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Worried About Silver? Listen to Eric Sprott’s Stump Speech

by John Rubino on October 21, 2011 · 37 comments

Hedge fund manager Eric Sprott’s speech at this week’s Silver Summit turned a room full of nervous precious metals owners into pumped-up silver buyers. Some of the highlights are posted below, and here’s a link to a recent Financial Sense interview where he makes many of the same points.

  • The US Mint sells about the same dollar amount of gold and silver coins, which means it sells 50 ounces of silver for every ounce of gold. It’s more or less the same story at GoldMoney and Sprott Money.
  • Ten times more silver than gold is produced each year, and the ratio in the earth’s crust is 15:1, so how can the price be 50:1? Expect a return to the historical norm of 15:1, which implies that silver will outperform gold.
  • The demand/supply picture has seen a 380 million ounce per year positive swing — in a 900 million ounce market. Where is the silver coming from?
  • The paper silver markets trade a billion ounces a day and the world only produces 900 million in a year. The amount available for settlement of these futures contracts is something like 1.5 million ounces, ludicrously little compared to the amount of paper.
  • “On the physical side I’m seeing only buyers.”
  • “There are a lot more people who can afford a one-ounce silver coin than an ounce of gold.”
  • Gold will be a reserve currency and silver will also play a role.
  • “We tried to buy 15 million ounces of silver and had to wait three months — and some of the silver we got was manufactured after we ordered. So there’s not a lot of silver sitting on shelves waiting for people to buy it.”
  • “Somewhere along the line some manufacturer will say ‘I can’t get the silver I want’ and the jig’s up.”
  • People will prefer gold and silver to having money in a bank where there’s tremendous counterparty risk. Three months ago Dexia was considered to be the best capitalized European bank and now they’ve been nationalized.
  • “You go to some of the biggest names who own gold and ask them about silver and a lot of them haven’t even looked at it.”
  • Central banks are selling gold surreptitiously.
  • “It’s shocking how undervalued the junior miners are…Gold and silver stocks are growth stocks. They all have a plan to increase production dramatically. Small miners can start a new mine and double in size…The relative value of gold stocks will become apparent with time…The breakout, when it comes, will be very sudden.”

Full disclosure: The staff at DollarCollapse is massively long precious metals, especially silver.

  • Jason Emery

    The math is pretty easy. Silver is trading at $31/oz, and unleaded gasoline, including taxes is at $3.35/gal in my area. One ounce of silver buys you 9.25 gallons of regular gas.

    Five years ago it was $15 silver and $2 gas, for 7.5 gal/oz ratio, and 10 years ago it was $5 silver and $1 gas (I think), for 5 gal/oz ratio.

    So not only is silver maintaining buying power with respect to this key commodity, it is actually INCREASING in buying power. And this is with silver in a pretty brutal correction from the March high. Silver (and gold) normally move up in price toward the end of the year.

    • http://www.3blenders.com Thomas

      and this also applies to the about 30 years ago when silver was about $25 to $30 as well and then dropped to $ 5.00/oz and gasoline was at 0.79 to 0.99$ per gallon. men, those were the good old days.

    • paper is poverty

      I think that’s because we’re in a decline in real economic activity, but it’s hidden by inflation in dollars and euros. If you convert prices and wages into a real form of money such as gold or silver, you can see that in real terms we’re in deflation. If the price of oil in real terms (gold or silver) is falling, then we’re obviously in an economic contraction. Thus the purchasing power of real money (gold or silver) is increasing.

      This is even true during catastrophic inflation such as in Germany in the 20s. If you translated prices, wages, or the total money supply into grams or ounces of gold, you could see that all three were falling precipitously during the Weimar event. By the end of it, a few ounces of gold could make you rich.

      I get it that over the long term, historically speaking, gold merely preserves wealth. But during short periods it can make people wealthier.

  • http://www.thegoldrate.com Gold Rate Today

    Sprott makes a great case for silver and I certainly own silver.

    The case for gold and the reason why gold may be trading at 50 to 1 right now is that gold is still held as a wealth reserve by central banks. I also think its feasible that at some point in time the U.S. or Euro nations may choose to revalue the euro or dollar to gold in order to recapitalize the system. That may or may not happen and it’s uncertain how silver would react in that case.

