Silver the industrial metal

[KDave]

I have seen an interesting bearish video by igold advisor regarding the weakness in silver on recent gold rally, hypothesis being that silver has lost its monetary shine and is now acting akin to a regular industrial commodity. The comparison to platinum is a good one. If silver follows the path of industrially driven commodity platinum and reaches the equivalent 2008 lows, we can look forward to single digit silver prices. 

The video is worth a watch, I can't seem to link it but it's on YouTube. 

What do we think, is silver a monetary metal or just another commodity in the complex now?

[vand]

I don't agree.

Just because it is used in industrial appliances doesn't mean that it doesn't have monetary qualities.

TBH this sort of argument is just a reflection of the sort of sentiment prevalent in silver at the moment. 

Look at the 2001-2005 period; silver lagged gold badly throughout this time. 

[KDave]

Good points especially in regard to sentiment, it's pretty bad.

If silver is lagging gold akin to 2001-2005 period where do you think we are in that reflection? Do the charts give any indication perhaps, start or finish.

Do you think platinum is similar to silver and has/will develop monetary qualities? 

[vand]

Looking more closely at the charts, there was a stretch between Jul 1999 - Jun 2003 where the GSR went from 49 to 78.. this the period I'm referring to, when Gold led the early bull market. I think the similarities are close enough, and I remember plenty of discussion and opinion back then that silver was "just a commodity" to explain why it kept lagging.

All I have to go on is the same data as everyone else.. silver is cheap right now, and a regression analysis shows that silver tends to subsequently outperform from such levels as  the law of means reversion kicks in.

I like Chris Aaron/igold advisor but his is only one interpretation of the current facts. It is worth noting also that he uses straight axis rather than log axis in all his charts. Just switching to log could conceivably change how he interprets the data.

 

I always say that silver is like a non-expiring call option on gold. It comes with a premium, tends to lag, disappoint and underperform in downward or flat markets, but if you are patient enough to hold on then once prices start moving up it will catch up and multiply the returns by multiples.

My big picture view has not changed - PMs bottomed in late 2015 and we are currently in the basing phase of a new bull market. Silver won't really get going until we get back into the main "institutional/public awareness" phase of cycle, and then during the mania phase we will see outrageous movements that early adopters couldn't have imagined.

[HawkHybrid]

 

HH

[vand]

There is also no sense to be bullish on one metal (gold/siver) while bearish on the other - the two have always been highly correlated. You may at best be bullish or bearish on one and neutral on the other, but overwhelmingly they both go in the same direction most of the time.

[HawkHybrid]

1 hour ago, vand said:

There is also no sense to be bullish on one metal (gold/siver) while bearish on the other - the two have always been highly correlated. You may at best be bullish or bearish on one and neutral on the other, but overwhelmingly they both go in the same direction most of the time.

 

I disagree.

since the end of 2015 gold has gone up by ~17% and silver by ~6.5%.

with hindsight would you have gone for gold at the beginning of a

possible bull market or silver? gold was the better buy in both risk and

reward 3 years ago. it's not about being bearish about silver. it's about

having data to show that buying gold at the beginning of a possible

bull market is better than choosing silver. people who stick steadfast

to silver stand to lose an opportunity. currently I can trade any gold I

bought in 2015 for more silver than I was able to afford in 2015. those

who chose silver over gold in 2015 have so far missed out on this

opportunity.

at the same price why would you chose mutton over lamb?

I'm not bearish on silver, there's just currently little reason to chose

it over gold.

 

HH

[KDave]

Yes if what Chris says comes to pass I would be bearish on both metals (obviously more so on silver in this case) as they both move in similar directions. The question for me is - is this more to do with relation to the commodity complex of which both metals are apart? Rather than the monetary element? I believe that the case for the monetary element of silver even in recent times is weaker than that of gold. The correlation is perhaps just as weak, perhaps the correlation is only linked to the monetary case alone first, and commodity complex second - now becoming only linked by the complex. If the monetary element is gone from silver (perhaps replaced by crypto?) then it will revert to commodity status and price wise will suffer relative to gold. Who knows.     

