trade.

Where is the deflation? What happens if the deflation you are waiting for doesn't happen?

 

As far as I can see the FED is trying to QE whenever it can to stop deflation. I think there will be a currency crisis very soon and the dollar and bond bubbles will burst.

 

Deflation Delusion Continues as Economies Trend Towards High Inflation

 

Delusional deflationists right from the Bank of England MPC, through to the mainstream press for well over a year have pushed the mantra of ongoing debt deleveraging deflation everywhere, everywhere that is than appears in where it counts i.e. the actual INFLATION indices, where inflation is on the rise right across the world as illustrated in the UK by the persistent failure of the Bank of England to control UK inflation that remains above the banks CPI 3% upper limit. Even Greece that really is in an depression is experiencing inflation at above 3%, whilst the US CPI continues to inflate at a more modest 1.2% as summarised below for key world economies.

 

Global CPI Inflation Rates

 

India 13.7%

Argentina 11.2%

Russia 5.5%

Brazil 4.6%

China 3.3%

UK 3.1%

Australia 3.1%

Euro zone 1.7%

USA 1.2%

Japan -0.7%

[romans holiday]

Where is the deflation? What happens if the deflation you are waiting for doesn't happen?

 

As far as I can see the FED is trying to QE whenever it can to stop deflation. I think there will be a currency crisis very soon and the dollar and bond bubbles will burst.

 

Deflation Delusion Continues as Economies Trend Towards High Inflation

If you're really interested, I've posted my views here, which are neither conventionally "inflationist" or "deflationist". It looks at the old idea of money illusion, which can make local CPI figures illusory... but hey, the inflationists always knew that.

 

http://www.greenenergyinvestors.com/index....t=0&start=0

 

1] Money illusion was first coined by Keynes, and Irving Fisher wrote a book on it. People are thought to be “irrational” towards money – to lack the ability to rationally distinguish between the nominal and real value of money. They are unable to see that the value of money units could change over time. This can lead to all manner of problems, for example, as Keynes noted, in depressions employees are often reluctant to accept reduced wages - less money units - even as the purchasing power of money increases against the decline in prices. This can lead to higher unemployment. On the other hand, Fisher - with his interviews from early 20s Germany - noted people were unable to perceive loss of purchasing power in their money. Of course, investors today think themselves under no illusion when it comes to money, indeed it is the very rationale for investing - cash depreciates. Yet, investors have solely in mind Fisher’s example of money illusion here where money illusion is simply the equation of money units with money itself, or the more nebulous idea of purchasing power. It is difficult to talk of different “forms” of money illusion because the sophisticated investor, who understands themselves not to suffer money illusion, sees “through it” with rational expectation [Fisher called it foresight]. Of course, as has been outlined, there are two alternative rational expectations; a “deflationary” expectation where units appreciate, and an “inflationary” expectation, where units depreciate. If genius consists in spinning a web and catching everyone in it, then the genius of Friedman is to have reduced the field of two expectations to one. Post-Friedman, rational expectation was reduced and equated with the inflationary kind; deflation was not an option due to a supposed monopoly on expectation, and of course the mechanics of monetarist policy.

 

<a href="http://www.greenenergyinvestors.com/index....t=0&start=0" target="_blank">http://www.greenenergyinvestors.com/index....t=0&start=0

</a>

[Pixel8r]

If you're really interested, I've posted my views here, which are neither conventionally "inflationist" or "deflationist". It looks at the old idea of money illusion, which can make local CPI figures illusory... but hey, the inflationists always knew that.

 

1] Money illusion was first coined by Keynes, and Irving Fisher wrote a book on it. People are thought to be “irrational” towards money – to lack the ability to rationally distinguish between the nominal and real value of money. They are unable to see that the value of money units could change over time. This can lead to all manner of problems, for example, as Keynes noted, in depressions employees are often reluctant to accept reduced wages - less money units - even as the purchasing power of money increases against the decline in prices. This can lead to higher unemployment. On the other hand, Fisher - with his interviews from early 20s Germany - noted people were unable to perceive loss of purchasing power in their money. Of course, investors today think themselves under no illusion when it comes to money, indeed it is the very rationale for investing - cash depreciates. Yet, investors have solely in mind Fisher’s example of money illusion here where money illusion is simply the equation of money units with money itself, or the more nebulous idea of purchasing power. It is difficult to talk of different “forms” of money illusion because the sophisticated investor, who understands themselves not to suffer money illusion, sees “through it” with rational expectation [Fisher called it foresight]. Of course, as has been outlined, there are two alternative rational expectations; a “deflationary” expectation where units appreciate, and an “inflationary” expectation, where units depreciate. If genius consists in spinning a web and catching everyone in it, then the genius of Friedman is to have reduced the field of two expectations to one. Post-Friedman, rational expectation was reduced and equated with the inflationary kind; deflation was not an option due to a supposed monopoly on expectation, and of course the mechanics of monetarist policy.