    • Cap Matifou

      Central banks holding gold is only a perception they try to protect with tooth and nail. Fort Knox is empty. In Clinton times there was a plan to reduce costs and withdraw the troops, then they realized soon that would tell anybody, what is in fact going on.

      Decoded: Ft. Knox – (Part 1 of 3)

  • http://www.3blenders.com Thomas

    it may even happen that governments lose control over price-fixing the gold value and silver value. they price-fix it all the time.

    And then, and even now, we should not get gold or silver with the dollar exchange for the pm in mind. the standard living that i can afford with it matters to me the most. I like what Marc Faber is saying, the most important thing is that you have something in your possession rather than losing everything. The exact value is secondary.


  • Tony D

    Firstly, I declare that I hold a significant amount of silver and will continue to do so. However, I question the continued predictions we see month after month where silver is about to explode. Seems to me to be a pump up by vested interests. The problem with these predictions is that they are made by people who continually claim that the PM markets are rigged by JPM et al(not for profit sellers) but offer no explanation as to how these markets will be “unrigged” so market forces can apply. I am yet to see someone put forward a cogent explanation beyond “short squeezes” as to how the markets will be freed. And by the way, short squeezes apply to market participants who don’t have direct access to the management of the exchanges, unlike the big players. The big players have deep pockets and the ability to manipulate whole markets so short squeezes are unlikely until they are extreme in nature and by then the big players will have many, many other problems.
    Thus silver buyers operate in an unnatural market, no doubt. The advantage of this is that silver is probably cheaper than it should be and these prices in retrospect may end up looking like a bargain.
    So why buy and hold silver if the market is rigged ? To me,its not about industrial demand or normal investment, it’s about insurance and speculation on a spectacular disintegration of the world’s economic system. Thus I believe that silver will be manipulated until the banks that do that dirty work can’t (not won’t) do it any more due to a freezing/collapsing banking system. At that time there will be a confluence of events that send silver prices absolutely crazy (parabolic, moon shot etc) . These events will be :
    1)Failure of/restrictions on the banks manipulating silver markets
    2) Flight to “safety” of the PMs (note that silver won’t stay safe for long though)
    3) Self fulfilling momentum of PM prices due to the flight for safety, the “mania” stage.
    4) Inability of changes in supply to adapt to changes in demand. Note that the supply/demand issues discussed in this article are irrelevant until the bank manipulation ceases.
    Thus most of the arguments in this article are largely irrelevant due to market manipulation, but these arguments will become highly relevant if/when the manipulation ceases. Oh, as well the G/S ratio will remain the same unless silver takes on monetary properties according to the market. The 50:1 ratio represents the premium gold enjoys as a monetary metal. We will only get 15:1 when silver is equally viewed as a monetary metal.
    I agree with a speaker I heard last year who said. “When the time comes, I’d rather be 18 months early than 1 day late”.
    Silver investors are going to need to be resilient and patient and just when it looks like not happening SHTF will happen and prices will rise almost vertically. It WILL be worth the wait.

    • Pete

      THANK YOU, Tony!

      Yours is the only comment I found that mentions the “PERMA-BULLS” and their non-stop predictions of the immenent, parabolic, short-sqeeze, mega-explosion COMEX default, Chinese-buying, tungsten-filled-bar, Indian Wedding Season, ultra-metals gravity-defying moon-launch that is always…

      I started reading this stuff on THIS WEBSITE about five years ago, and I bought it hook, line, and sinker. Correct me if I’m wrong, but have any of these so-called experts ever issued apologies or retractions after their horrible calls? James Turk, who convinced me silver would be $35 by the end of 2008, is now quoted on Kingworldnews saying gold should be $11,000!

      Are we the only two guys who read dollarcollapse who notice this?

      Yes, we should all hold some silver, just like we should all keep some food reserves, excercise 45 minutes per day, and keep fire insurance on our houses.

      • Xavier Cromartie

        Is a 200-400% gain in 5 years not enough for you?

        • Pete

          XAVIER: Sure, gold and silver have been great. But there have been lots of other big moves in commodities in the past 5 years; Peanuts, coffee, corn, crude oil, unleaded gasoline, cotton, wheat, copper, etc., have all made some major moves.

