ski aus dem USA Gold Forum: My Medium-term Silver Price Prediction

verfasst von Pancho, 27.03.2002, 13:13

I have been following the evolving silver story for the past 19 years or so. Being curious about how high silver prices might go, I began making a list of major market forces that will come to bear on the future POS. The first time I did this exercise I came up with 29 approaching forces. The list has now grown to 44.

At the end of this post I will have my conclusion for the medium-term (3 to 7 year time period) POS.

Making investment predictions and projections is usually a huge waste of time because almost no-one is ever right. But on the other hand, virtually all investment buying and selling is an exercise in price prediction. We only buy when we expect a price increase and sell when anticipating a general price decrease.

No one knows the future POS. However, one can study the individual approaching forces and then make an educated guess as to its impact on the future price. Anyone can make price predictions. However, IMHO supplying the actual data that the prediction was based on is far, far more important. In the spirit of"show me the data" that my prediction is based on, see below:

1. The same PROFESSIONAL DEALERS and INSIDERS that have made so much and done so much structural damage on the downside will surely be positioned to capitalize on the upside. At the least, their personal accounts will be properly positioned. Their activities have not simply been analogous to holding a lifejacket underwater but rather to holding a helium filled balloon underwater. It not only wants to break to the surface but wants to fly to the moon.

2. In a rapifly rising price environment, the process of metal coming to market will SLOW. Why? A DELAYED SHIPMENTwill stand an excellent chance of being worth even more.

3. In a free market, the amount of metal coming to market will have to"overshoot" demand to create at least some SURPLUS. The words"silver deficit" will have to be removed from current literature. A permanent silver deficit is economically impossible in a free market.

4. The practice of"just-in-time" or zero inventory techniques will give way to the old STOCKING-UP MENTALITY for distributors and end users. Why? Survival and price protection.

5. Due to such a long period of low prices there has been a decrease in silver SUBSTITUTION RESEARCH than would otherwise have been the case.

6. Since silver cannot be created, it can only originate from 3 sources: ABOVE GORUND SUPPLIES, re-cyled silver, and mine production. Above ground supplies are apparently nearing exhaustion, leaving only two remaining sources. 3 minus 1 leaves us with only 2 future sources of silver.

7. Silver MINES open and silver mines close. More are CLOSING than opening (usually due to depletion).

8. Beause silver has been priced below its all-in production cost for so long, silver EXPLORATION has practically ceased. The net result is that there are almost no silver projects in the pipeline to activate. Rather than just re-opening shuttered mines, the industry will have to sart from ground zero exploration.

I have attended a large mining show for several years running. Gold mining projects are a"dime a dozen" but true silver projects are rare at these shows.

9. Once a discovery is made, a mining project must advance through a series of pre-production steps before the first ounce is produced. In-fill drilling, feasibility studies, permitting, project financing, infrastructure construction and the like. Because silver has been priced below its production cost for so long, DEVELOPMENT and ADVANCEMENT phases of silver projects has practically ceased.

10. Around 75% of mined silver originates from by-product base metal mining. A deepening RECESSION, particularly in manufacturing, will dampen the demand for base metals resulting in decreased overall silver production. (I have yet to see any sustained data that supports the end of the recession/depression.)

11. Any ANXIETY BASED CRISIS that comes along will boost demand. Stock market, holy war, oil shock, civil unrest, defaults, currency crisis etc. Our war on terriorism has just begun. When, where, and how will THEY strike next?

12. Higher ENERGY PRICES and OTHER PRODUCTION COSTS are here stay. The process of mining, smelting, transporting and refining require huge amounts of energy and effort. Higher production costs necessitate higher commodity costs.

13. Presently the PAPER COMMODITY PRICE is determining physical silver price. A price jolt will occur when prices begin to be set by physical availability.

14. Large quantities of silver have been LEASED into the world market. During this process, silver that is BORROWED (leased) is actuall SOLD into the physical market, depressing prices. As falling prices reverse or the supply of lease silver evaporates, this prevailing negative counterforce will end. Leasing, while the POS is rising is like holding your hand in a fire.

15. In most cases there will be a legal and/or contractual obligation to RETURN LEASED SILVER to the lenders. This force will ADD to the demand side of the equation.

16. Metal LEASE RATES have averaged near historically low levels. A sustained period of rising lease rates will increase the incentive to return borrowed metal from an ever-shrinking physical pool.

17. A huge PAPER SHORT POSITION has depressed prices. When prices begin to rise in earnest, many short sellers will switch to becoming buyers. To close out a short position, a short must deliver physical silver or buy out their contracts if so allowed.

18. A percentage of FORWARD SELLING MINERS will repay their metal loans with phsical silver thus removing those ounces from the grasp of the marketplace and increasing the shortage.

19. A percentage of UNDERWATER HEDGED INERS may slowproduction, close down, or go bankrupt. Because they will owe so much while being denied the profit from higher prices, they will have little remaining incentive to produce silver.

20. LEGAL attacks and LAWSUITS by a wide range of parties will be launched that will effectively curtail some production. Lawsuits by two or more of the following parties will be commonplace. Auditors, bankers, bullion banks, central bankers, commodity houses, counter parties, depositors, employees, government agencies, hedge funds, individuals, insurance companies, lessees, lessors, management, mining copanies, regulators, shareholders, speculators, third parties, and users.

21. When the STRONG DOLLAR falls as expected, it will take more dollars to buy the equivalent amount of silver from foreign producers.

22. When supplies are exhausted and prices skyrocket, GOVERNMENT will be expected to"do something". The usual, counerproductive answer is to interfere and regulate. In economic circles, it is a well-established fact that when anything is regulated, you get less of it.

