Just over a decade ago silver was trading at $3.50 per ounce. I was encouraging my friends to load up on silver as I believed that in a very few years silver would top $50.00 per ounce. None of them agreed with me and none of them bought at that time. In May of 2011 silver nearly touched $50.00 per ounce before the CME and COMEX raised margin requirements five times in a row to manipulate the price down and protect institutions like JP Morgan who had massive short positions at the time. Since it was headed parabolic at the time I felt it could have run much further were it not for the market intervention (manipulation?) by CME and COMEX. Now it is back down to $30 per ounce. Once again, it looks like a buying opportunity to me. The silver market was artificially pushed down by the unprecedented actions of the CME and COMEX.
That is just the first decade of what is likely to be a multi-decade advance in the price of silver. The authors of “Future Shock” believe we will soon see three years of 100% inflation in a row. If that scenario were to happen we might see silver move from $30 per ounce in the first year to $60 per ounce. In the second year it could double again to $120 per ounce. And finally, in the third year, it might advance to $240 per ounce or more. So far their crystal ball has been pretty good.
Why should you put any credibility into what they’re saying? First, because the fundamentals that have been driving this secular silver bull market are still in place. These fundamentals include things such as:
1) The dollar is being rapidly debased by the printing of trillions of dollars.
2) The U.S. Government has unfunded liabilities and future commitments in the range of as much as $106 Trillion! Their only hope to fund this monstrous commitment is more monetary inflation.
3) Industrial uses for silver are escalating.
4) More people than ever before are investing in silver. The world’s population continues to grow. With the growth of the Indian and Chinese economies hundreds of millions of people are looking for safe havens for their savings. Those two cultures have always looked to precious metals for a store of value. They buy silver and gold.
5) Governments around the world are swimming in debt. This creates huge financial worries and gigantic doubts about their currencies. The people living in those countries will increasingly turn to silver and gold as an alternative to their currencies.
6) Silver production has been in a deficit to silver industrial usage for most of the last 65 years. Investors piling into the market as an alternative to depreciating currencies can exacerbate this situation and even cause a buying panic.
7) New means of investing in silver such as Barclay’s silver ETF have given investors a more convenient way to own and store silver. Another example is American Gold Reserve, a company that has launched an affiliate marketing program for precious metals that allows everyday people to buy and take delivery of silver and gold while also enjoying an opportunity to build an affiliate marketing program that pays them commissions. These innovative channel expansions in the precious metals market are bringing thousands of new investors into the market.
8) Unfolding geopolitical uncertainties drive whole populations to seek safety in precious metals.
How high can the price of silver go? Perhaps the better question is: “How worthless can the dollar become?” When Future Shock writers start talking about multiple consecutive years of 100% inflation and provide credible evidence for such a thing you may reasonably expect the dollar’s value to shrink dramatically. Since the creation of the Federal Reserve the dollar has already shrunk in purchasing power by 98%. Believe it or not, it can become worthless if enough of them are printed. Trillions of them have been produced over just the last few years.
When refugees from South Vietnam fled their country after its fall, some took bags of South Vietnamese currency, others took gold and silver with them. Those with the currency were disappointed to find that it was worthless. Those with the gold and silver found they had value that could be readily traded for any currency they wanted. U.S. citizens faced a similar fate when during the civil war they exchanged goods and services for Confederate dollars. When the war ended they found those dollars were worthless. They were backed by nothing and could not be exchanged for gold or silver. They were just paper with no intrinsic value.
Will a time come when the U.S. dollar will be worthless? I don’t know, but for decades now it has become worth less, and less and less. Eventually that path leads to worthlessness.
America’s forefathers wrote silver and gold into the U.S. Constitution for a reason. They had watched the Continental Dollar (fiat currency) become “not worth a Continental”. They knew even then that eventually paper money that is backed by nothing will be inflated into worthlessness.
Precious metals carry no counter party risk (Investopedia definition: The risk to each party of a contract that the counterparty will not live up to its contractual obligations. Read more: http://www.investopedia.com/term/c/counterpartyrisk.asp#ixzz1jl4fgtJJ). What holder of U.S. Federal Reserve Notes today or of U.S. Treasury Bonds can trust that the U.S. Government will not inflate themselves out of debt and in so doing destroy the value of the dollar through monetary inflation? Who has not experienced dollar devaluation in his lifetime? This monetary inflation is a form of fraud. It defrauds the dollar holder out of the value of that asset. The risk in holding dollars is that the government will default on its obligation to maintain the value of the currency as they print more and more and more.
Will we see $240 per ounce silver within a few years? Some very educated prognosticators believe it is possible if not probable. If you knew silver was going to move from $30 to $240 per ounce, how much of it would you buy?
Investing in stocks and precious metals is risky and could result in losing money. I am offering ideas for your consideration and education. I am not offering financial advice. Please do your own due diligence. I am not an investment adviser. Precious metals is not for everyone. I sell precious metals through American Gold Reserve (see my website listings as part of my bio). You should do your own due diligence when making investment decisions of any kind. You should consult your own financial advisers before making any investment decision. I make no guarantees that by following any advice or suggestion I might make that you will realize any return. Beware, all commodity markets and other markets carry risk of loss.