          What I am criticizing are the so-called experts who are really just blow-hard attention seekers with vested interests in pushing a sensationalist agenda who SPECIFICALLY CALLED FOR A COMEX DEFAULT, HYPERINFLATION, and PARABOLIC GOLD AND SILVER PRICES by 2010. Oh, and gold and silver stocks were supposed to be in the stratosphere now as well.


          Why are you critical of my honest observations and not more critical of the so-called experts who said we’d all be zillionaires by now?

          I’m only trying to warn newcomers to not give these loud-mouth prognosticators too much faith, like I foolishly did. Is this not enough for you?

          • Shizo

            Well, it could have something to do with mark-to-market (presto-chango) to mark-to-unicorn? Or, massive bailouts whereas Bloomberg had to SUE to get information about where the money went (overseas banks). Or, POMO, or market triggers to stop people from selling, or, insert any of the Tom-foolery (Appologies to the many Tom’s out there) that is being played out right now… there are so MANY of them I lose count.

            Normally these things are highly inflationary but moneys are being destroyed faster than they can print them (supposedly). So while the $ has lost over 95% of its value over the years, I have chosen something else to represent my earnings in.

  • Terrance Kennedy

    I am a businessman…I accept gold and silver as payment, no questions unanswered. I’ll give you dollars or silver change in return. Money is money and believe me, there are many more merchants who do business this way.

  • Pingback: Worried about silver? | Silver Investing Blog()

  • Dave Ziffer

    There is another factor that people aren’t discussing here regarding what might explode the prices of PMs in the near future. The largest single asset class of worldwide invested wealth is bonds. We never hear about the bond market on the news (whereas every day we are regaled with useless short-term info about the Dow and such) because it is so un-dramatic. But that will change. At some point, enough people will have figured out that they are getting negative inflation-adjusted bond yields, even with relatively high-interest junk bonds, and they’ll be abandoning the bond market. The flight will increase with the Fed’s inevitably increasing inflationary policy in the coming months and years as more and more people figure out that the published CPI is a fiction and consequently that their real bond yields are far less than they imagine.

    The rate at which the Fed has been buying Treasurys at Treasury auctions suggests that this abandonment is already well underway, at least at the international level. In order to attract buyers with real money (as opposed to our Fed with freshly minted money), bond issuers at all levels will eventually have to raise interest rates. But the taxpayers funding government bonds will be unable to handle the resulting required tax increases because their salaries will not remotely keep up with inflation and their houses (whose values are the basis of property tax levies) will keep losing value. At some point after some number of bond rate hikes, municipalities and states, which cannot simply print their own money, will start defaulting.

    Using figures available from Wikipedia, the worldwide bond market today (at $83 trillion) represents almost nine times the dollar value of all the gold ever mined on earth (about $9.6 trillion [165K metric tons @ $1646/oz]). Money fleeing the bond market in the wake of a wave of defaults will have to go somewhere. What would be the effect on PM prices if even 10% of the bond market fled to PM, especially given that severe natural limitations on PM supply increases might fuel market hysteria?

    Read this article [http://blogs.reuters.com/felix-salmon/2011/07/15/the-horrifying-aaa-debt-issuance-chart] regarding the worldwide amount of AAA-rated debt (now somewhat reduced since the US lost its AAA rating) and you’ll start getting the same creepy feeling that you get when reading the history of the housing bubble: a fantastic increase in the amount of issued debt, and all of it perfectly safe. How much longer can this continue?

  • Mike

    Good to hear about the real facts on Pm’s.
    “On the physical side I’m seeing only buyers.”

    Someone must be selling…f.ex the Mint ect.
    + paper shorts – giving us a Garage sale.
    “please smash the price again, so I can fill up my garage…wanksters”

    But clearly the volatility lately is trying to shake leveraged positions
    before the big surge coming.
    ? What is the purpose of everybody leveraging 10x on E-trade ect
    I found it a quick way to empty pockets
    Holding Physical

    Another weekend of saving the Euro…
    Pathetic & useless b.euro.crats
    The banks have Hedged those bonds…Right ?
    Well then, lets call the bluff….selling insurance that can’t be covered
    hmm, might start my own Bank…ScamBank,Ponzinvest or ?