Something else that is interesting is the ever widening GSR over time, what does that tell us about the relationship of gold to silver over time? If they are both monetary metals why is the trend for one to weaken against the other at the extremes over time? 

[HawkHybrid]

imo whether or not silver has already made a bottom is a moot

point.

3 hours ago, vand said:

Silver won't really get going until we get back into the main "institutional/public awareness" phase of cycle,

this is when you should buy silver.

 

imo silver is no longer a monetary metal as no one accepts it

as being one. all the things about silver being a monetary metal

is all history.

 

HH

[vand]

1 hour ago, HawkHybrid said:

 

I disagree.

since the end of 2015 gold has gone up by ~17% and silver by ~6.5%.

with hindsight would you have gone for gold at the beginning of a

possible bull market or silver? gold was the better buy in both risk and

reward 3 years ago. it's not about being bearish about silver. it's about

having data to show that buying gold at the beginning of a possible

bull market is better than choosing silver. people who stick steadfast

to silver stand to lose an opportunity. currently I can trade any gold I

bought in 2015 for more silver than I was able to afford in 2015. those

who chose silver over gold in 2015 have so far missed out on this

opportunity.

at the same price why would you chose mutton over lamb?

I'm not bearish on silver, there's just currently little reason to chose

it over gold.

 

HH

Hindsight is always 20/20, of course you would always pick the better performing option if you had a time machine

But the same fundamentals drive both metals, so what I say holds true, you can't be bullish on one and bearish on the other

And in fact, by the numbers you quoted, you would have been right to be bullish on both gold AND silver, for BOTH have risen. Gold has gone up more, but it would have been a mistake to be outright bearish on silver

And you are wrong, there is one VERY GOOD reason to favour silver over gold; relative valuations... and while no one has a crystal ball, the weight of historical evidence and the maths strongly suggest that silver is the smarter buy right now

[HawkHybrid]

5 hours ago, vand said:

Looking more closely at the charts, there was a stretch between Jul 1999 - Jun 2003 where the GSR went from 49 to 78.

 

we're not talking purely about hindsight. part of it is actual data

that you had access to in 2015.

gold led the bull market from the early 2000's, gold looks like it

could be leading going into a possible bull market starting 2015.

 

16 minutes ago, vand said:

and while no one has a crystal ball, the weight of historical evidence and the maths strongly suggest that silver is the smarter buy right now

not true unless...

 

5 hours ago, vand said:

Silver won't really get going until we get back into the main "institutional/public awareness" phase of cycle,

we've already reached this point.

 

think outside of the box and ask yourself

'what is the better buy right now?'

 

you have access to data that can prove the conventional wisdom

is not the best choice available to you. it's not a coincident that

gold leads silver into a bull market.

 

HH

[vand]

11 hours ago, HawkHybrid said:

 

we're not talking purely about hindsight. part of it is actual data

that you had access to in 2015.

gold led the bull market from the early 2000's, gold looks like it

could be leading going into a possible bull market starting 2015.

 

not true unless...

 

we've already reached this point.

 

think outside of the box and ask yourself

'what is the better buy right now?'

 

you have access to data that can prove the conventional wisdom

is not the best choice available to you. it's not a coincident that

gold leads silver into a bull market.

 

HH

You are still looking in the rear view mirror. It's not 2015.

Valuations are what they are CURRENTLY. You can't buy yesterday's performance. If I didn't hold gold yesterday, I can't benefit from yesterday's performance. To expect gold to continue to outperform silver you are saying that you think GSR will continue to march (much) higher from its already rarified levels. That might happen, but I personally won't be changing my strategy on the likelihood of that scenario playing out.

