Silver

Silver has been falling off a cliff for about 135 years at a minimum, having lost something like 70 to 75% of its value in gold. In comparison, the USD has lost about 97% of its value over the same period, but anyone thinking silver can function as a store of value will be sadly mistaken.

Bart, although your comment is a couple of years old, and you will likely never see this reply, I will respond for future visitors to this page. Silver IS a store of value, just like gold. Only difference is that silver's true value, that is it's value without price suppression which it has dealt with even more than gold through concentrated short positions by 2 US banks as a proxy for the "Federal" Reserve to protect the fiat dollar's perceived value, is much higher than gold. We will see silver priced higher than gold in the near future, although it will likely eventually come back to it's geologic ratio to gold of 17:1 in terms of price. Before end of 2010 we will see gold at or above $5000 and silver around $1000, at least temporarily.

Money of all sorts has three functions: to measure value, to transfer value, and to store value. Our present Federal Reserve Accounting Unit Dollars (F.R.A.U.D.) are quite good at the first two on any time-scale that matters. They are, however, absolutely miserable as a store of value.

Right now, silver is very clumsy as a measure of value. As always, it is an excellent means by which to transfer value, and for that purpose I actually like it better than gold. There was a reason the $1 and $3 gold pieces of the 1850s were generally considered to be a pain in the ass. Silver worked way better at that scale and you didn't have to panic if you sneezed.

So, silver is great for transferring value, but for measuring value it's not all that good. Historical data since 1300 AD show that it's also not particularly good at storing value, at least in relationship to gold, farmland, or hammers.

The problem with F.R.A.U.D. is only that they're a terrible store of value, for which we (and the Chinese) have numerous alternatives.

Gold and silver are each excellent ways to transfer value, but they're generally inadequate as a measure of current value. As a store of value, gold is vastly better. Silver is generally adequate for the task at normal human time-scales, but not across centuries.

Guess what? I hold all three … and own a good chunk of productive farmland as well.

"Anyone thinking silver can function as a store of value will be sadly mistaken."

The three monetary metals are gold, silver and copper. With the FED printing the us$ into oblivion true values are bound to reassert themselves. IMO silver will regain its historical 1 to 10 ratio to gold.

Hang on its going to be quite a ride. Next stop silver priced in three digits.

I don't think people get it, at all.. The Fed is not "printing" dollars, the Fed is "lending" dollars – which it will collect back, with interest. Meaning that there will be even less "free dollars" in the future = gold & silver both will go back down..

Nick,

Don't be so quick to point out others' lack of understanding… The Fed is purchasing US Treasuries from primary dealers as part of its Quantitative Easing program. When the Fed adds to it's balance sheet (i.e. buys something) it's creating new money. So you're correct in saying that the Fed is not "printing" dollars, but only in a litteral sense. When the Fed buy's US Treasuries, it doesn't print the money and send it to the primary dealers. It simply makes an accounting entry on its books, and adds some zeros to the primary dealer's (digital) account at the Fed. Also, it's worth noting that this new money is base money (i.e. M0). That money is eventually lent into the economy (at which point it CAN be converted to CASH that's obviously been PRINTED)and is subject to the money mutiplier effect due to fractional reserve lending. So if the Fed buys $1,000,000,000 in Treasuries, that equates to $10,000,000,000 of NEW MONEY flowing into the economy… in theory. In practice, banks are not lending this money, and are instead letting it sit at the Fed, earning interest (excess reserves held at the Fed are at unprecidented levels).

So in effect, the process works like this:
1. Bank buys Treasury from US
2. Fed buys Treasury from Bank (i.e. this costs the bank NOTHING)
2a. Bank earns commissions from the sale to the Fed (PROFIT!)
2b. Bank's account at the Fed is credited with the amount of the sale
3. Fed pays interest on the Bank's deposits at the Fed (PROFIT!)
4. Banks earn record profits and pay out record bonuses for the "geniouses" that came up with a way to earn FREE MONEY at the expense of the oblivious tax payer.