    Intervention in the markets is UNdemocratic
    it’s THAT simple.
    Vote with your cash
    Paper Pension OR Silver Pension
    Place your bets

    Have a nice week end

  • Bruce C.

    All discussions of value within the framework of a dollar-centric worldview are distorted. The belief in the US Dollar is still strong and everything is still measured against it. Relatively few “investors” consider the purchasing power (or value) of gold or silver to be more fundamental, “real”, or reliable than the dollar. It is a matter of belief – not unlike religion – and logic or facts have little to do with it. Until the majority of people would rather have gold or silver INSTEAD of dollars (or any other fiat currency) the dollar will remain the arbiter of monetary value for everything.

    “Investors” may not necessarily trust the Fed these days, but I think they still fear it, and are unwilling to fight it. The Fed/Treasury says the official price of gold is about $42/oz so 1-ounce gold American Eagle coins have a face value of $50 and silver Eagles have face value of $1, both about 32 times less than their market values, so how far out on a limb are people willing to go?

    Bad money (fiat currency) drives good money (gold and silver) out of circulation (Gresham’s Law), or does it? Not during a severe deflation (spot price of gold/silver under $50/$1 anyone?) and, evidently, not if euros are the legal tender. Here’s another evocative little factoid that might suggest that silver is in a kind of twilite zone: A one-ounce silver Vienna Philharmonic coin has a face value of 150 euros, or $206. Do do do do do do do do do do …..

    • Jason Emery

      Bruce C. said, “The Fed/Treasury says the official price of gold is about $42/oz ……..”

      I’m not aware of any recent statement from either the Fed or the Treasury reaffirming their belief that $42/oz is the logical and correct price for the gold they used to hold at Fort Knox. That has been the official price for several decades, and since the actual physical gold was leased out to bullion banks long ago, there is no compelling reason to revalue something you no longer have.

      In fact, just the opposite. Why would one want to draw attention to a major potential source of embarrassment?

      The correct, marked to market, price for that gold that has been leased out is almost impossible to calculate. On the one hand, if the bullion banks attempted to acquire physical gold, should the gold lease be called, that would almost certainly jack the gold price much higher. On the other hand, there is clear and present possibility of a failure to deliver, which means a write down of some sort.

      If you were in Bernanke’s or Geithner’s shoes would you go out of your way to invite scrutiny regarding this phantom gold?

      • Bruce C.

        First of all Jason, beware of giving the monetary “authorities” too much credit. I’m not saying those people are stupid, but they all share the same very strong framework of beliefs along certain lines else they would never have made-it/been-selected to their levels of authority.

        Furthermore, the low face values given to the gold and silver coins are indirect testaments to those “official values” and are in themselves both intimidating (by creating doubt amongst “the masses” about the “true” value of gold and silver) and strategic (in that confiscation would be self-funding.) For example, the US gov. will pay you $50 for each gold Eagle usurped – no more and no less, because that’s all they’re “really” worth.

        • Jason Emery

          I’m with, Bruce, in that thinking that gold confiscation is at matter of ‘when’, not ‘if’. I’d say the gold community is about 25% believing that confiscation will happen and 75% that it won’t. But you’re the first I’ve seen that puts the confiscation dollar value at $42/oz.

          If you follow gold stocks, you would know that at the present gold price of about $1600/oz is not much above breakeven for gold miners. The Amex Gold Bugs Index (hui) is trading about where is was 3.5 years ago when gold was at $1000/oz. At $42/oz, you won’t be able to get union workers to move it from one side of the vault to the other, lol.

          It will be interesting to see how much Euro wealth goes into precious metals when the Euro disintegrates over the next year. Gold $2500/oz in 2012? Or closer to $3000/oz?

    • River Walker

      Very good points. Yes, start thinking in ounces. But the face value of an Austrian Philharmonic is 1.50 euros, not 150.

    • Forceofgravity

      1,50 euros…not 150…in other countries they use commas where we would use decimals and they use decimals where we would use commas…it’s strange.

