When? When? When?
(When will silver prices really move up?!)
Silver Stock Report
by Jason Hommel, July 9th, 2013
Many people ask me, "When will silver take off, and really rise?"
This is a good question! I don't know. But I have four standard answers, all good ones!
I like this question, because I know that the person asking this question really knows the fundamental reasons why silver is expected to rise. But let me review some of the strongest reasons briefly.
Money printing is out of control by government, $1 trillion more in spending per year that they don't have, that's $1000 billion. There is no political will to stop the spending. Tea party Republicans are a tiny minority, and often cave in for small victories, rather than really hold the line on spending.
In contrast to the $1000 billion of new money, investment flows into the silver market are a tiny $2 billion per year, represented by about 100 million ounces of investment demand. New mine supply annually is about 700 million ounces, but most of that, plus most of recycling, is used up by industrial demand. This leaves very little room in the tiny silver market for new investment demand, let alone monetary demand, without dramatically raising the price of silver.
So, when will investors buy silver in quantity to really move the price? That is the question.
My four standard answers are:
1. They already are, investors are already buying silver, and the price is moving up, in response, dramatically.
2. But so few are buying, not yet 99.9% of Americans, that the question as to "when" is perhaps a spiritual question; reflecting on why the 99.9% of people are not buying silver is the bigger question. But even if 1% bought, forget the 99%, that could drive the price to $500/oz. for silver.
3. The silver market is so tiny, there is no telling when any one of 1000 potential billionaires bought into the market to both dry up supply, drive up demand, and advertise the silver story to millions of Americans who could then start buying in significant amounts.
4. Soon. Anytime.
So, let me expand on these four answers.
First, silver is moving, and investors are buying.
Silver is up to around $20/oz. now from $4.15/oz in 2003, and an average of $5/oz. where it languished for about 15-20 years from 1983 to 2003.
So, from $5 to $20 is a gain of 300% That's not insubstantial. But two years ago, silver hit $49.50/oz., so I could have said we had a gain of 1000% in 8 years, and that's a bit more impressive.
Furthermore, the US Mint has been making silver eagles 1 oz. coins since the mid 1980's. They used to make only about 10 million of these 1 oz. silver coins per year. These days, they are making from 30 to 40 million ounces, accounting for nearly half of all investment demand for physical silver. This is a substantial increase, and the silver price is moving up in response to this increased investor demand. Here is the link to the US Mint silver eagle production figures per year.
The Wall St. Journal takes note, 23 million produced before the close of the first half of 2013!
Those who try to discourage silver investors refer to investment demand as a "surplus", which is an accounting misnomer. Investment demand is not "surplus", but rather, it is vital to protect the wealth of the world as paper money fails, and the amount of silver available to investors is not excessive, but miniscule. The word surplus is specifically intended to deceive; there are certainly not pallets of 1000 oz. bars of silver laying around outside warehouses unguarded and not wanted by anyone, or being donated to the Salvation Army. The word surplus is simply inapplicable to money; because everyone always wants more money. In fact, the people printing money are so insatiable in their insane desire to create even more paper money, they lie and claim there is a surplus of silver, when the reality is that there is an excess of paper money being printed, and a severe shortage of silver available to satisfy many people who try to buy silver.
So, the silver price is moving up, as it should. Investors are buying silver in increasing quantities, as they should. If you have not done so yet, you are just missing out.
Second, the next point. The silver market remains tiny, super tiny. Forty million ounces of silver eagles is not a large amount of monetary demand. And it supports the figures that only about 100 million ounces of silver are purchased for long term investment each year. Silver Eagles account for less than half of our sales of silver at www.jhmint.com.
Because the silver market is so tiny, at only 100 million oz. of demand, at $20/oz., that's only $2 billion dollars per year, the market is absolutely primed to move up in response to significant investor demand; there is no other option; the price must rise.