The Fed IS printing dollars. Ben Bernanke said so himself in a 60 Minutes inteview (and then went on to state the exact opposite during a second 60 Minutes interview; i.e. HE IS OUTRIGHT LYING!!!). Jon Stewart did a good bit on Ben's lie… just google it.

EDUCATE YOURSELF!!! You should really read this link. It is a detailed explanation of money creation and how modern banking actually functions. It was prepared by the Fed Bank of Chicago:

http://www.archive.org/download/ModernMoneyMechanics/MMM.pdf

… any words about why silver has dropped off and been so volatile in the last 135+ years,
when it had been relatively stable in comparison for quite a while before that?

strange to me that the price of silver is so low compared to gold, when it is so much more widely used in industry, and in much lower supply. It's getting used up, and the amount now available is quite a bit less than available gold.

@Ray:
Ray, it now over 2 years later….the end of 2011….and the price of gold and silver continues to get smacked down by TPTB. Gold today is $1,580 and Silver is $27.96. Heaven knows where it will go in 2012, but it continues to be obvious that the USD is under assault and the Yuan is the rising star. Maybe 2 years from now someone will comment on my post.

The price of gold is up, silver is up, real estate prices are stable-ish, oil is still very expensive.. Maybe things aren't over priced, maybe the dollar just lost value. And as the amount of dollars in circulation is increased every year, I expect the prices of nearly every thing to go up. Including gold and silver.

I am curious why silver dropped from 2.0 to 0.5, any one any ideas?

paradigm shift in silver
( and the other asset class )
.
http://www.tfmetalsreport.com/blog/3313/coming-paradigm-shift-silver

Recent comments by Eric Sprott, Ted Butler and others suggest a looming shortage of silver due to price manipulation by bullion banks acting as proxies for the Fed, ECB and other Central Banks. Price suppression has occurred, as a result, and above-ground physical inventories of silver less than half that of gold.

In addition, there has been a remarkable demand shift. China was a net exporter of silver until very recently, but is now a very large importer. No doubt, a significant reason for this shift is silver use as an industrial metal, and more specifically, China's large solar panel industry. However, China also has a very sizeable investment demand, and the new Gold Exchange that will open in Shanghai in June 2012 will further add to this regional trend.

Finally, and perhaps most telling as to silver's future direction, is the investment demand for Canada's Silver Maple Leafs and U.S. American Silver Eagles. The entire output of Canada and the U.S.' silver mines in 2011 was used solely for minting these coins. This, and Chinese demand, strongly suggest that silver's value relative to gold will increase significantly in the years ahead.

Silver, as priced in gold, is really, really low. Near an all-time low in fact.

But so is everything else! Nearly every chart on here is at or near an all-time low. One explanation is that all kinds of goods and services are hitting lows, when priced in gold, and doing so simultaneously. That can't just be coincidence, but is there anything about the global economy that would explain that kind of behavior, simultaneously across so many sectors?

Wouldn't a much simpler explanation be that the charts are all near all-time lows because of the denominator that they all share, namely gold? And shouldn't we expect that silver and other commodities with real intrinsic value (as opposed to fiat money with no intrinsic value) will revert to the long-term average, as they have done over and over again historically?

"Wouldn't a much simpler explanation be that the charts are all near all-time lows because of the denominator that they all share, namely gold? And shouldn't we expect that silver and other commodities with real intrinsic value (as opposed to fiat money with no intrinsic value) will revert to the long-term average, as they have done over and over again historically?"

I agree with DSW. Gold has been bid up by the fear factor and as a result all other commodities look cheap.

It might be a useful exercise to price in terms of gold certain benchmark silver coins [viz, old silver dollars].

All currencies will go crashing down after US dollar collapse, Euro will go down and euro countries with it, then US will start going down and Asia will follow. The .gov will announce a new monetary system and NWO will come into effect, there will be poverty and unemployment worldwide, social and political unrest, some kind of war will commence, the populations will dwindle bringing total under 500,000,000 as the 'The Georgia Guide Stones' transcribes up to this day.
But I am still listening to Gerald Celente and Alex Jones and buying silver and bullets and farmland and will miltiple like a rabbit for survival 🙂

@Bart Hall (Kansas, USA):

I recommend listening to Pastor Lindsey Williams new videos. He says that the prices of gold and silver are deliberately being brought down and the elite are buying like crazy. They want to scare the regular people out of buying.

