The true price of silver – and what about those pesky spikes?
I believe the true price of silver, now, is $50-$125. For now. And it will be soon.
A reader tipped me off to GoldSilver’s recent article about the length of price spikes of silver. I love reading everything that Jeff Clark puts out there (he is one of the top people I read and watch on videos!), but I want to take some of this in context with the fact that price is determined on the COMEX – with highly rigged prices. I want to show the data on those charts makes a compelling case, but this time it IS different.
They write:
“In almost every case silver’s big run-up can be measured in months. None last more than a year.”
And follow up with the conclusion…
“1) It is normal for silver to rise very sharply. The average gain of all spikes since 1970 is 150.4%.
2) The duration of silver’s spikes is short. The average duration has been just 7.4 months.
3) Big runs in silver can happen anytime, but the average time between spikes has been 3.5 years.”
I think this is excellent data to consider in the context of the COMEX model when taking PAPER profits. Meaning, if I was a futures trader, and I buy into these spikes, it’s good to get out at a certain time with profits. However, this may be different than with buying with physical. Vastly different.
My silver philosophy
I want you to consider my philosophy with buying silver. Your own experiences will shape YOUR decisions to create your own plan. But here’s my PHYSICAL philosophy:
Get emergency silver, in your possession, ASAP. I have recommended to my friends 25-100oz of “junk” silver. If we run into a situation like in Venezuela, Zimbabwe, or even Weimar, fractional silver pieces will buy you food.
Have other silver you may want to exchange for gold or larger purchases, like Eagles.
Have some bars for very large purchases or to profit on when you need to sell. Perhaps in a Venezuela situation, a 10oz silver bar might get you a year of rent somewhere. That’s $300 in today’s prices.
I then would sell in reverse order, ONLY as needed. To make mad money from silver, I use miners, not physical. Bars I feel can store larger amounts of wealth in a dense area. I called these “financial energy batteries”. I don’t know if someone else coined this term, and if they have, please let me know and I will give them credit – but this is my take on it. These bars should appreciate in value at or above the rate of inflation to store whatever financial energy you want to put into them. So two silver dimes could buy a gallon of gas in 1964, today, and in 2050.
The point above is if you are buying 25-100 ounces of physical silver, consider the concept of this going to your great grandchildren. Do not consider this as part of some sort of profit thing. Any money you put into THIS area I’d consider gone, forever. Or, until there’s an emergency. So it doesn’t really matter if you buy it at $20 and spot is $100. Who cares. This is doomsday money. This is not get rich quick money. It can be, but you need to put that in the back of your mind, for now.
With the Eagles and bars, these I’d consider trading for things like gold or convert to real estate/cash if times were good. With the wealth cycles Mike Maloney talks about, you may have periods of time where great anxiety occurs – and PMs are severely undervalued. Buy them then! At another time years from now, there may be housing vacancies everywhere and PMs may be overvalued. Converting to real estate that could generate rent would be helpful.
So when I look at spot prices, in reality, I care mostly about this due to my investments in miners, not my physical. I implore you to put away the calculators when looking at physical. “But the premiums are high!!” OK – if you have your survival 25-100 ounces, don’t buy. Or, buy and hold for 40 years and those premiums won’t matter much 20-30 years from now if silver is $500-$1000 per ounce.
The manipulation
I’m going to gloss over 400,000 words I can write, and have written, to simply state – silver is heavily manipulated. Please check out my site for all of the fines just paid the last 3 years by major banks regarding this subject, and how these amount to over $2 billion and “hundreds of thousands” of times price has been manipulated in the last decade.
The big deal here I want to point out with the data is – WHY are they so short? I will focus on 2 periods mentioned above. By focusing on these two, I can then show you that the next spike up may not follow this trend they discuss.