That above is not at all relevant to what is going on currently. There is a depression, but there is no deflation except in certain assets bought with credit. There is a large amount of inflation in the things needed to live though, food, energy, taxes etc.

 

What is the point trying to compare this depression to the 1930's when there was real deflation then and none now. There was deflation in the 30's because the money system was gold backed and they couldn't print more at will. Now the currencies are fiat and any problem is being printed away and debt monetized. The governments are blowing one more giant bubble at the moment, that of government debt in the bond market, this will pop with a currency crisis. What is deflationary about a currency losing purchasing power???

 

Keynes is saying above that workers refuse to take pay cuts as the currency purchasing power increases. How is that relevant to now, the purchasing power of money is dwindling not increasing with negative interest rates???

[romans holiday]

That above is not at all relevant to what is going on currently. There is a depression, but there is no deflation except in certain assets bought with credit. There is a large amount of inflation in the things needed to live though, food, energy, taxes etc.

 

What is the point trying to compare this depression to the 1930's when there was real deflation then and none now. There was deflation in the 30's because the money system was gold backed and they couldn't print more at will. Now the currencies are fiat and any problem is being printed away and debt monetized. The governments are blowing one more giant bubble at the moment, that of government debt in the bond market, this will pop with a currency crisis. What is deflationary about a currency losing purchasing power???

 

Keynes is saying above that workers refuse to take pay cuts as the currency purchasing power increases. How is that relevant to now, the purchasing power of money is dwindling not increasing with negative interest rates???

 

 

http://www.greenenergyinvestors.com/index....st&p=176763

1] From Deflation to Hyper-deflation

 

Was it Nietzsche who said that history is first seen as tragedy and then repeated as farce? And there is definitely a farcical element to the inflation/ deflation debate as it has all been seen before. In the wake of the 30's Depression, Irving Fisher [a pioneer of neoclassical economics] left behind his equations and normative theories - or how people would act if they were rational - and went on to outline his more pragmatic descriptive theory of debt deflation. This theory focused on the actual behavior of economic agents. As mentioned previously, theory is distinguished from dogma by its ability to be falsified, and monetarism has been well falsified before in the Depression. The theory has a long history, one that Keynes also broke with, and buried, faced with the cold hard facts of a depression. A memory-dulling long passage of time was required before it could be once again be patched up and rehabilitated by Friedman. To do so, he had to argue that the depression would have been prevented if only the Fed had been more aggressive in money supply. His view was US-centric, uni-causal, doctrinaire, and not without its critics[Kindleberger is well worth a read in this regard]. Yet monetarism was soon once again established due no doubt to its attractive simplicity and political seductiveness; growth could be controlled and managed by controlling and managing the money supply [one has to wonder if there is a self-delusional aspect to cognitive illusions].

 

So we are back to depression economics. If we want to make sense of today and predict the near future, we should be looking to the depression and boom/ bust economists of the past such as Keynes, Fisher, Von Mises, and Minsky. The common factor here is their rejection of the dominance and centrality of money supply in favor of a more central role for human behavior and psychology. Once the shock of a financial crisis hits, it’s the psychological demand for money [cash and not to be confused with credit], the “liquidity preference”, which makes the supply side of money [credit] redundant. With the ensuing liquidity trap, the velocity of money decreases leading to downward pressure on prices. As money becomes more valued by people and accordingly saved and hoarded, money becomes more valuable relative to assets. Neither does it matter whether money is fiat or gold-backed here, what matters is the reality of existing debt, and how that debt becomes more burdensome. Given that our modern currency system is credit based, the positive stock of money tends to depreciate in a period of expansion [inflation expectation and high money velocity aids this]. However, and this is the Achilles heel, in a period of contraction or “debt deflation”, the opposite occurs, where cash becomes more valuable and appreciates. The sea-change from expansion to contraction of credit leads to a prolonged period of “short covering” of the currency [for what else is a bank loan than a shorting of the currency] as people pay down debt and also save. Money velocity - the average frequency with which money is circulated in the real economy - decreases. Central banks may seek to maintain expansion and growth by expanding their own balance sheets. Yet, they are not really so much “printing money” here as “shorting the currency” once again [this time using a public balance sheet] by creating yet more debt and money. Positive digital money may be created, yet this can not so easily be multiplied into cash, via loans, into the real economy once a contraction has set in. The demand for credit, for both consumption and assets decreases as the demand for cash [the “liquidity preference”] increases. The newly created central bank money only serves to recapitalize banks, on a slippery slope, even as their collateral values continue to deteriorate.