[KDave]

Will silver out perform tomorrow or has it been relegated to commodity status along with platinum. I agree with hh that silver is not a monetary metal anymore and will only correlate with gold to the extent that it is a part of commodity complex. Is that perhaps due in part to the way people invest in today's paper market and explains the widening trend in the gsr. The physical market is worth investigating as a separate entity though. 

[vand]

The key defining characteristic silver shares with gold is that its above-ground stock is relatively high compared to annual consumption and physical turnover (although not as high as gold's)  - ie it is (still) horded. That quality defines it as a monetary metal much more so than the price action.

[StackemHigh]

Many 100,000s of Toz are sold around the world to everyday people like you and me. Same can't be said for gold, platinum or paladium!

[KDave]

2014 world gold council data. I do not think silver can be considered to be money in the 21st century by virtue of hoarding unless we consider nickel, platinum and palladium as more like money than silver. Silver does have historic monetary qualities but these have always been secondary to gold in nature, and since the gold standard these qualities were also distant second in function, as demonstrated by the Weimar republics attempt at a silver based reichmark under the world gold standard, which later led to another inflation in the 30's as the GSR expanded (doubled). I think since the loss of the world gold standard completely, silvers has been slowly losing its historic correlation to gold and I am inclined to think this process is now complete, but who knows. The recent price action in silver perhaps reflects this, indicating correlation is now only to the commodities sector and no longer to gold, although I concede price action alone does not define a metals monetary qualities and this price action could simply be a repeat of the early 2000's.  

As a side I am surprised at the stocks of palladium and platinum, these stocks perhaps indicate why despite strikes in SA a few years ago platinum's price did not reflect the supply shortage, we saw no supply shock price increase as above ground stock was more than sufficient to cover. 

[vand]

1 hour ago, KDave said:

2014 world gold council data. I do not think silver can be considered to be money in the 21st century by virtue of hoarding unless we consider nickel, platinum and palladium as more like money than silver. Silver does have historic monetary qualities but these have always been secondary to gold in nature, and since the gold standard these qualities were also distant second in function, as demonstrated by the Weimar republics attempt at a silver based reichmark under the world gold standard, which later led to another inflation in the 30's as the GSR expanded (doubled). I think since the loss of the world gold standard completely, silvers has been slowly losing its historic correlation to gold and I am inclined to think this process is now complete, but who knows. The recent price action in silver perhaps reflects this, indicating correlation is now only to the commodities sector and no longer to gold, although I concede price action alone does not define a metals monetary qualities and this price action could simply be a repeat of the early 2000's.  

As a side I am surprised at the stocks of palladium and platinum, these stocks perhaps indicate why despite strikes in SA a few years ago platinum's price did not reflect the supply shortage, we saw no supply shock price increase as above ground stock was more than sufficient to cover. 

 

I suspect your chart only shows disclosed inventories, and as silver is not on the books of any central banks so doesn't appear any different to the other ordinary commodities.

 

 

 

[HawkHybrid]

by that data people are not hoarding silver as they hold (in

50:1 gsr terms) under one fifth of their wealth in silver as

they do in gold(at a gsr of 70+ it gets worse). people hoard

gold, they happen to have a small percentage of their

wealth in silver(maybe for speculation). are people

accumulating silver as they do gold?

 

HH

[HawkHybrid]

https://www.silver-phoenix500.com/article/silver-price-forecast-silver-bottoming-almost-complete

 

maybe it's time or close to when the gsr will not rise

enough to cover the spread of buying gold first.

 

HH

[Lowlow]

Tis the questions of the day ...

I believe we'll have deflation like we did in 2008 and gold and silver will get cheaper denominated in the U.S. dollar, that's what happened last time the equity markets took a hit, no reason to think it won't happen again.

That said, there is a question about that.  Though equities would fall vs money in general, it hasn't ALWAYS been the case that silver and gold have fallen with equities, there is historical precedent for gold and silver to hold its own vs the $us until the bottom is in.