23. The RULES that the COMEX and Commodity Futures Trading Commission (CFTC) presently operate by could be described as liberal to the exteme and have contributed to depressed metal prices. More rigid and restrictive RULE CHANGES should be anticipated.

24. In a free market, INFLATIONARY FORCES are enevenly manifest in different economic sectors. One day it's Nevada land prices. The next day it's the price of milk. The long term price of silver has gone nowhere for several years which seems to indicate that price inflation has not yet been properly priced into the commodity.

25. For eons the US GOVERNMENT has been a silver supplier. They are now apparently at the cusp of being out of supply and will how have to enter the market as buyers; an effecive double whammy for silver price.

26. During most market conditions, ASTUTE INVESTORS do not try to pick bottoms. Rather, the preferred technique is to wait until an apparent bottom can be observed before big positions are initiated. With silver fundamentals as well known as they are, you can be assured that there are huge amounts of investment money poised to enter this arena once a technical turnaround is apparent.

27. A certain percentage of investors will be attraced to silver for only one reason, BECAUSE ITS GOING UP. Like a moth attracted to light, these momentum investors will want to jump on the bandwagon.

28. Because of the INTERNET etc., the world will quickly be alerted to what is happening and why. They will want their piece of the action.

29. The total silver MARKET IS TINY. It would take perhaps $10 billion to buy all the remaining physical silver and silver mining stock in the world at today's prices.

30. Mutual funds and other institutional players are grossly underrepresented in ownership of PM socks and physical. If and when these investors simply REBALANCE their PORTFOLIOS to include silver, it will result in a tidal wave of demand for this tiny market segment.

31. Virtually every US and world citizen already has a WORKING KNOWLEDGE of what silver is. We're not talking semiconductors, megabites, export quotas, or quasars where the learning curve is extreme. When silver begins to get world attention, this residual, in-place knowledge will grease the skids for the novice participation.

32. In the coming economic environment, precious metals may be one of the few investment areas making established up-trends. Individuals, businesses, mutual funds, pension funds and hedge funds who WOULD NOT DREAM OF INVESTING IN METALS today may have few other choices.

33. Silver may be the most versatile metal of all. NEW USES are constantly being discovered in a very immense range of applications.

34. SUPERCONDUCTIVITY technology as applied to electricity transmission efficiency will increase silver demand. (On one hand this is just a repeat of"new uses" for silver being discovered. However the amount of silver that this area may use is so relatively high, that it merits ts own place on this list.)

35. Increased use in automobile battery manufacture as they evolve into ELECTRIC GAS HYBRIDS for mandated greater fuel efficiency.

36. The % of SILVER BULLS is historically low. When prices begin to rise, newsletter writers and their readership will join the party by buying.

37. The more taxes rise (the overall trend has always been up), the more people will seek ways to keep the govenment out of their pockets. Silver is one of the few remaining alternatives left in this area.

38. In a growing environment of envy & financial distress, the NON-REPORTABILITY advantages of silver will enhance its demand.

39. If a mineral is found in great abundance in the earth's crust, depletion will never be a real issue. But a silver occurrence is an extremely rare event. Therefore, every day that a silver mine is in production it is one day closer to its closing date due to REAL DEPLETION."They ain't making any more."

40. In broad geologic terms, the deeper you go in a gold mine, the richer the ore deposit becomes. Silver is the opposite. The deeper you go in a silver mine, the lower the grade of ore. To state this PERCENTAGE DEPLETION another way, because silver deposits are found near surface, they have already been found and mined out.

41. At this point in the business cycle, there is a very high level of conidence in paper or fiat, especially the US dollar. This cycle can be expected to change. The result will be INCREASED TRANSFER OF PAPER WEALTH to PM'S.

42. There are presently no PM backed currencies in the world. Yet, the history of currency shows us that all paper currencies eventualy crash. A SILVER BACKED CURRENCY is ust a matter of time. The discussion phase has already begun in some quarters.

43. For many reasons, we have not had a pure and free market in world silver since the US began supporting the price and supply in the late 1800's. This artificial intervention is finally coming to an end.

44. In world markets, virtually all stocks and commodities go from being under priced to being overpriced and back again. There is no reason to believe that the POS will stop rising when it reaches its EQUILIBRIUM PRICE.


What forces might contribute to lower silver prices?

1. In a high price environment, some jewelry, tableware, silver coins and the like will come out of hiding. Is thought that much of this silver is long gone. Most people don't own any silver to sell and have never seen a real silver coin.

2. With higher prices, STERLING SILVERWARE and TABLE ITEMS will be too costly and many potential buyers will be priced out of the market.

3. Sales of silver JEWELERY that is now being sold at your local shopping mall and flea markets will practically vanish. However investment demand can be expected to take its place.

4. High prices will cause end users to attempt to MINIMIE USAGE by any means available.

5. A RECESSION or DEPRESSION will result in less industrial silver demand. (This force may be off-set by decreased by-product mining.)

6. During a silver shortage, fewer and fewer retail outlets (coin shops) will have avaiable silver for distribution. If some potential buyers are not able to satisfy their demand, potential maximum demand will be reduced.

So there you have the data that I have used to make my MEDIUM-TERM SILVER PRICE PREDICTION. I believe that in the 3 to 7 year time frame, the price of silver will exceed the price of gold.

Quelle: USA Gold Forum, Beitrag 72139

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gesamter Thread:

• ski aus dem USA Gold Forum: My Medium-term Silver Price Prediction - Pancho, 27.03.2002, 13:13
  • Danke für dieses Posting - ich habe zum Silber auf meiner Seite ein Update - Lentas, 27.03.2002, 13:34
    • noch den Analysetext dazu... - Lentas, 27.03.2002, 13:35