 

So is that it, is the debate over… is it just a matter of saying deflation, selling everything, and bunkering down in money? If only it were that simple. Breaking with the conventions of the inflation camp need not in turn entail that one has to subscribe to the conventions of the deflation camp.

 

 

Deflationists and Money Illusion

 

Deflationists are right to think of money units as ideally appreciating against goods and assets in a deflationary environment, but often fail to consider the wider forces that currencies are today subjected to. With an abstract model of a single economy and currency in mind, it does indeed seem a simple case of deflation, yet the reality is quite different; currencies are not “hermetically sealed” but are traded akin to assets on the international foreign exchange market. This market is gigantic, dwarfing the bond markets, which in turn dwarf the equity market. This puts currencies in quite a different light as the monetary value of currencies can be just as much in flux as it is in assets. If the monetary value of say local property is relative to [and priced by] a local currency, the monetary value of that currency is also relative to [and priced by] other currencies. Unless this macro point is kept in mind, another form of money illusion can gain a foothold here [perhaps novel to our times] which I’ll term “state-centric” money illusion. It works as follows; say Joe’s [local] money units can buy 10% more local property than they could a year ago. He therefore believes his money has appreciated 10%. But this might not be the case. If Joe’s local currency had in turn depreciated against other stronger currencies in the foreign exchange market, then his money has also depreciated. If Joe had bought a stronger currency then his money may have appreciated 20% against local property [if Joe had an "investor's" mindset, besides a saver's, he would have done this]. But it gets worse; even though there may be deflationary pressures at work, a local currency may not appreciate against local property at all if that currency is at the same time depreciating at an even greater rate against other currencies. A weakening currency could have the effect of neutralizing downward pressure on prices, with prices remaining relatively stable at the nominal level [a practical example of this would be foreign buyers finding property more attractive to buy when the local currency depreciates…putting upward pressure on nominal prices]. In this situation the saver, has to behave like an “investor”; it is not enough to just save “money” [the local currency], they need to save money in the strongest currencies. Given the realities of our current international monetary system, where currencies trade in a global market, focusing on local prices may prove illusory. It is money illusion, from the investor’s perspective, because the real value of money needs to be conceived within a global setting, not within a local one.

 

Due to the relative nature of a local currency, the investor who is concerned with real value can not afford to be fixated on prices as priced in the local currency. He has to take an international approach, and one that centers now on monetary value not prices. Even though the inflation/ deflation debate is ostensibly and rationally about monetary phenomena, it often looks for confirmation of either an inflationary or deflationary outcome in prices. As I have outlined, focusing on local prices within a global economy is problematic. Accordingly, I’d argue that given the novel circumstances a retreat from a price-centric approach to a value-centric approach is required. This brings me to my theory of hyper-deflation, which seeks to escape both forms of money illusion that the inflation and deflation camps are susceptible to.

 

Hyper-Deflation Theory and Exiting Money Illusion

 

Having established that monetary value can erode from both assets and currencies, hyper-deflation is simply the deflation of monetary value from all monetary assets. The “hyper” in hyper-deflation theory conceives of particular currencies as themselves monetary assets of both investors and central banks, and recognises that when these assets are traded in a market, they are capable of large swings in value.

 

Hyper-deflation does not necessarily mean that the local prices of goods and assets will collapse; this would be to fall back into a price-centric approach. This can be illusory in a hyper-deflation due to the fact that the pricing mechanism, namely the local currency, could be losing value [internationally on the fx market] at the very same time local goods and assets are losing value [locally in a deflationary environment]. To put it another way, local prices can be caught in the cross currents of first, downward pressure due to demand destruction, and second, upward pressure due to a depreciating currency. This could conceivably lead to a negation in any clear price trend. It is this international dimension of current money that necessitates the move to a value-centric approach. A value-centric approach is also a macro-economic one, which goes beyond a particular economy and correlates well with the free floating nature of currencies.

