Is Silver Getting Bubbly?

Silver's rising prices as measured in US government fiat dollars (alias paper funny money) spawns new articles on a daily basis predicting that surely now silver is in a bubble (a price that is irrationally higher than the intrinsic value of the product or investment). I suspect that as the "tears of the moon" metal approaches the 1980 high of $50 per ounce, the uninformed scare-mongering will only increase in volume. But is silver really in a bubble just because its worth as measured in rapidly devaluing 2011 US dollars is nearing the former 1980 peak?

Firstly, let's make sure we're comparing apples to apples, or at least dollars to dollars. Based on the CPI, you'd need $134.29 today in 2011 to purchase the same products you bought in 1980 for $50. So, while we can talk about the NOMINAL high of $50 for silver per ounce, the real figure we should be eyeing for bubbly signs is a lot closer to the $134 mark in inflation adjusted dollars.

Secondly, exact information as to what price point constitutes pricing above an item's "intrinsic value" is always a little sketchy, to say the very least. However, I'd like to tentatively submit the inflation-adjusted high for silver of $134 as that point, since the 1979-1980 bull market is the best and only historical comparison to today's market.

Next, I think a "real world" comparison of actual buying power of one ounce of silver for the years 1980 and 2011, may aid us in our search for buying power equivalency, and perhaps the actual 2011 point at which we may be entering bubbly territory. Therefore, I've collected the economic information below:

1980 $ Price - Price in Silver Oz. @ $50 per ounce

Avg. New Home $76,400 - 1528 oz.

Median Household Income $17,710 - 354 oz.

First Class Stamp $0.15 - 0.003 oz.

Gallon Regular Gas $1.25 - 0.025 oz.

Dozen Eggs $0.91 - 0.018 oz.

Loaf White Bread $0.50 - 0.01 oz.

Next, we'll look at the 2011 - Silver @ $41 per ounce

Avg. New Home $202,100 - 4,929 oz.

Median Household Income $52,029 - 1,269 oz.

First Class Stamp $0.44 - 0.01 oz.

Gallon Regular Gas $3.75 - 0.09 oz.

Dozen Eggs $3.00 - 0.07 oz.

Loaf White Bread $2.78 - 0.07 oz.

It's easy to see from these two pricing tables that you need a lot more silver to buy everyday items in 2011 than was required to purchase the same products at the peak of the 1980 silver bubble. For example, you could purchase an average new home in 1980 for only 1528 ounces of silver, but you'll need 4929 ounces to close on that same house today!

Finally, I'd like to see how high silver would have to rise in price before it could buy the same amount of products it did in 1980. To determine the 2011 dollar adjusted figures I'll divide the current 2011 dollar product costs by the number of silver ounces required in the 1980 peak. See below:

Avg. New Home - $132 per ounce silver

Median Household Income - $147 oz.

First Class Stamp - $147 oz.

Gallon Regular Gas - $150 oz.

Dozen Eggs - $167 oz.

Loaf White Bread - $278 oz!

The incredible numbers above show that silver will have to rise to between $132 to $167 per ounce to arrive at pricing levels in 2011 dollars that proved to be overheated or bubble-ridden in 1980! In addition, if you want to eat bread again like we did in 1980, you're going to need silver at $278 per ounce! So, our tentative figure of $134 per ounce for a silver top is pretty right on the money.

Given all the information above, I'd say we have quite aways to go with silver at about $41 an ounce before we reach any frothy action! For my part, don't even wake me until silver has exceeded $100 per ounce!

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles.

Rick
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Silver is Consumed!

Industrial Demand

The first fact that jumps off the page is that the future for silver looks remarkable with industrial silver demand rising from 15,160 tons (487 million ounces) in 2010 to 20,712 tons (666 million ounces) in 2015. Much of the growth in the global total of industrial silver consumption will be driven by stronger demand for a number of established uses including the manufacture of electrical contacts and the use of silver in the photo voltaic industry. New uses center on silver's antibacterial qualities, while other new uses tend to make use of its conductive properties, including solid state lighting and Radio Frequency Identification (RFID) tags. Overall please note that silver’s importance in the technology of the day is huge. We go so far as to say that the demand from silver has transformed from a want to a need! Whether we are in a boom or bust silver’s demand will remain robust. It is now needed to make all facets of an economy run well and at all levels, even down to individual needs. This secures its future and assures us that silver prices are well supported. Here is the list of the amounts used in different applications that emphasize this point.