  • W G Thompson

    Is the Fed able to avoid hyperinflation,
    without a doubt? If so, Gold’s a hold
    at best. If not, only silver coins are
    divisible enuf to serve as real money,
    and paper gold (paper anything) will
    crumble. Let us not forget that US
    silver coinage is legal currency, and
    represents the only form of PM that is.
    vty, W G Thompson

  • tomt

    The increasing value of silver relative to oil is a pleasant surprise. I had not read this before. It is a powerful comparison given the enormity of demand and wealth in oil (gasoline).
    The affordability and exchange practicality of silver are the reason silver will be increasingly used as money again. “poor man’s gold” yes, and destined to return to this former role. I think is may happen in Mexico , or another country first, on an official level, and it will defacto take its place in traditional barter exchanges, though its still a big leap for us to get a US administration willing to condone it. In the mean time a goldmoney type account will suffice as a way to own the PM’s and tap their value for making exchanges.
    Hoping an equivalent vault/debit card solution becomes broadly available in Utah soon.

  • tomt

    A follow on to previous musing –
    There is not enough silver to make it into broad circulation- except as a % of content. Also it is far more likely the introduction of a Intl. trade currency that is backed (basket of commodities?) will be introduced, if Ben doesn’t beat them to it. This could possibly elevate silver to that basket.
    After all a junk dime buys a gallon of gas today, and will likely buy~ 2 gallons in the future if Silver is at $120+ and gas at $6+. How will we make change? – nickel & copper anyone?. Perhaps gas and everything else will go much higher, but this is the future and nobody’s been there, except through past experiences. History foretells a further loss in value for the US dollar is a “definite” expectation, and that a sudden drop, not an orderly decline, is the more probable.

  • Pete

    In the Financial Sense interview, Sprott predicts within 5 years we’ll see the gold/silver ration back to “historic norms” in the 12:1 to 15:1 range.

    WARNING TO NEW, GULLIBLE READERS: Five years ago, I was reading identical predictions on this same website! Thanks to my foolish trust in articles I’ve read (mostly at Dollarcollapse and goldseek) I was convinced that there would be hyperinflation and a precious metals explosion no later than 2010. I foolishly believed the forecasting of James Turk, Bix Weir, Ted Butler, Bob Chapman, Jim Willie, and a bunch of others. I feel very embarrassed for believing these guys. I think I know how those “doomsday cult” members must feel when the world doesn’t come to an end as their leader predicts. I wasted a lot of productive time, and made an arse of myself by trying to warn friends and relatives of a disaster that never happened.

    Guess how many retractions or apologies these perma-bull guys have issued after making terrible calls?


    Guess how many times they’ve called a short term top in the metals price?


    NOTE TO DAVE ZIFFER: Did you just mention the existence of a factor that might explode precious metals in the near future?

    But Dave; when I was recently complaining about poor forecasting by the precious metals perma-bull “experts,” you implied that it was my fault for being too focused on the near term. You defended Eric SPrott, and said he only makes long term predictions in no less than ten-year increments (Oops, see the first sentence of my post).

    Why the sudden focus on the “near term,” Dave?

  • saxa

    re: pete sir, if you bought five years ago you should be in quite an enviable position methinks. don’t cry about this article, why not sell some/enough to take your stake off the table and let it ride??

    • Pete

      SAXA: No ones crying. I’m publicly admitting my mistakes in an effort to warn newcomers by pointing out certain “perma-bulls” who continuously call for incredibly higher metals prices. THey never admit when they’re wrong. Instead they blame lackluster results on nebulous market manipulation. Not suprisingly, the perma-bulls have vested interests in keeping gold and silverbugs like us scared.

      John Rubino sells books and advertising on this website.
      James Turk sells books and goldmoney shares.
      Ted Butler sells newsletter memberships $299/year.
      Jason Hommel sells gold and silver (formerly sold mining stock data).
      Jim Willie sells a newsletter.
      Eric Sprott sells gold and silver.
      Bob Chapman sells a newsletter.
      Etc., etc.

      I’ve been reading these websites almost daily since 2006 and I know what I’m talking about. I wish I had not fallen victim to all the hyperinflation fear-mongering, alarmist BullSH**!

  • ze

    I am also very bullish on silver!! I buy from https://silversaver.com/share/WCCA3/ for as little as $25 a week. There are alot of sites to buy from but bottom line you need to be buying silver!!