 

Note also that the shift to a value-centric approach also creates a unity, or a synthesis, out of the previously disparate and incommensurable logics of the deflation and inflation camps:

 

Insight of the deflationists: monetary value is eroding in assets

Insight of the inflationists: monetary value is eroding in currencies [some more than others I would add]

The unity of hyper-deflation: monetary value is eroding in all [to be qualified] monetary assets including currencies.

 

As outlined in the first section, it is the role of theory to combine all the phenomena is a unifying whole as best it can. By focusing on monetary value, a coherent theory can be developed where the valid insights of both camps can be recognized. Of course, for this theory to make coherent sense and in turn pragmatically work in providing a practical investment strategy, there needs to be some constant, something by which monetary value can be measured; how could you measure the erosion of monetary value if ALL monetary assets were eroding in value? I’d argue that for pragmatic reasons, this has to be gold.

 

 

Gold as the Base for Measuring Monetary Value in a Hyper-deflation

 

To have a theory involves there being something which is constant. If absolutely everything was relative, it would be impossible to make rhyme or reason out of the flux of appearances. With monetary value understood to be eroding out of both assets and currencies, I’d argue that gold has to perform this "bedrock" function, and not for theoretical reasons but for practical ones [keeping in mind that money performs primarily a practical function]. It was the aim of the monetarists to create a scientific [theoretical] currency. In the face of yet another depression, it is becoming obvious this experiment has failed. It seems there is a dimension to money that escapes the pure rational analysis of mathematical theorems. Economists of a mathematical bend first assumed ceteris paribus “all other things being equal”. The problem is “irrational” populations, which lie at the centre of economic behavior, fail to respect this maxim. Rather than find error in populations [which only megalomaniac ideologues do] it is best to find error in the assumptions. Why this should be, should have been obvious to the economists; valuation, the way in which people value things, can not be perfectly measured, stabilized, quantified, and sterilized. Defying the scientific method, there is an irreducible idiosyncratic quality to the way in which our species place value on things. As less conventional economists have recognized, unpredictable “animal spirits” can turn the most carefully laid out tables upside down. And yet, if history was taken seriously, it is so predictable… it is only the a-historical mathematic models which can not predict human behavior. Which brings us to gold: if economy is like history and cyclical, we can see that gold always performs well in financial crises. This is not because gold is the most rational currency, but because it is the strongest symbol of money. With symbolic power, its monetary basis is grounded more in the collective imagination of the species than in its reason, or should I say in the prevailing ideology. With uncertainty hanging over both modern currencies [and the ideology on which those currencies are based] investors and central banks will start to move into gold in order to preserve liquid capital. In the process of doing so, the price is bid up and gold is informally “revalued”. This revaluation does not just involve putting a higher price on gold but monetizing it. This can also be considered a “currency event”, where, for practical reasons, gold shifts from being thought a commodity to being thought a currency. This is not a sudden event, but a long drawn out process - though at times volatile – and is reflected in the slow and steady strengthening of gold as priced in currencies, which, from a hyper-deflationary perspective, is only reflecting the slow and steady erosion of value from currencies [devaluation] into gold.

 

In a global debt deflation, or a hyper-deflation, there are a few things going on at different levels. This makes valuation in terms of gold necessary:

 

- the short covering of local currencies at the local level where local currencies appreciate against local assets.

 

- the short covering of funding currencies at the centre of carry trades… this would lead to the appreciation of these central funding currencies against peripheral ["risk on"] currencies.

 

- the selling of currencies for gold as investors and central banks become concerned about the levels of public debt expansion via the shorting of the currency on central bank balance sheets, being required to offset the contraction in the private sector.

 

It is for this third reason that gold will continue to perform well against all currencies [though better against some than others] even as local currencies perform well against local assets. Whereas you would expect a steadier and more measured rate of strengthening against central reserve currencies, a more “staged” and volatile strengthening should be seen against peripheral currencies; these currencies would depreciate against central ones, and doubly so against gold. Given that local assets could well also depreciate against their pricing currency, then asset depreciation could quadruple against gold.

 

Think of a series of concentric circles. In the outer circle are assets depreciating against a minor currency, next is a minor currency depreciating against a major currency, finally in the centre is a major currency depreciating against gold. In this hyper-deflationary scenario, the ratios of gold/Dow, and gold/ property we all know so well are relevant and will hold. What does not hold is the idea that currencies will hyper-inflate with hyper-inflationary theory on the one hand, or that the price of gold will crash with deflationary theory on the other. The most likely course is a continuation of the one that has been seen for the past few years, where gold steadily and incrementally strengthens against all currencies.