- Cell phones used 404.35 tonnes [13 million ounces] of silver last year.

- Computers consumed 684.29 tonnes [22 million ounces].

- Thick film PV consumed 1,461.90 tonnes [47 million ounces] in 2010.

- Automobiles which used 1,119.75 tonnes [36 million ounces] of silver.

- Electrical and electronics demand for silver reached an all-time high of 7,555.21 tonnes [242.9 million ounces].

- Solar Power in 2011 is expected to reach 2,177.29 tonnes [70 million ounces], up 40%.

- RFID tags in 2010 reached between 31 and 62 tonnes with a long way to go before reaching full market.

- Water purification used 62 tonnes [2 million ounces] set to grow to 74.65 tonnes [2.4 million ounces].

- Medical applications may grow strongly to reach 93.3 tonnes [3 million ounces] by 2015.

- The use of nano-silver in goods packaging and hygiene combined would consume 124.4 tonnes [4 million ounces] of silver over the next five years.

Silver is consumed

While photographic use of silver allows for the re-cycling of silver, reclamation of silver from most of the above uses is difficult to nigh-on-impossible. This in itself assures either a constant or rising demand for these applications. Of particular note is the growth in Asia where we are watching around half of the globe’s population developing at infrastructural level as never before. This growth will continue at double figures, per annum for at least the next decade. Gold is rarely consumed as it is deemed far too valuable. Reclamation efforts relative to the value of the gold ensures that scrap merchants will go to extraordinary lengths to recover the gold. In silver’s case these efforts would cost more than the sale of the silver so used. As the silver price rises further reclamation efforts will become profitable and more silver will be recovered, but we are still a long way off from that day.

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles.

Rick
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Prices Haven't Risen for Over 70 years!

When you're riding in a car the houses and trees outside the vehicle appear to be whizzing past rapidly while you stand still. Of course, every adult knows that the apparent movement of the objects outside the car is only an optical illusion. The motor vehicle in which you're riding is moving. The scenery is actually rooted fast.

The driving analogy above is ideal for describing the inflation of prices in US fiat money (US Dollars). It is not the prices of food, fuel, etc., that are continually moving upwards, it's the value of the US paper Dollar that is plummeting downwards!

To prove my price inflation assertion, let's look at everyday prices on items from 1940 and 2010. All costs will be computed using US 90% silver coins (dimes, quarters, halves) that were minted for circulation up to and including 1964. Coins minted after that date for circulation were made from base metals and fall under the heading of fiat money (money that has no value outside of the government mandated value).

Average Cost Gallon Of Gas

1940 $0.11 cents

2010 $2.75

Present Value $0.11 cents silver money $2.97

Average Cost Loaf of Bread Food

1940 $0.10 cents

2010 $2.79

Present Value $0.10 cents silver money $2.70

Average Cost 1lb Hamburger Meat

1940 $0.20 cents

2010 $3.99

Present Value $0.20 cents silver money $5.40

You can see from the price information above that if you'd saved your 90% US silver coinage since 1940, you could still buy these everday items for the same amount based on their silver content value! In other words, the "real prices" of these items has really stayed relatively the same. The only reason that inflation has appeared to cause prices to rise is that the actual buying power of the US Federal Reserve Notes un-backed by precious metals has dropped precipitously.

There are exceptions, of course, to the above rule. Although housing prices have been battered by the recession, they're still hovering above their 1940 silver coin equivalent. The price of a new car is likewise further ahead than its equivalent in 1940 silver coins. However, I expect these exceptions to be liquidated in the future as silver continues to rise versus the empty shell that is the US Dollar of today.

So, the next time you fill up with gas, don't give the gas station attendant a hard time. Remember, it's the Federal government with its money printing presses flooding our economy with worthless greenbacks that you should direct your anger towards.

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles.

Rick

CLICK ADS BELOW FOR FREE DISCOUNT!

Beware These Gold/Silver Sellers!

In every reputable industry you invariably have a few bad eggs salted in with the honorable sellers. The precious metals industry is certainly no exception to this unfortunate rule. The following companies have raised flags with consumers who found their business practices less than satisfactory.