  • saxa

    re: pete i have been reading those websites too since 11 years ago and bought and sold silver 28 years ago. i have silver at $6.79 oz and gold at 479 oz and even if we never get to hyper inflation i feel confident in my move. the silver i recently bought at 30.67 is a more speculative move on my part. i would not count on as bull the prediction that silver will reach 100 an ounce, it is when as the question. my feeling is though that within 3 to 5 years time it will happen.

    • Pete

      SAXA: Since you’ve been reading the same articles as me since 2000, do you remember all the predictions I mentioned? Wouldn’t you agree that there have been a lot of horrible calls by so-called experts, but that they are never confronted afterward? James Turk, for example, with his “Undeniable signs of hyperinflation by 2010,” and “$35 silver by end of 2008?”

      Wouldn’t you agree that these guys get away with horrible predictions, yet are still welcomed by the gold and silver community as heroes and experts?

      I’m starting to think the gold and silver bug crowd is religious, and they only seek the advice of preachers with whom they already agree. Instead of Christ returning, we are waiting and praying for the hyperinflation and silver short squeeze comex default so we can get filthy rich and live in heaven on earth. Anyone who disagrees with the religion is a heretic. When our preacher is wrong, we forgive him and blame some invisible devil.

      • chowthen

        You keep mentioning prediction and that’s exactly it. Why do you believe in predictions? Nobody in their right mind believes in prediction because no one can predict the future other than God himself. Why did you believe all these writers predicting hyperinflation and such around 2010? I’ve never read any articles on PM prior to 2 years ago but I’ve been buying PM since the 1990’s just because I like looking at them but now I begin to realize that perhaps it is also a store of value and just like any other commodity it gets more expensive in time because of inflation and limited production.

        • Pete

          Yes, then we agree; these guys like James Turk, JOhn Rubino, Ted Butler, Jason Hommel, Jim Willie, Bob Chapman, Bix Weir, and many others have made horrible predictions. Isn’t it interesting then that when they are interviewed or write new articles, it is never mentioned that their past forecasts were pathetic? Instead, they’re treated like wisemen.

          I believed them because they seemed honest, credible, and aware of monetary history. In contrast, the “mainstream” financial writers seemed clueless. In retrospect, I now understand that my hard-money heroes like Turk were being fed softball questions by interviewers, and never confronted on previous crappy insights and flawed perspectives on our monetary system. For example, James Turk keeps saying governments print money, when in fact, ALL currency in our system is created by private banks in the form of credit. When you sign the mortgage for $200,000, the bank creates the so-called money out of thin air as a ledger entry. If you’re missing this essential fact in your fundamental analysis, of course you’re going to make some bad predictions.

          I’m only trying to warn new readers so they don’t believe this stuff like I did. PLease stop blaming the victim and kicking the messenger.

          Buy some silver and gold along with other smart investments, but don’t sell the farm, and don’t quit living or being creative due to a fear of immenent hyperinflation like I did.

  • http://4salebyowner.com jim

    HUH?? “On the physical side, I’ve only seen buyers”… ??? WTF ??? How can you buy something that someone else is not selling??? The jig is up alright.

  • Dave

    I have been buying and sometimes selling silver since the early 70s. Harry Browne was one of my heroes and I have read every book ever written on the subject. I have always got more for what I paid for every time I decided to sell some. I remember buying silver quarters for 50 cents each. I had silver coins out of circulation at face value early on and was pulling 40% Kennedy’s out of circulation in the 80s. I still find a few war nickels in rolls every now and then. The point is I felt comfortable buying some silver when it recently hit $50 an ounce and will do it again. Having heard all the doom and gloom talk over this long period of time has harden me to the point that my gut reaction to such things is well developed. I have some gold, but I am still stacking silver. Tomorrow I plan to buy another 10 oz of silver. I know a pawn shop where the silver guy changes prices to reflect current values on a weekly basis. All of the 90% silver coins I have bought have been below what spot was at that time since I can time when the guy comes in and changes prices. I feel this won’t last much longer. Last month I walked in and all the 90% coin, silver eagles and the other good stuff have been completely bought out. He now has inventory back in place , but I see this pattern where people are beginning to wake up and are buying what silver they can afford. I am not trying to give any facts here that are to be debated, just giving you a story of one long time silver stacker that may be valuable to those just starting out. No one know when the fan will start slinging but my gut tells me it is fast approaching.