1980 – in 1980, we dealt with a financial crisis of inflation for a decade. Silver went up 29x. Sure, they want to blame the Hunt Brothers, but in the same breath, gold went up 24x. So….buddy….tell me who manipulated the gold price up 24x? Yeah. No. The 1970s were an inflation nightmare, and with this, the Hunt Brothers may have had some effect, but to put a 29x move on them when gold and silver are highly correlated would suggest there were many players on the gold side doing the exact same thing. So for now, let’s just hypothesize that inflation was the driver of this price up. At the same time, you had people lined up around the block at coin shops all over the country. Today, we can clean out all retailers worldwide….in a day using online forums to “find deals” to share.
How did the price go down?
It did not burn out, as the data suggests in the charts. The charts above seem to make it sound like silver is a shooting star, and by using this data, you will see that hopes of silver to be sustained at $50 or above for decades is not to happen. The problem is, the data set is flawed because of HOW the price was so abbreviated. It simply documents the time period of the duration of the spike – not WHY the spike was abbreviated.
I was 5 years old in 1980, and no, I was not reading the Wall Street Journal to follow this. What I heard happened was twofold:
The COMEX peeps came out and changed silver to “sell orders only”. You know, because in our “free market system”, nothing says free like someone stepping in to rig your price down.
Paul Volcker came out and jacked the interest rates up above inflation rates – which made REAL rates positive. This took the wind out of the sails of precious metals.
The Hunt Brothers were dragged in front of congress and made scapegoats. In this situation, I had heard they bought futures contracts on leverage which positively affected price upward. Position limits were then set on the COMEX to prevent such a thing from happening again.
2011 – In this case, we had a lot of fear of inflation coming, with the MASSIVE $900 billion TARP and QE plans (I’m being facetious here now, as $900 billion is chump change compared to what lunacy is going on now). I had read that many manufacturers like Toyota had feared inflation would raise costs, so they put in larger orders than normal, and this set off a reaction of much higher prices.
How did the price go down?
Promise of tapering off of QE.
Realization the money created stayed in the banking system, and did not create inflation because it did not go to Joe Sixpack on the street
JP Morgan initialized a takedown overnight one night. Chris Marcus details this in his book, “The Big Silver Short”. This book describes how this banker systematically took the price down. JPM was then found guilty of price rigging and fined $920m and accused of rigging the price “hundreds of thousands of times” over a decade.
“This time it’s different”
In the above cases, the similarities were that you had inflation or the threat of inflation as the catalyst for the rise up, and in both cases, you had price manipulations – whether direct or covert – to take the price down. This was not your grandfather’s supply and demand chart we all learn in micro economics 101. These were price take downs.
So let’s look at why price might go up this time….and might NOT come back down.
Inflation is real.
Like in 1980 and 2011, the threat of inflation is real. We do have the 1970s inflation happening with commodities right now. Authorities like to use the word “transitory” – which I believe they are using to suggest that the supply chain disruptions from COVID are the root cause of the prices going up, which is viewed as inflation – but under times of normalcy, this will subside. They could be right. Or overly optimistic.
With literally trillions of dollars getting pumped into the system and going directly to the people, you now have INFLATED the money supply, and these are going against a fixed amount of goods and services. So even if the supply chains fix themselves next week, all of this money supply is now out there, which, by definition, will inflate the costs of goods and services. So maybe we are seeing a 25% rise in the cost of commodities year over year – and perhaps – in a few months, prices recede. But they may only come down 50% from their highs. This still provides a SIGNIFICANT amount of inflation.
2. No one is chasing paper futures – yet. This game is physical and it’s about to get ugly.
While media gleefully mocks the failed silversqueeze attempt, they completely missed the mark, or, perhaps, want to mock people into not following. With my “metrics dashboard” of the silversqueeze movement, I rate my metrics based on media coverage. First – no attention at all. Second – when they start mocking you and trying to change the narrative, you know you struck a nerve. Third – when they send the muppets out on CNBC to lie and misinform, you know they are on defense. Last – is capitulation when everyone says, “of course, didn’t you see this all along??”.
What the media mocked was some people jumping into the futures market and getting hit like a bug on a windshield of a semi driving 200mph. This isn’t the sandbox anyone in the silversqueeze movement is playing.
Like the hunt brothers in the 1970s, we all fear inflation. We are all getting informed about how gold and silver have been money for 5,000 years. We are taking physical possession of silver. This is different from the Hunt Bros who played paper tiger games on the COMEX. We are literally taking items legally for sale, into our possession. There are no position limits on physical silver.
