Episode-661- The Future for Silver as an Investment

Silver is up, now it is down, record high, another record high, drops, now to the moon, then a massive drop, a minor recovery.  So what in the world is going on with the “white medal” the little sister of gold?  Today I will try to get past the hype, dig deeper into the reality and the reasons we hold metals like gold and silver in physical holdings in the first place along with answering a few of your emailed in questions along the way.

Join me today as we discuss…

  • A little price history about silver
  • The concept of a floor
  • Silver’s relationship to gold
  • If silver goes to 25 dollars it is actually “down”
  • What is a moving average and what it tells us as
  • Where does silver go next
  • George Soros is selling metal, what does that mean
  • Was the silver margin increase a conspiracy
  • What a naysayer has to say about silver
  • Evaluation of profit, loss and perceived loss

Additional Resources for Today’s Show

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26 Responses to Episode-661- The Future for Silver as an Investment

  1. Great Topic!

  2. Good show on a timely topic. Of course, many people might say “Where were you a WEEK ago on this topic?!” Me, I did buy a little of the physical shiny stuff at over $40, but I have a lot of catching-up to do in my long-term stores. I don’t regret buying, because I know that by the time I need it, the $40+ purchase will still be worth more than the paper I traded for it.

  3. I’m about half way through the podcast right now. I like the idea of buying small amounts of metal over long time periods to hold as a permanent wealth storage.

    Regarding “investing” (or speculating on price), instead of just looking at price (which is distorted by expansion of M2) look at this chart (http://screencast.com/t/IcvZPGJdrd) of SLV/GLD, which should help put this in a context removing the effects of inflation. It shows 5 years, weekly . The blue line is a 10 period moving average and the red line is a 30 period.

    Look at the parabolic move up in the ratio. For some reason, the ratio is off by a decimal, so where it shows 0.22 it should be 0.022. Also look how far apart the two lines are. I think until the fast MA crosses or at least gets closer to the slow MA, its probably not a good time to buy silver for the purposes of speculation. Also something below 0.020 seems like a better opportunity.

    Also, I don’t like buying silver until volume drops. There is way too much interest right now (how much of it is long interest?). Just my 2 silver pieces.

  4. In case anyone is interested, the reason the ratio is off by a decimal place is the GLD ETF (which is what I used for the gold price in the above chart) is priced at about 1/10 an oz of gold.

  5. rich hutchins

    excellent podcast as usual. i buy silver not as investment but as a way to store value anonymously. And i bought 10 ounces yesterday just because i saw it was lower than it has been for a month or so..

  6. I have mixed opinion of the podcast. First I agree with absolutely everything said. The problem I have is that there was absolutely no discussion on these items:
    1. The historic Hunt brothers story.
    2. The fact that Silver is a commodity that is used in applications where its not recycled thus decreasing the amount in existence.
    3. All the COMEX chatter and do they truly have the inventory they advertise?
    I really would like to hear Jacks opinion on the COMEX item. My friend is Mr. Gloom and Doom, I would like to hear a more balanced opinion from Jack on this.

  7. Alfonso Crawford

    Man, I feel like a fool for buying a silver round at $52 last week. It was my first purchase of precious metal, and a with what was a sizable chunk of my pool of money.

    Darn. :(

  8. I was wondering how much silver you have? If you do not want to share I was just wondering how much you would say a good stock of silver is? I have at least about 100 troy ounces, and if that is enough, or should I have more? And what is the best price to buy it? Thanks ~ Dan

  9. Love the show but your assessment of Soros being a financial genius is off the mark. Yes, he’s a maggot (or more likely a tapeworm) on society. But I can guarantee you he’s getting more insider info from his Wall Street and K Street friends. Ditto for Warren Buffet who is the republican version of Soros.

  10. Mozartsgokart

    Ive been buying threw the uptick in prices. I will continue buy as prices goes down too. I’m in for the long haul. My goals are a minimum of $150 in pre 65 silver coins for each family member.