[romans holiday]

That above is not at all relevant to what is going on currently. There is a depression, but there is no deflation except in certain assets bought with credit. There is a large amount of inflation in the things needed to live though, food, energy, taxes etc.

The point is money illusion can cut both ways. Money illusion is the tendency to equate units with money/ purchasing power. In an inflationary period, the danger is to equate money with the numerator.... the individual units. In a deflationary period, the danger is to equate money with the denominator... the total amount of units [money supply figures]. This is the mistake inflationists are making today [due primarily to the ideological dominance of monetary theory, where "rational expectation" - which actually can be either inflation or deflation expectation - has been reduced to just inflation expectation]. They are looking at the increase in base money and then assuming this automatically depreciates the currency [against assets]. Not necessarily so. If you're interested in reading my reasons for this:

http://www.greenenergyinvestors.com/index....st&p=176193

 

 

What is the point trying to compare this depression to the 1930's when there was real deflation then and none now. There was deflation in the 30's because the money system was gold backed and they couldn't print more at will. Now the currencies are fiat and any problem is being printed away and debt monetized. The governments are blowing one more giant bubble at the moment, that of government debt in the bond market, this will pop with a currency crisis. What is deflationary about a currency losing purchasing power???

 

Keynes is saying above that workers refuse to take pay cuts as the currency purchasing power increases. How is that relevant to now, the purchasing power of money is dwindling not increasing with negative interest rates??

 

This has been discussed before. I don't think things are so black and white.

 

http://www.greenenergyinvestors.com/index....st&p=180196

Yes, but in regards to the perception that dollar was backed by gold, keep in mind that both countries and investors were nervous about whether the US would actually stay on gold [which was wise given that so many countries had gone off]. The general population wouldn't have given much "fundamental" thought to the currency as they don't today. Most, if worried, ran to the bank for dollars which they stuffed under their mattress... evn though those dollars were soon to be devalued by decree/ fiat. The same forces are at work today, but consider how much more difficult it is to actually devalue a currency that floats in the market as opposed to one backed by gold. Roosevelt could simply by decree, confiscate the gold, and then devalue the dollar against gold, a huge windfall for the treasury. Today, market partipants may keep buying dollars [to pay down debt/ safe haven etc] even as the Fed wants to devalue it. This "short-covering" of the currency will only serve to strengthen it... just as has happened with the Yen. Those same market participants and others besides [the real big players], investors and central banks, will also be buying gold due to concern about rising debt, and mounting currency instability. So dollar up against weaker currencies... and higher gold prices in all currencies.

 

 

http://www.greenenergyinvestors.com/index....st&p=179966

 

What is deflationary about a currency losing purchasing power???

I think the Dow will go to 5000 over the next few years, and property prices will continue to fall.

[romans holiday]

I bet you wish you held on to the silver you sold at around $16 I seem to remember, you are now saying you would "back up the truck" at $16.

When I changed my mind on silver, and no longer saw it as simply a "leverage" on gold, I swapped an overweight core position in silver to gold. Involved here was a change of strategy and a reduction of perceived risk. The price at that time was $16, but this is irrelevant as I was buying gold with silver. I think the gold/ silverratio was somewhere in the low 60s. Once again, it was not about maximizing the trade on the ratio, but reducing risk by going to gold. A core position should be the least risky one.

 

Another smaller silver position that I did hold onto, in order to trade on the "periphery", was sold at 17.90 six odd months ago, and this time for dollars. This trade aims at accumulating dollars [not silver] as a hedge against a very large core bullion holding in gold [over 50%]. Because of this, I will be more conservative in my trade... hence the trade out at 17.90. Silver has in the course of these past six months remained volatile to both the up and down side, and hasn't really gone anywhere. This latest move up in silver looks like just another momentary spike.... and I still half expect it to come down to 16 odd. That said, it could break either way, I'm not dogmatic about it and consider both currencies good to hold.... for the meantime. This trade is also a hedge against deleveraging and a double dip should we see it.

 

If you are going to take issue with someone's investment/ trading decisions, I think you need to consider the context, rationale, and strategy within which those decisions were made... instead of just taking arbitrary numbers out of context.