3. Derivatives may start running for the hills.
You may have someone like Jeff Currie come out and say “silver is a 25 billion ounce market”, and everyone shakes their heads saying he doesn’t know what he’s talking about. There’s only 3 billion or so ounces in 1,000 oz bar form, and perhaps another 3 billion with the stackers. The rest of everything mined has been lost to history and is sitting in TVs, band aids, and stetchy pants in dumps, perhaps never to be recycled.
But what about things like the Perth Mint unallocated? What if…..
What if a company like that had 1m oz in stock, but then sold 10m to customers as “unallocated”? This is where a lot of things get fuzzy. You put your hard earned money into SILVER. And, you want to take it into your own possession. But they give you song and dance how you can’t get it. Or there will be delays. Or discussions about “it’s in the pipeline”.
Consider a bank who may then have a pile of silver, and they use this for all kinds of instruments like an ETF that says “all of the silver might not be here”.
What if….what if that 25m oz Currie referred to was 85% in this shell game?
Well, here’s where the fun starts.
It seems that with all of the underground press lately on this, many have been taking their money from these unallocated shell positions, taking the cash, and then either buying ALLOCATED, PHYSICAL, or PSLV.
I ask you this….
IF there is 25b oz invested into silver, and 19b of those oz are in sham fractional reserve instruments. This has 3b in 1,000 oz bars and 3b in homes of stackers. And…IF these people are now suddenly awakening to this…
The suggestion is that the cash money invested today in 19b oz is about to get raided. The first in line will get whatever silver is on the floor, and the rest may get paid out in cash. And perhaps that is 18.5b oz worth in cash, then going to chase 6b that is known. 3b are sitting in the hands of stackers, not coming out for less than $50 per ounce. Most of the other stuff is not for sale, as it is sitting in allocated and owned by ETFs like Sprott’s PSLV. This leaves 127m oz on the COMEX available for sale.
With 18.5b oz worth of money coming for it over the next few months as these derivative instruments get waxed.
What if it’s only 6b oz worth that are awoken? That’s still cash of 6b oz chasing 127m oz for sale.
This is the storm coming that I have been forecasting.
4. Basel 3 and squaring away the books
I’m not going to get too far into this as now there appears to be soldiers on two sides of a line here. I’m going to suggest that IF Basel 3 NSFR requirements are affecting silver, the issue is here that they would need to reduce the paper shorting games. By simply stepping aside and not actively shorting, as much, you reduce the negative downward pressure that we all see when someone feels it’s a good idea to dump 20m oz in the middle of the night on a holiday. I had found where Basel 3 refers to “all balance sheet items”. So, not sure how silver will be treated.
5. Real yields destined to go negative, for a long, long time
The driver for silver, ultimately, is real yields. As the inflation narrative is picking up, so is the 10yr rates. The high frequency trading bots see this and then dump paper silver. This is a machine algo, at this point. And when someone who is doing the programming of this realizes that you are selling paper silver at $24 an ounce, and you perhaps have 6b oz of PHYSICAL DEMAND coming, I just would not want to be in that room when a risk officer or compliance officer comes to visit your quant desk. This is the case of stupid smart people being stupid smart in one area and not being able to see the avalanche coming. I did lots of “scripting” over the years in IT. Tons. Scripting is programming, in a sense, for systems administrators. It’s logic based. However, if the guys writing the logic here are not seeing this 6b oz demand coming for 127m oz for sale, then the problem is all of the quants at all of these hedgies are really….really….really screwed.
The truth is that we have the supply and demand train coming, but the PAPER trades will also flip long as inflation is felt. Forget CPI. I heard a lot of these firms use different measurements than the CPI. OK. Great.
Now I want you to picture a day a few days, weeks, or months from now. The $120b the fed has been buying a month is nowhere near enough. Gov’t keeps up with $2T plans, recovery this, recovery that. Their “yield curve management” as I heard someone call it, is replaced with an active cap. Maybe 1.8%? 2%? Well, by then, inflation may be on its way much higher. And the day all of these HFT algos flip long, will be far, far, far too late.