Why aren't more people buying at these low prices? It's kind of a funny question. For if more people were buying, the price could not remain low! The low price explains why more people are not buying. Perhaps another more accurate question is why are more people not taking advantage of the low price? Again, they are increasingly buying! But how is it possible that less than $1 in $500 of new money printing is finding it's way into silver?
Well, where do people hear about silver? Newsletters like this one? This letter does not reach 1% of the people of the USA, which would be 3 million people. This letter reaches barely 68,000 emails, and only about 17% open the emails when it hits their in box! That's barely 11,000 emails, and that says nothing about how long the email was open, for many, it might only be half a second before they hit delete.
But people, by and large, do not hear about silver from their friends. How can they? The supply sales figures show that less than one person in 100 is interested in silver, perhaps more like one person in 1000 or less.
People do not hear about silver from the controlled media. Why would they? The media supports the status quo, big government & big business, which means bonds and stocks.
People do not hear about silver from their Universities or Schools. Why would they? The Universities are not fed by silver, they are fed by big government and big business.
People do not hear about silver from their Churches, which should be promoting the importance of honesty, honest money, the importance of using honest weights and measures in commerce, debt forgiveness, Jubilee debt release, the regulation and Biblical ban on usury, etc., but they do not. Why would they? Well, do preachers learn these things from their Bible Universities? No? Can they learn them from their parishioners when less than 1 in 1000 people across the nation knows anything about silver? Again, no. The preachers are in the same insulated bubble of ignorance and misinformation about silver as everyone else.
So, finally, this brings me to the billionaires who could all really move the silver market. So far, there have been several that have dabbled in silver. Buffett. Gates. Hugo Salinas Price.
What if a billionaire founded bullion dealerships within a pre-existing chain of 1000 retail outlets across a nation? What if Walmart or Costco had the corner glasses shop, the corner drug shop, and the corner bullion shop? What if Walmart put the majority of their cash into silver?
What if Apple Computer put the majority of their cash into gold and silver and added the bullion shop section to each of their stores?
Things like this happen as bull markets develop. In 1980, gas stations began accepting silver as payment for gasoline! In fact, dealing in silver is required as silver returns to being used as money again, when paper money fails and is ultimately rejected by most of mankind. I don't expect things like this to happen tomorrow, as the silver market is still too small. These kinds of things are more likely after silver hits about $250/oz. to $1000/oz.
Finally, let me review what I wrote in Feb. of 2013.
"Silver should continue to do better than the last ten year average of about 22% per year, on average, from $4.15 to $30 over ten years. Expect 30% per year, on average. Expect silver to do worse right after it has gained more than 30% in the prior year, and expect silver to do better after a year when it has done worse.
Silver prices have stagnated, consolidated for the past two years from the prior peak of just under $50/oz.
I expect silver prices near $45 to $50 before the end of 2013. $50 will likely be an epic price battle that may last 6 months to a year.
Silver should hit $75 to $125 in the next peak or run up, likely sometime before the end of 2014."
Since we have just passed the mid way of 2013, and since the battle for $50 might take 6 months to cross, and since we have not hit $50 yet this year, then silver might not hit $50 by the end of this 2013, but perhaps that is more likely by mid 2014.
All of this is just extrapolating the trend from the charts. But again, all the reasons for silver to move up strongly, more strongly than ever, are still in place.
If I were manipulating silver prices, and if it were my job to paint the tape with a price trend that created the maximum disinterest in silver's price rising over time, and to discourage both physical investors and paper leveraged traders, I would create quick spikes up, too quickly for people to jump on board the trend, and long slow declines, to create maximum discouragement over the maximum amount of time, say about a year or two. The reason is that people are often short term thinkers, thinking only of "what have you done for me lately". And that is very similar to what we see on silver's ten year price chart, a lot of quick spikes up, and a lot of long slow grinding declines.
That's why I have consistently said, get it now, at today's prices, while you still can!
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