 

 

[electroweak]

When I changed my mind on silver, and no longer saw it as simply a "leverage" on gold, I swapped an overweight core position in silver to gold. Involved here was a change of strategy and a reduction of perceived risk. The price at that time was $16, but this is irrelevant as I was buying gold with silver. I think the gold/ silverratio was somewhere in the low 60s.

...

That said, it could break either way*, I'm not dogmatic about it and consider both currencies good to hold.... for the meantime. This trade is also a hedge against deleveraging and a double dip should we see it.

...

If you are going to take issue with someone's investment/ trading decisions, I think you need to consider the context, rationale, and strategy within which those decisions were made**... instead of just taking arbitrary numbers out of context.

*I think we might know which way it has broken..

 

** Credit to you for actually saying what you were doing - selling around $15 iirc. When I "backed up the truck" in Nov'08 it was around $10, and again the truck made reversing noises (BEEP BEEP BEET TCSSHHH) when we went into the $14's in early Feb'10. I still have those positions - not sold an ounce. Maybe I will be wrong, but I agree with Ben Davies (It gets interesting at about 5m13s.):

http://kingworldnews.com/kingworldnews/Bro...3A25%3A2010.mp3

 

His assertions:

1. The collapse in silver is not going to happen this time in deleveraging mode if the economy tanks into a double dip.

2. Dynamic going forward: there is not enough silver to go round

3. Silver has been suppressed.

4. Over the last 60 yrs. inventory has gone from 10bn-->6Bn ounces, and recently has become just 500m ounces.

5. Production/demand imbalances: currently demand exceeds supply by about 150->200m oz p.a.

6. Silver has been consumed in such a fashion that it is non-recoverable.

7. Conclusion: silver is going to blow. up.

 

 

[romans holiday]

Neither does the trend on the ratio look that great.

 

 

[romans holiday]

*I think we might know which way it has broken..

Still a bit too early to say imo [look at the massive run up in May that went nowhere]. Silver has shown a tendency to spike then quickly lose its gains. If it can stay above 19 for a few weeks......

 

** Credit to you for actually saying what you were doing - selling around $15 iirc. When I "backed up the truck" in Nov'08 it was around $10, and again the truck made reversing noises (BEEP BEEP BEET TCSSHHH) when we went into the $14's in early Feb'10. I still have those positions - not sold an ounce. Maybe I will be wrong, but I agree with Ben Davies (It gets interesting at about 5m13s.):

http://kingworldnews.com/kingworldnews/Bro...3A25%3A2010.mp3

 

His assertions:

1. The collapse in silver is not going to happen this time in deleveraging mode if the economy tanks into a double dip.

2. Dynamic going forward: there is not enough silver to go round

3. Silver has been suppressed.

4. Over the last 60 yrs. inventory has gone from 10bn-->6Bn ounces, and recently has become just 500m ounces.

5. Production/demand imbalances: currently demand exceeds supply by about 150->200m oz p.a.

6. Silver has been consumed in such a fashion that it is non-recoverable.

7. Conclusion: silver is going to blow. up.

Silver has worked well for you thus far. I assume you also have a core holding in gold.

 

I sold silver for gold at around the 60 ratio [that ended up being a good "trade" though it was more about reducing risk in my core holding].

 

A smaller tradable holding of silver was then sold for dollars at 17.90, which I'm still happy with given the context of that trade as posted above [2891]. As this year has progressed, silver has not really gone anywhere, yet neither has it tanked. Believe it or not I'm actually quite bullish on silver [you'd have to be if you were bullish on gold right?] but may appear overly bearish at times in order to make some obvious points; that I think silver is not quite gold [pretty good nevertheless], and is very volatile.... especially in this environment.

 

I think it would take a good hit to gold to see silver come down to 16 odd now. This may take another round of deleveraging... not sure why Davies thinks silver would hold up... maybe he thinks gold will also hold up. And I think it may come down to how gold performs.... has it become monetized enough to remain free of deleveraging. If so, then silver should hold up well on the coat-tails of gold. I'm a bit wary of fundamental supply/ demand arguments as they can be trumped by the dynamic of deleveraging. Even so, if silver were to take a hit, it would no doubt bounce back again. Which is why I'm still interested in it.

 

I'm not really quite sure where the fundamental disagreement is over silver. I mean, I think silver will perform well against most currencies and assets [even if it underperforms gold]. I think it's more a case of different ways to skin a cat.

