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cbwang888 (25.72)

Revenge of silver --- after 30 years of supression

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April 26, 2011 – Comments (6) | RELATED TICKERS: SLV , AGQ , GLD

 

If you buy the idea of gold/silver ratio shall be about the ratio of silver/gold on the ground, some says it is about 16.

@ 1500/oz gold will give silver $93.75/oz.

 

With gold and many other industrial metals continue to make all time high, silver is trading around the peak 31 years ago.

 

The one aspect of the paper trading system is that you can borrow from things backed by nothing. So as long as the system still still functioning and traded within the bound, it is considered stable. However, for silver,  things started to change and the once the feedback loop has gain greater than 1 (backwardation?), the price is going to get out of controlled.

 

We has seen many times of quick and sharp pullbacks during US trading hours being end of more buying with demands of physical deliveries. The games are been played by banks, hedge funds, retail investors and foreign banks.  It looks like US banks are on the side of pushing down the future price, but I'm suspecting China is still printing to peg USD and turn around sell USD for PMs and commodities. The next catalyst for PMs is going to be the falling of US T-bonds and/or runaway inflations.

For silver backwardation talks and $400/$500 targets:

 

$400 target:

http://www.youtube.com/watch?v=021yEhjPDa0

 

$500 target:

http://www.youtube.com/watch?v=ntYAXrGP51Q

 

My target of $200 for silver and $3000 gold by 2015 maybe too low ...

6 Comments – Post Your Own

#1) On April 26, 2011 at 2:05 PM, ChrisGraley (29.67) wrote:

If I were China, I would be buying silver with dollars right now until there were no dollars left.

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#2) On April 27, 2011 at 12:43 PM, leohaas (31.76) wrote:

"If you buy the idea of gold/silver ratio shall be about the ratio of silver/gold on the ground, some says it is about 16.

@ 1500/oz gold will give silver $93.75/oz."

Of course, you can also turn that around:

@ 45/oz silver will give gold $720/oz!

There is no arguing that your conclusion is more correct than mine...

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#3) On April 27, 2011 at 3:35 PM, cbwang888 (25.72) wrote:

6%+ after Fed's April meeing's announcement

 

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#4) On April 27, 2011 at 6:28 PM, rfaramir (29.27) wrote:

"If you buy the idea of gold/silver ratio shall be about the ratio of silver/gold on the ground, some says it is about 16."

Stop! No, I don't buy that idea.

If they were essentially the same substance, differing by, say, color only, but totally interchangeable in most ways, then you could buy this idea. But they're not. They are different materials (silver is the best conductor of electricity of any element, gold is much more durable and more highly sought for jewelry).

Looking at historical ratios is of some use, but it has varied widely. 1:1 some say in one ancient location, 8:1, 12:1, 15:1 - 16.5:1 during our countries early years, and recently 70:1, now back below 40:1.

Looking at current yearly production is of some use, 8:1 I believe I saw for 2008. That suggest continued downward pressure on the ratio if both are even roughly similarly demanded for investing and silver is more desired for industry (and less recoverable than gold after industrial use). But it's no crystal ball.

What matters is what people are willing to pay, and a free market where people can express that willingness transparently. The PM markets are highly manipulated, though, so we don't have that. Government interferes in the financial markets (changing reserve requirements, margins, bailing out speculators) and government-propped up companies unfairly speculate in the gold and silver markets. Especially the silver market, as it is so much smaller. If the government restricted itself to enforcing contracts life would be much better: failure to deliver would be treated as bankruptcy with forced liquidation of the failed party to recover as much as possible for their creditors.

Push for respect of private property rights by your local (and higher) government(s), and we might have a free market reemerge, with prices of PMs that reflect the true, subjective valuation of the people.

Until then, who knows? Counting on a particular historic or geologic fact to dictate a market price will not work except by lucky accident.

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#5) On April 27, 2011 at 9:40 PM, cbwang888 (25.72) wrote:

OK. Lucky or not, one invest without throwing some darts has to come out with his/her reasons or guts feelings ...

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#6) On April 28, 2011 at 1:07 PM, rfaramir (29.27) wrote:

I do agree with your title, though. Silver is coming back big, after being suppressed.

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