  • James

    I buy gold and silver to protect me against financial collapse or hyperinflation, the same way I buy insurance to protect my car or house, and keep a decent supply of food, guns, and ammo in my house.

    But at the same time I also keep some money invested in traditional investments. Why? Because in spite of all the dire predictions, nobody really knows what the future holds, and I certainly don’t. The basic principle of investing has always been to diversify so that if one investment does poorly the investor doesn’t lose everything.

    Stocks and bonds may be risky, but so is gold and silver. It is possible the price of PM could go way down, just as they did during the 1980’s after the big runup at the beginning of the decade. It is also possible that a physical supply of precious metals can be stolen by thieves or confiscated by the government. Storage in a secure facility also has risk, as no facility is completely secure and you must trust the people who run it, not to mention that it makes it easy for the government to find it. Storage in a facility also costs $$$, regardless of whether the value goes up or down.

    Remember the famous investment advice: “Buy low, sell high”. Everyone has heard it but few people obey it. People tend to ignore a stock until the price has skyrocketed, then suddenly they want to own it. When they see the stock market go way up they invest all their money, and when it crashes they take their money out. Same thing with precious metals. Back when the prices were low hardly anyone was interested. Now that prices are several times what they were just a few years ago, suddenly people want it.

    The few people who bought gold at $400 have more than quadtripled their investment. At current prices gold needs to hit $6800 to make the same kind of return. The difference is that at $400 gold was near a historic low and a fairly safe investment, while gold is now approaching an historic high (inflation adjusted), making it much more risky. And this applies to silver too.

    I’m not against owning gold and silver (I own some), I’m just saying that people need to be aware that there is high risk in buying now, and they should be prudent regarding how much money they put at risk. My personal goal is to keep about 10% of my assets in precious metals. This gives me some security in the event of a major financial collapse while keeping the risk manageable should the collapse never happen and the prices of precious metals plummet.

    Like I said at the beginning, it is about buying insurance, not about getting rich.

  • Matt H

    There is some really good information and thoughts in here. I do know that i just started buying lots of silver and gold recently when silver was down to 30 an oz. I have really got addicted to finding flea markets and pawn shops who are uneducated on what they are selling or never change there prices.I have come across some really good deals well below spot and still have paid up to 3 dollars above spot on items such as silver eagles. Ive spent hours and hours every nite reading articals and such on the internet and magazines and and the most logical answer i can come up with is that i beleive right now with silver at 33 an oz is that in the next couple years i will have doubled my money. I know lots of people that have recently turned buying silver and gold into a hobbie type sport. It gets brought up alot more at work and with freinds than i ever could have imagined.even 5 years ago no one mentioned anything about investing in silver or gold.I saw a 16 y.o boy spending his paycheck on morgans the other day at a coin shop in minneapolis.

  • http://Vistagraphs.net Steve A. Mizera

    I really appreciate all of you taking the time to put your collective knowledge (especially regarding silver) because iT is so diverse and somewhere in between there has got to be some truth to guide me.
    As a new buyer, I started just about the time silver peaked in March 2011 and have been buying bars and coins, and war nickels sets including BUs ever since. I get real excired as the price drops because I see buying as a SALE. I have accumulated $10 K todays spot or melt value but it suddenly dawned on me: why am I buying?
    First I thought I have to eat and I could exchange silver for food, but then I just bought a year’s supply of food and rotate it based on the expiration date.
    I was first in line to foreclose my house at its hyperinflated value after I squeezed the last of its equity from it and bought an expensive depreciating RV and used that for housing. So If I don’t need food or housing in the future whether armageddon comes or not, What am I buying silver for? I really like fondling it, and counting the ounces, and converting its value to dollars, but I sure would like to know why I am buying it? If I could find a good answer I would buy more.
    Thanks again to all of you for your variety of insights.
    PS. My other hobby is making large panoramic photographs I print (in China because it is one tenth the cost to print in the USA) and you are welcomed to go on a vietual vacation to view the places I have photographed since I retired in 2004 – http://www.vistagraphs.net

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