On this question I've taken a "watch closely and see what happens" stance, and have put money into silver and $us cash.  I think in a deflationary environment it's obviously best to be in cash, but what form that cash takes isn't quite as obvious - like I said, I tend to favor $us until the bottom, but I don't know that's the right place to be.  I've certain picked up my fair share of silver and then some, in case I'm wrong, but I'm heavily weighed to the $us over silver at the moment.

On the gold vs silver issue, GSR, I favor silver.  It's not that I think silver isn't a good value, it's a very good value here I think (though it could get to be a much better value in a deflationary environment w/ falling precious metals prices).  I tend to think the GSR will "correct" when gold FALLS, not when silver rises.  I think gold is priced too high at this level and has a long way to fall.  I think the same easy money that has driven up stock prices has drive up gold as the preferred investment metal - I think that's obvious enough by looking at what the other precious metals have done in relation to gold i.e. fallen in price.  When money flees the equity markets, I see no reason why gold won't suffer too, because I think it's the same money driving up prices in both markets.

Edit, so, in summary ... I like cash, cash is king ... and I like $us cash over silver and certainly over gold, but I am buying silver and think it is a good price here.

Once we have some deflation and hit bottom, I'll flee the $us .. literally the day I think the bottom is in I will get out of the $us and move as quickly as possible into hard assets and some equities (dividend stocks with very low debt ratios).  Debt would be a scary place to be then, especially corporate debt, but up to and including Treasuries, in my opinion ... too much counter-party risk, and with the inevitable inflation that would follow a serious deflation I don't see how anyone could want to be in bonds.  I'd look for that to be the ultimate reversal of the 30+ year bond bull market ... and ultimately the end of $us hegemony.

[sovereignsteve]

1 hour ago, Lowlow said:

I think gold is priced too high at this level and has a long way to fall.

We are constantly hearing how some countries and central banks have been buying gold like it's going out of fashion and people telling us how recent price action is mirroring that of 2008.

Does anyone know whether the same CB buying was taking place leading up to 2008 or is this cycle different?

[dicker]

On 02/11/2018 at 14:14, KDave said:

2014 world gold council data. I do not think silver can be considered to be money in the 21st century by virtue of hoarding unless we consider nickel, platinum and palladium as more like money than silver. Silver does have historic monetary qualities but these have always been secondary to gold in nature, and since the gold standard these qualities were also distant second in function, as demonstrated by the Weimar republics attempt at a silver based reichmark under the world gold standard, which later led to another inflation in the 30's as the GSR expanded (doubled). I think since the loss of the world gold standard completely, silvers has been slowly losing its historic correlation to gold and I am inclined to think this process is now complete, but who knows. The recent price action in silver perhaps reflects this, indicating correlation is now only to the commodities sector and no longer to gold, although I concede price action alone does not define a metals monetary qualities and this price action could simply be a repeat of the early 2000's.  

As a side I am surprised at the stocks of palladium and platinum, these stocks perhaps indicate why despite strikes in SA a few years ago platinum's price did not reflect the supply shortage, we saw no supply shock price increase as above ground stock was more than sufficient to cover. 

The graph is most amusing

[dicker]

A friend I discuss PMs and Crypto’s with likes to tell me that Gold and Silver are analog currencies in a world where Crypto’s are digital. 

He believes that Gold and Silver are essentially the same as platinum which he classes as an industrial metal.

Funnily I beg to differ with this view, although metals of course have industrial uses.  

Physicality is the very key part of PM’s that make them completely unlike paper currency or crypto’s.  

Best

dicker

 

[HawkHybrid]

one key data would be how much of the annual gold production

is hoarded as jewellery. what's the percentage for silver. imo

silver is an industrial metal because much more of annual

production is used in industry. people could buy more silver

jewellery, silverware etc to increase it's percentage versus

industry, but they don't.

 

HH

[Guest]

Can we please rename this forum into thesilverhaterforum.com?

I've never seen that much ant-silver sentiment as on this very site!