  11. Of course the show was great as always, but I thought one specific point may have been overlooked. That’s the “US” (us like we the prepper, not United States) factor; others who are looking at the threat of a diminished dollar. I think this aspect will be clearer to discern with the announcement of the next debt ceiling. I would of course love to hear your opinion, but I think we will realize just how many “preppers” there are once we see the outcome of that debate. If the price rises sharply again after we reach the current debt ceiling we will know that we are not alone, because anyone using silver as a conventional investment has probably moved passed silver now.

  12. I added to my holdings on the initial dip at about $40 – 1964 dimes. I’m considering trading out some of my physical silver for gold – or maybe a down payment on my BOL.

  13. Good show. I still want to get more silver, but I wonder what the perfect ratio of gold to silver is. In fact is there a perfect ratio?

  14. Mozartsgokart

    I’m wondering how many people are willing to trade in gold and silver. Is anyone hearing that offer from people or offering that option to people. When we set up our road side stand for our extra fruits and veggies I’m going to offer payment in silver dimes. Just a few coins can get a heck of alot of produce. But I wonder if anyone will really use that option. Or if I’ll just get screwed from lowlifes.

  15. Modern Survival

    @Mozartsgokart I don’t know if you will get a lot of takers, if you have repeat customers may be. But how the hell would you get screwed over doing this? That statement just doesn’t make any sense at all to me.

  16. anotherkevin

    I have been waiting for this show! Unfortunately, very disappointed – no discussion of the market in the 80′s & 90′s and how it played out? No mention of what silver to buy – numismatic or generic rounds? Still useful information, but seemed to be missing important stuff.

  17. @anotherkevin The show was quite good, I thought. Jack mentioned he thought silver spot was going down further (from 38.XX or whatever it was) and, bam, here we are at 35.XX. I liked the advice to buy in the low 20s. Especially liked one point of emphasis: physical silver investing calls for different tactics from paper investments.

  18. My timing couldn’t have been better, I bought silver at $14 an ounce and loaded up after selling a car of mine. A friend of mine said silver would peak at $40, so I started looking for some land when it was at $38 then 2 weeks ago I finally closed on a BOL/Piece of land; 12 acres, I traded half the cost with silver and gold I had, so I basically got the property for 35% off since I made so much on my Silver. The day we traded I got $47 an ounce for silver & $1500 for the gold…I couldn’t have been happier.

    Now I will wait for it to fall again and buy again when it’s under $25…maybe $18…lol

  19. Excellent show, as always! I was about to jump in on the dip today. Glad I did- it is down 8.32% as of this posting. I was quite anxious to acquire more while I decide what and how to do alternative energy. Excellent point on the difference in thinking & approach to physical vs. paper assets.

    Physical silver is considered a “collectible” for tax purposes and taxed at a rate of 28% (I think, please, please confirm). I am not sure if there are any ways around that. Fortunately, I hear the $600 1099 requirement was repealed and signed. I believe the 1099 reporting threshold is now back to $10,000, but I can be mistaken. Please be careful how you ask when selling because it can be construed to be an attempt to evade the report and thus trigger a mandatory 1099.

    I like “junk” silver in the form of pre-64 dimes, quarters and half-dollars. Silver dollars have a higher premium and war nickles are not widely recognized, have too many variables and are more difficult to extract the silver. Numismatic coins are for very knowledgeable collectors, have too many variables and the market for collectibles is volatile. I pay just 2% commission over spot for junk. Of the junk, I prefer half-dollars because they tend to be in better condition. Ok, I do like some collectibility, but that is not my focus – Just 6 months ago, I paid only 9 cents more per face value for Walking Eagles and I have also bought them at spot! Rounds have a premium since they are newly minted and generally small runs. Rounds, Eagles and bullion are better for gifts, collecting, commemoration or for use as alternative currencies, etc. Eagles and foreign bullion also have premiums. However, dealers usually will only offer spot when buying. I don’t know if they have any tax advantages to offset the premium on Eagles and foreign bullion. There is so much misinformation on that point out there! I don’t have enough information on bars.

