The Future Price of Silver

by Carefix

Leaving aside the unlikely but still possible discovery of large supplies somewhere on Earth the price of silver is heading up in a big way and for several reasons:

Firstly many countries are printing money which is still sloshing around the financial systems and not moving into the real economy because of low interest rates. The money printing will go on indefinitely until enough money leaks into the real economy to trigger some growth. Unfortunately that is when the real trouble begins as tax receipts increase and government debt increases slow and then reverse. Rising interest rates then open the flood gates and the fiat funny money gushes into the economy. The result is price inflation. So far the USA for example has printed enough for a hyperinfaltion of 400%. This on its own would guarantee a 400% increase in the price of silver. It wouldn't buy you any more gas for the car but under this scenario, the one the world's financial leaders are aiming for, your wealth remains protected.

Secondly a collapse of the financial system and/or a collapse of currencies will lead to a panic spike as people dump fiat and jump into physical PMs. Many people, the wise, have already done this. It is worth noting that the price graph above is not (I believe) inflation adjusted so todays price is actually similar to prices in 2006-2008. Well down the curve. The panic spike stops abruptly as the currency crashes to zero. If you are nimble it might be worth swapping out some PMs for the stocks being sold off by the financial institutions in their race for liquidity. Utilities are a good bet. But do not assume any money from a sale you put into a bank account will be available to buy stocks the next day. It is risky.

A new world reserve currency will likely be backed by PMs and sensibly the price of silver will likely be pegged to gold at 1:10. At today's prices that means silver at $120/oz.

Thirldy if neither the first or second scenarios come about or even if they do the industrial use of silver is so high it is running out quite quickly and so the price of silver will rise to the point where most industrial silver is economic to re-cycle. There is no ultimate limit here. Sure gold could be substituted for most electronics uses....but that just about says it all.

Finally do not be mislead by all these wonderful stories about silver rising to $1000 or $5000 dollars an ounce. In the short term at least the authors are mostly talking about fiat currency inflation.

If you get into physical silver expect short term prices to be manipulated downwards slightly but do not in my view expect a temporary loss of more than 20%. In the medium to long term and major new discoveries aside the price of silver is going up several hundred percent.

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Oct 02, 2015
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by: Carefix


Changed my ideas much since the above was written. I am still very optimistic in the medium to long term and believe silver is very good for the medium term as an investment. Long term I doubt that silver will be pegged to gold(pegs break anyway)except as a political tool during a financial war.

Also industrial use is falling to some extent due to the ongoing global recession but investment demand has indeed increased as financial uncertainty increases. Ultimately investment demand will drive the price much higher.

Today PMs are (and perhaps always were)tied to the fate of the financial system. They are unlikely to be released from price suppression until this system dies. The smartest of money sees this and accumulates silver as protection against the inevitable.

To me gold gives the greatest certaintity for the long term future but silver the greatest returns.

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