[Pixel8r]

Neither does the trend on the ratio look that great.

To give any of you that read RH the another outlook, here's another chart.

 

This chart shows the massive increase in the gold/silver ratio in August '08 when JP Morgan inherited the Bear Sterns silver short position and crated the market to clear some of them. It also shows the ever tightening upper and lower resistance, which shall be coming to a point very soon.

 

If we get continued positive action in silver next week this will lead to silver breaking out to the downside on the ratio with silver gaining more strength than gold.

 

 

[electroweak]

Still a bit too early to say imo [look at the massive run up in May that went nowhere]. Silver has shown a tendency to spike then quickly lose its gains. If it can stay above 19 for a few weeks......

 

 

Silver has worked well for you thus far. I assume you also have a core holding in gold. *

 

I sold silver for gold at around the 60 ratio [that ended up being a good "trade" though it was more about reducing risk in my core holding].

 

A smaller tradable holding of silver was then sold for dollars at 17.90, which I'm still happy with given the context of that trade as posted above [2891]. As this year has progressed, silver has not really gone anywhere, yet neither has it tanked. Believe it or not I'm actually quite bullish on silver [you'd have to be if you were bullish on gold right?] but may appear overly bearish at times in order to make some obvious points; that I think silver is not quite gold [pretty good nevertheless], and is very volatile.... especially in this environment.

 

I think it would take a good hit to gold to see silver come down to 16 odd now. This may take another round of deleveraging... not sure why Davies thinks silver would hold up**... maybe he thinks gold will also hold up. And I think it may come down to how gold performs.... has it become monetized enough to remain free of deleveraging. If so, then silver should hold up well on the coat-tails of gold. I'm a bit wary of fundamental supply/ demand arguments as they can be trumped by the dynamic of deleveraging. Even so, if silver were to take a hit, it would no doubt bounce back again. Which is why I'm still interested in it.

 

I'm not really quite sure where the fundamental disagreement is over silver. I mean, I think silver will perform well against most currencies and assets [even if it underperforms gold]. I think it's more a case of different ways to skin a cat.

* oh yeah. I am about 70/30 Gold/Silver in liquid investments.

** I tthink Ben feels that the "not enough to go round" will trump the deleveraging. I agree.

 

[romans holiday]

* oh yeah. I am about 70/30 Gold/Silver in liquid investments.

** I tthink Ben feels that the "not enough to go round" will trump the deleveraging. I agree.

I suggest from henceforth all posters should place in their signatures in percentage terms what investments/ currencies they hold. This would avoid a lot of confusion and misinterpretations. Such a simple break-down speaks volumes.

 

Me:

50% gold

10% silver

40% dollars.

[Pixel8r]

Nope, perfectly happy I swapped most my silver for gold. Gold's price has proved to be a lot "stickier" to the upside than silver. Don't see how you can argue with this if you looked at the charts

 

 

The fun hasn't even started yet. The price of silver has shown to be a lot more vulnerable when markets start cratering. Once again look at the longer term charts. Try not to focus too much on momentary nominal figures, and arbitrary time frames, and look at the bigger picture instead [by the time you'd worked out your calculations and posted, the silver price was already back below $19 ].

 

 

 

By having a decent position in US dollars one can take advantage of deleveraging when it occurs. Because of a deflationary dynamic, the dollar will strengthen when markets tank. That will be the time to buy silver. In the short/ medium term, dollars are worth holding for trade.

 

 

The figures that I provided above were not from an arbitrary time frame, they were performance over the last year from the silver & gold fix price, which is the timescale for your changes of selling silver for dollars and gold. If you had stayed in silver rather than building your gold and dollar positions you would have done better over the last year. Perhaps that explains why you are commenting that you would back up the truck if the silver price went back to $16, as you now realise the mistake.

 

We can visit this again in another year if you like, I sure silver will outperform both gold and dollars again but time will tell. The deleveraging you are waiting for already occurred in '08, what makes you so sure it will happen again?

 

As you can see from the chart below silver has outperformed gold all year;

 

 

 

[romans holiday]

The figures that I provided above were not from an arbitrary time frame, they were performance over the last year from the silver & gold fix price, which is the timescale for your changes of selling silver for dollars and gold.

? I sold my silver only six months ago. If you are going to bother with my views about silver, try also to bother to get the facts right.

 

If you had stayed in silver rather than building your gold and dollar positions you would have done better over the last year. Perhaps that explains why you are commenting that you would back up the truck if the silver price went back to $16, as you now realise the mistake.