@Bart Hall (Kansas, USA):

Silver will continue to function as a barter currency for a long time, perhaps until utopia. Even though that huge dip is concerning, the very fact that silver is trying to overshoot the mean or at least meet it tells me silver has a place in trade, and is heavily undervalued.

@Bart Hall (Kansas, USA):
Silver has and will continue to be a good store of value because of it being a commodity. The majority of the loss of value in the past 150 years was a result of the demonitizing of silver. When a commodity is money people seek to acquire it for use as a medium of exchange and there then becomes demand for both its use value and exchange value. As the commodity becomes a more widely used money the exchange value for it becomes greater because the scope of its use has increased. When silver was demonitized it lost nearly all of its exchange value. This explains the crash in price.

Looking at the long view of history, 4000 bc to about 1750 when the modern banks began the money manipulation silver was money and gold was either just a store of value or held for religious reasons.
Gold's artificial high of 15 silver to 1 gold came about around this time. Before that it was 8:1 in Muslim lands and 12:1 in Roman lands.
The really high ratio of greater than 60:1 can't hold forever. I think silver will stick around and be in demand for a while.

To me it looks like Au, Ag, Pd, Pt, Art, etc. are private transportable assets. At some point people may feel a stronger desire to hold more private assets and this without counterparty risk. Is this not the primary investment ultility? More important than fixed supply. Check out the amount of cash physically held per person in the US and see if this might favor one or the other of these. Look at a picture of a pyramid if still in doubt. Also, it may be helpful to say Price = ((?) money unit) / ((1) Thing for sale). So three things can happen: price stays same, more units required to buy thing for sale, fewer money units required to buy thing for sale. Either or both numerator or denominator can change in value in relation to other money units or things for sale to accomplish any of these three possibilities. Wouldn't you agree?
Thanks

The Silver/Gold ratio reminds me of the fertility rate in Germany from 1880 to 2010, see
https://www.in-die-zukunft-gedacht.de/de/page/84/thema/145/dokument/647/themen.html

Please ignore the time from 1933 to 1945, because during the Nazi era, women were instigated to give birth to more children.

With over 10,000 established commercial uses for silver and mine production at or near its peak the long term future for this metal is rosy. Supply v Demand will out. Ergo with any diminishing resource in big demand its "Price" can only go north. Price is relative. Silver prised in £'s or $'s or Euros is speculative. Its true price is its worth in other assets, especially gold. Its the Gold/Silver ratio which should be the focus of attention. Logic would suggest the ratio should improve for Silver because of Industrial demand. That factor ALONE makes silver a smarter long term investment. HOWEVER humans are not always logical.

@Ray: Never mind seeing your reply in 2007 I just saw it now. Your $5,000 was a bit premature but I think we will see it end of 2016. Taking a chance like you on the timing.

2020: gold $2400 silver $120 = 20:1

Ah, these predictions are fun.

Look, prices go up and down and the Fed has stopped outright printing money for now. The real price increases are going to come from one of these things:

1) Increase in aggregate demand for real goods and services spurring increases in industrial consumption, ie big time economic growth & general inflation

2) Increases in asset prices due to printing money or lowering interest rates, ie big time economic contraction spurring widespread default risk spurring money printing

3) Increases in costs due to either increasing oil prices or running out of supply at the current price. This is related to #1, but could also happen naturally over time as the mining companies eat up the cheapest/richest reserves first.

4) Decreased demand for USD vs the currencies of silver-producing nations like Mexico, ie, dollar collapse

So far it looks like #1 and #3 are playing out, which may lead to #4, but the real money will be made when we exhaust this current cycle of credit creation and hit #2.

Good Sir Charles!

I noticed on the "silver in terms of gold" charts that the long view chart on silver shows peaks of 2.0 but none past the 60's. But looking at the ten year chart it shows that those peaks were reached– does the long view chart need updating?