    Here in New Hampshire, The Free State Project is making it easier to trade in silver. How to Vanish had some pointers to stay out of trouble: http://www.howtovanish.com/2011/05/can-you-be-prosecuted-for-using-gold-or-silver-liberty-dollar-part-iii/ Maybe I’ll just use junk. The problem with using silver in trade is that I don’t want to part with any!

    I recently helped an unemployed friend keep his house by buying what he purchased back in the 1990s. We split the difference between dealers’ buy and sell prices to and from the public; a win-win for both of us.

    Regarding the ratio: In ancient Egypt, silver was more precious during some of the dynasties as it had to be imported. Spanish mining, with massive silver discoveries in the New World and the Comstock load discovery actually caused inflation because so much silver was in circulation. It’s supply & demand. Precious metal backing alone won’t stop inflation. Spain went bankrupt and their empire ended shortly thereafter.

    Regarding Porter Stansberry(Is that his real name? Sounds very aristocratic), his videos are very annoying- no way to pause, rewind or forward and the audio just follows words on the screen. I’d rather just skim an article and go straight to the point. And a “Government-created two Dollar silver investment vehicle”? Common! It’s a freakin’ dime! As if the government makes it better!

    Here is a funny article that parodies the “Buy Gold” fear investing “advice”. http://www.marketwatch.com/story/buy-gold-2011-04-26

    @Mozart (my favorite composer, btw) You may like the videos of honor system stands on permies.com and Paul Wheaton’s YouTube channel. Other than one or two instances of neighborhood kids, they didn’t have any other problems and did very well.

    @Pistol – I think these subjects may have been covered in previous shows. One can’t cover all the topics. Jack is probably using the time to work on the money saving episode, which I am very much looking forward to.

    @Dan, it is hard to know how much without knowing your circumstances and goals. One really can’t say what the best price is since it would involve knowing the future with certainty.

    @Mark, Rich & Alfonso – There has been discussion of a correction for a while, but don’t feel bad- I just bought oil stocks after last week’s dip.

  20. I bought 22oz on Tuesday. Yes I know that I am buying at the “top” but this is my first purchase of silver. Later buys will probably lower my cost basis,but at least I have the physical metal and that has its own benefits. Buy the way, the Silver and Gold Shop has awesome customer service!

  21. @MacAlpine:
    Thanks for the reference, yes I know there is only so much time to the podcast.
    I really want to here more opinions on the COMEX issue. Do you think they have inventory concerns if everyone wanted physical delivery of the Silver futures? There is a lot of chatter, for example:
    http://www.roadtoroota.com/public/146.cfm
    I am unsure what to believe.
    Thanks, Pete

  22. Great show, Jack. Your advice mirrors the advice I’ve given my family members who are interested in silver. I have a wary eye out for a deeper bottom similar to what happened in 2008/9. Hopefully we’ll see a solid pattern for silver emerge soon.

  23. The 100 DMA is now touching the price of silver at about $35. Exciting to see the 200 DMA hit $30… when/if the price of silver falls below the 200 DMA, I’m going to accumulate. Til then, hold.

  24. Interesting article on Seeking Alpha today, wrt re-entering silver long position:

    http://seekingalpha.com/article/269252-piling-back-into-silver-for-the-long-haul

  25. Thanks for some good advice on how to judge whether something is in a short-term bubble or not. I was sitting on the edge of my seat during the rise to $50, worrying that it might be signaling the end of the US’s ability to ride the fiscal carousel. Intellectually I knew it was far more likely that silver had overshot, but I wasn’t sure how to gauge that and I’m afraid I did buy a few ounces at the top of the high. Fortunately I am one of the “a few ounces a month” buyers and most of my physical holdings were bought well before mid-April, so it’s not as though I took huge losses. But with this show I now have a better way to gauge shorter-term market timing when it comes to determining when to make those monthly purchases. So thanks :-)