 

We can visit this again in another year if you like, I sure silver will outperform both gold and dollars again but time will tell. The deleveraging you are waiting for already occurred in '08, what makes you so sure it will happen again?

 

As you can see from the chart below silver has outperformed gold all year

You obviously have a difficulty with understanding the various motives someone might have for holding gold, holding silver, and holding US dollars. And again, the difference between a core position which entails the least risk, and a peripheral/ speculative/ trading position which entails more. Not to mention hedging. My decision on silver made perfect sense, given the logic of my position, and continues to do so. How can I say it was "wrong". Rather, it just doesn't make sense to you because you buy into a logic which consists of the single idea of hyper-inflation.

 

 

It is quite irrelevant in an over-all scheme of things [strategy... investment is like war..didn't you know?] if my momentary paper prices would've been slightly higher if I'd stayed in silver. What you miss is the factor of risk which I see hanging over the market. Silver is still looking vulnerable against deleveraging and a dollar spike. You obviously disagree with that, but that's besides the point here. The point is my position on silver is completely logical given the views I have. Given my view of the fundamentals there was [and still is] every reason for me to reduce my exposure to silver..... that logic still holds now as it did then. As you say time will tell.

 

As you can see from the chart below silver has outperformed gold all year;

Taking into account the volatility of silver on that chart [where silver regularly dips back to gold] and the likelihood of another dip after this recent spike, I think the best you can say is that gold and silver have performed equally well over that time period. It may be the case that silver will continue to equally perform with gold [gold is dragging it up imo], but then there is no disadvantage involved with swapping silver for gold.

 

Perhaps that explains why you are commenting that you would back up the truck if the silver price went back to $16, as you now realise the mistake

No, I haven't realised the mistake..... I continue to have much more peace of mind bunkered down in gold as a double dip continues to threaten. I will only buy silver at 16 odd if we see a market crash... it may even go lower.

 

The funds I'll use for this will include dollar funds I raised when I sold silver at 17.90. Is it so difficult to get 17.90 into your head? I've mentioned it a few times now.

 

My core position in silver was mostly swapped for gold when the ratio was in the high 60s. This was NOT a trade but a retreat to a less risky core position [the dollar price at this time was 16 but irrelevant because I did not sell for dollars]. This involved a change of view where I didn't think silver would be a "leverage" on gold [a view many commentators are starting to express... the advice being offered now is buy gold first then silver]. I know think gold will drag silver up... though silver would be a lot more vulnerable to the downside. I also think the ratio may continue up for a while.

 

You seem to pick your moments to debate silver... when silver spikes. The rest of the time, when silver is flat, you go quiet.

[lyb]

I believe the investment decisions that each of us makes may be different, although we all appear to share a bull market view of the precious metals.

 

In perspective, I still participate in blogs trying to convince people that the real estate market is dangerous and that PM is a good investment. The difference in views in this case is enormous.

 

I am aware of the danger of deleveraging and even more aware of the increase in silver commercial shorts in the most recent COT report. Still, I hope that September, as is usually the case, will provide strong demand for physical gold that will limit the scope of any correction in both PM.

 

53% gold

28% silver

13% PM stocks

6% cash

[HPCsoYESTERDAY]

Well, I predicted silver would underperform gold which it has. I also thought it would remain volatile and wouldn't really go anywhere to the upside for a while, and that the price is vulnerable to a the double dip, which is still threatening. This is all still relevant to silver, and looking at the chart $16 is very feasible on a sell-off

 

According to some, silver was supposed to explode to the upside at any time over the last few years... but the reason it hasn't is due to market manipulation. It makes just as much sense by that logic to say that silver won't explode to the upside beause of market manipulation.

 

Silver should do well in the end, even if it has to be dragged up by gold, which will do better. It would probably only get down to $16 if gold sold off a bit.

 

my 2p worth

 

I confess i have 'previous' with RH over his silver strategy;

 

point of fact, I actually agree with you that a sell-off to $16 is possible (though how likely that is now I am unsure). However, the difference between us is that I did not sell my core silver holdings, hence if we don't get back to $16 (or below) and go on from here to take out the previous high and then make new highs, is it fair to say you might rue the day you sold up on your silver stockpile?

 

time will tell and if you feel that being heavy gold and usd and light silver is your best strategy, then good luck with your decision.

 

DA's PM holdings:

 

gold 25% silver 55% pd and pt 20%