Monex Deposit Company http://www.monex.com/
Currently rates a D- with the BBB. Monex will offer to hold silver for you, or offer you leveraged accounts. I strongly advise against that. Their BBB report quotes the following:
"Complainants allege that they purchased precious metals based on advice and coaching from account representatives and as a result, they incurred substantial financial losses. A few clients complained that account representatives did not follow their instructions in applying funds for investment or that they failed to keep them informed, and as a result, they suffered losses they would not have incurred had their instructions been followed. The company responds to some complaints by disputing the allegations and stating that the investments are self-directed and they are not responsible for losses, denying requests for refunds or monetary compensation. In one case a partial refund was issued, but was conditional upon signing a release waiver composed by the company. "
Northwest Territorial Mint www.nwtmint.com

NWT Mint comes in with a C rating with the BBB. The primary complaints here lie in the long wait times (up to 6 months) for delivery of gold and silver bullion purchased from this company.

Goldline International www.goldline.com

Goldline rates an A+ rating with the BBB...which I find more than a little SUSPICIOUS. The last time I wrote about this company was in November 2010, when they had just moved up from an F to a D-. Rumors about buying a BBB rating have been kicked around, but who knows. Maybe they suddenly got religion...maybe not.

At any rate Congressional investigations were launched last year in response to a variety of predatory selling practices. One of their reputed favorite selling routines was to talk investors interested in buying gold or silver bullion coins into purchasing foreign numismatic collector gold coins with higher profit margins.

Check out these two links for other articles I've written about Goldline:
http://survivalus.blogspot.com/2010/07/goldline-international-scam.html
http://survivalus.blogspot.com/2010/11/goldline-scam-swiss-gold_30.html

Kitco www.kitco.com

Kitco has NO RATING with the BBB as their rating is "under review", whatever that means. My biggest problems with this company are their pool accounts, unknown delivery times for silver, and unknown and backlogged payment if you sold silver to them.

With Kitco Pool accounts your purchased silver and gold remains in their unallocated pool of precious metals. You get a statement for your gold or silver, and bills for trading fees. On the positive side, I guess, you get to easily sell and buy by punching a few keys on your computer.

I'm sorry, but any trust I had in my fellow man died with Enron and the Bernie Madoff scams. What's to stop a company like Kitco from preserving only a fractional supply of actual bullion, while reaping free profits for themselves with your assets? Bottom line, if it's in an unallocated pool, you don't know WHAT'S ACTUALLY SWIMMING AROUND IN THOSE MURKY WATERS!

One of Kitco's top men is Jon Nadler, a perennial gold and silver bear. He's been wrong so often in his precious metal price predictions since 2008, that he must surely envy a broken clock that's right twice a day! Internet rumors have speculated that Mr. Nadler has actually acted as Kitco's resident disinformation officer to help depress gold and silver pricing to preserve the "integrity" of the Kitco pool accounts by discouraging demands for physical delivery.

If interested, you can read The Best Places To Buy Silver http://survivalus.blogspot.com/2010/08/best-places-to-buy-your-survival-gold.html.

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies, APMEX Gold and Silver and Silver American Eagles.

Rick
CLICK ADS BELOW FOR FREE DISCOUNT!

Why You Must BUY SILVER NOW!