Sincerely,
Mark

Thanks for these charts, most interesting.

Does anyone know what caused the peaks in silver price around 1920 and 1970 ?
I remember the Hunt brothers tried to corner the silver market in the early 80's but the other dates are a little before my time.

Given the magnitude of the price swings compared to the 1980, I imagine something dramatic must have happened then.

@curtis: Curtis, the reason silver fell off the cliff was "The Crime of 73' ". Gold was chosen over silver. I know this is six years after your post but I wanted to point out the intersection of the period to the event for anyone interested.

The real potential for Silver using real personal factual data:(give or take 10%)

Bought my first house in 1980 then it cost £15,000 = 30oz Gold = 480oz Silver. (Ratio16;1)
Same house sold in 2017 £600,000 = 600oz Gold = 47,000oz Silver Ratio (Ratio 78:1)

Two things stand out for me, UK houses are outrageously overpriced and Silver is ridiculously cheap.

Something has to give!!!!! Sell the house and buy Silver !!!!!!

physical silver will become difficult to source and the price will finally find a level once thought impossible even for the silver bugs.
You won't be able to buy it at the retail level soon enough.
Hold on to what you have and don't just give it away. That is exactly what they want and expect you to do.
It has been years and everyone is frustrated but unfortunately that was their plan up til a certain point.

That you to the editor for these charts!

It is entertaining to read a decade+ worth of comments; and I hope the editor will keep this thread going for posterity. As the last decade has unfolded, it reads as a new chapter in Charles MacKay's 1845 book; 'Extraordinary Popular Delusions and the Madness of Crowds'.
The Central Banks have behaved much like John Law; it is fun for a while before things got out of hand… It appears things are about to get out of hand.

When considering some things about the centuries old episodes of fiat currency, one realizes that the price of Silver today, whether expressed in fiat or Gold; it at multi-generational lows.
Nearly a Billion ounces of paper Silver is 'priced' in fiat nearly every trading day, without the real good backing this trading; and this derivative pricing scheme has now obscured the real price mechanism to such an extent that nobody understands the function of Silver in a monetary sense. A century of cheap oil and mechanized mining has also eroded, or subsidized, the relative value of a Silver ounce.
As these schemes collapse, and now all the easy Silver long since mined out, Silver and its value in the monetary sense will reassert. Maybe its a decade or two from now; and maybe the Central Planners will force a Digital Currency first… but every scheme that exists today avoids the timeless truth that money cannot be created from nothing, else it is debased into nothingness. Always has been and always will!

@silverseeker You were being prophetic. Corona virus scare has flattened everything, including gold and silver spot prices. But the physical market premiums are way up, just like the end of 2008. Hard to get one ounce silver coins for under $24 compared to $14-$15 spot. I wonder if I should buy more silver or silver stocks (or both) and hold on for dear life for the next 6+ years before selling?? 90-year and 60-year cycles are converging and things are like a rollercoaster. FED "printing" up to 6 Trillion onto future balance sheet, Congress approving MMT-like checks to peasants to keep them from burning the cities down. Physical Security seems to be just as important as what to invest in going forward.

Silver is at last coming into its own again and outperforming gold. Evidence of a real bull market in the sector. I also appreciate your comments from the main weekly summary of Aug 7
"Looking back over the last year, silver is now the best performing asset, rising 24.9%. Ethereum is close behind, up 21.1%. Gold stocks, despite their poor performance for the week, are still the 3rd best performer on the one year time scale, with a gain of 18.1%. Crude oil still shows the largest loss, down 40.2% for the year."

Very sound analysis in my view. 1 year relative strength is one of the more reliable metrics one should pay attention to.

Silver in "The history of money and banking" by Murray Rothbard
https://www.youtube.com/watch?v=1W-lSrSGrVQ

Lets see if the silver squeeze will do anything.

@Jacob: #wallstreetsilver, https://www.youtube.com/watch?v=jndEVD2u1s8

Buy silver to war with the elites!