Silver prices are continuing to climb, and scale new pricing heights. Today (Feb. 21, 2011), silver tasted highs over $34 USD. That's an increase from the prior close on Friday of almost 4.0%!
Still, it makes sense to buy silver. Here are six good reasons:
1. China has turned net importerChina, the biggest commodity guzzler in the world, is importing silver big time. In fact, in 2005, China exported 100 million ounces of silver (one troy ounce = 31.1 grams). In 2010, five years down the line, the country has turned a net importer, importing 122.6 million ounces, which is around 14% of the global production.
Now, we all know the impact China has on the price of a commodity it takes fancy to. India, the biggest consumer of gold and silver in the world, imported 1,200 tons of silver in 2010, up 20% from the previous year. This increase in imports has largely been attributed to increase in the price of gold, thus making gold jewelery very expensive.This has made people in these countries turn to silver jewelery. In fact, as the price of silver keeps going up, more and more people are likely to take fancy to silver jewelery.
2. Supply demand mismatchThis is a very basic point, which is behind every price rise. Silver demand is more than silver supply, and thus the prices have been on a run. The Silver Institute, which tracks silver supply, reports that from 2000 to 2009 (the latest data available), the supply of silver went up to 709.6 million ounces, up from 591 million ounces. This shows an increase of around 2% per year.
Data from the CPM group shows that mine production rose to 741.5 million ounces in 2010 (up around 4% from 2009). Silver demand in 2009 stood at around 889 million ounces and the difference between supply and demand was largely met out of scrap sales. Given this, nearly 19% of silver demand is being meant out of scrap sale. This is not sustainable.
3. No recycling of silverOne way to increase supply is to recycle silver like gold has been over the years. Silver is largely used as an industrial metal. It is a very good conductor of electricity, the best heat transfer agent and reflector of light, a very good lubricant, catalyst and alloy. But it is used in very small amounts as an industrial metal. Given this, it is not easy to recycle silver.
Also, at its current price, it is not monetarily feasible to recycle silver. Experts are of the view recycling will become monetarily feasible only once the price of silver crosses around $50 per ounce (currently it quotes at around $32-33 per ounce). Given these reasons, increasing sale of silver scrap is not very easy.
4. Not easy to ramp up productionExperts who closely track silver believe the world is running out of silver. The most vociferous of this lot, Adrian Douglas, the proprietor of Market Force Analysis and also a director of GATA (the Gold Anti-Trust Action Committee), has gone on record to say the world will run out of silver in 2020, and thus become the first element of the periodic table to become extinct.
Theodore Butler, silver analyst, Butler Research, has said in the past that silver inventories have declined from 10 billion ounces (one ounce equals 31.1 grams) in 1940 to 1 billion ounces today. In comparison, gold inventories stand at a total around 5 billion ounces. So, if we were to believe these experts, there is five times more gold on this earth than silver. But does that reflect in the price of these metals? Certainly not.
This decreasing inventory cannot be built up through increase in production. The earth’s crust has around 17 times more silver than gold. Despite this, silver production cannot be ramped up quickly. The primary reason for this is that it is rare to find a pure silver deposit. Hence, nearly two thirds of the silver that is mined comes as a by-product of mining other metals, like copper, zinc and lead. So, increased production of silver in turn depends on the price of the other metals it is co-mined with.
Also, the silver “mine-cycle” is around 10 years, i.e. the time it takes from starting to explore for silver and until the mine finally begins to produce silver. Over the years, the low price of silver has ensured that the mining companies haven’t gotten around to looking for silver.
5. New uses of silverAs mentioned earlier, silver has lots of industrial uses, given that it is the most malleable and ductile metal, after gold. Silver is currently used in electrical applications like conductors, switches, fuses etc. It is also used in photography, and silver alloys are used as cathodes in batteries. New hybrid car batteries rely on the gray metal, as does the growing solar cell industry. Interestingly, the new uses of silver keep growing.
One of the newest and most innovative uses for the "poor man's gold" is to kill germs! As a bactericide, silver is used in water purification and air handling systems. Additional new products using silver’s biocidal qualities are being developed each year; clothing, bandages, toothbrushes, door-knobs (flu-protection), keyboards, and the list goes on growing.
6. The investment argumentInvestors are gradually realizing the potential of silver. This has led to an increased demand for silver coins as well as exchange traded funds worldwide. The US Mint sold more than 6.4 million silver eagles this January —- the highest sales in a single month since the coin was introduced way back in 1986.
Eric Sprott, who runs Canada-based Sprott Hedge Fund and who recently launched a silver fund, made a very interesting point during an interview. His new fund entered the market to buy 1 million ounces of physical silver. The silver wasn’t readily available, and it took the fund nearly 10 weeks to acquire the entire stock.
Now, this was the impact of just one fund. Imagine what would happen once a few more silver funds are launched. In fact, data from the Silver Institute shows that the investment demand for silver went up by a whopping 184% to 136.9 million ounces in the year 2009 (the latest data i.e. available).

Time is running out fast! Hyperinflation seems unavoidable as fiat paper money is being printed as fast as the US presses can run. To protect your wealth and your family, buy gold and silver now from these top companies (below):

Rick

CLICK ADS BELOW FOR FREE DISCOUNT!