The point is, that the driver for gold and silver is negative real rates. And they are here to stay for a long time.
6. QE to infinity and beyond
While 2011 had promises of getting off of QE, everyone with a few brain cells realize that the fed is in a death spiral trap of epic proportions. If they mention the word taper, stock market crashes. Many democrats now feel that the government handing out thousands a month to a lot of people just seems like the right thing to do. The truth is, it appears one of many bad choices out there to prevent a revolt. They could go back to sound money……or just placate the populace with ever-diminishing dollar values by throwing monopoly money printed in the fed basement at them.
Point is, no one believes the fed this time, and, unlike 2011, the Fed sent money directly to the people, and will continue to do so – making THIS QE even more likely to cause toxic inflation.
So why won’t price flash in the pan like other times?
First, it might. This could be a run up coming to $50 and just like before, people smash it down. They may try and find other creative ways to hulk smash this. So keep this in the back of your mind, that just because me or someone else says it will go over $50, doesn’t mean it will. Problem is, I believe this time, they cannot prevent it from blowing up…and staying up.
Supply and demand fundamentals – physical to be cleaned out worldwide hundreds of times over
Like Palladium, I believe there’s a good old fashioned supply and demand crisis coming – and I’ve been writing that here since December 2019. This is both 1980 and 2011 wrapped into one, with none of the tools available to take it down like then. If you have over 1,000 products using silver, and constant supply deficits, and ADD ON the 6b oz cash equivalent in derivatives now chasing 127m oz on the COMEX – Houston, we have a problem. The thing here is media is now mocking. Look for more of Jeff Currie types and other muppets on the major networks trying to talk this silver thing down off of a ledge. Meanwhile, 1,000 oz bars have seen record premiums lately and as more people roll out of the garbage unallocated fractional reserve instruments for REAL silver ounces, oh dear god.
Palladium has gone up 5 times on supply and demand fundamentals that broke the paper price. This could then have silver at $125 in less than a year if it follows in Palladium’s supply and demand fundamentals. This is not paper price. This is crisis scrounging for any metal to prevent lines from shutting down.
They like to tell you there’s plenty of silver. The question is, plenty at what price? Remember – in the back of your head – you potentially have 19m oz invested in “unallocated” and other derivative accounts who THINK they have silver. AS they try and take possession, or learn about the fact they have no silver, this cash will then hit their piggy banks and chase REAL silver. So the demand is there with people who thought they already had 19b oz. And now, these people want to chase the 6b known to 1,000 oz bars and stackers. Stackers aren’t letting it go for less than $50. So I see 19b oz worth of fake derivative money chasing 127m oz on the COMEX available for sale.
So unlike in 1980 where there were sell orders only, you have legit people needing to buy buy buy to keep their lines running. The COMEX will be the supplier of last resort, so you cannot make this “sell only”. Even if you do, the metals are not there to back this massive demand coming.
The suggestion here is silver will do a Palladium, and with this, silver COULD see a 5x rate increase like Palladium. Silver has run up twice without the COMEX breaking, it can do so again. The difference is with the investment money coming in to PHYSICAL silver, and away from fractional reserve re-hypothecated derivatives, I don’t think many have understood what this will do for supply and demand fundamentals.
Even if it’s not 19b or 6b oz chasing 127m, it could even be 1b chasing 127m oz. Add this to existing supply deficits, green initiatives, declining silver grades being mined, and dearth of mine supply – and there is a wall hitting the COMEX. Days, weeks, months, years. But it’s coming. Before that wall hits, is where the industrial giants get to the head of the line to massively up orders and front run those leaving their unallocated positions for physical.
2. Paper game problems
Like above, you will see massive demand coming, and this will then have a lot of paper longs chasing this. The HFT bots will flip long. And what about the 800m short on the COMEX? Well, many of these have paper long positions, so maybe they lose lots of cash. Others may be long silver in SLV, but short on COMEX. Do they hand over that silver? This is what I meant in my video and my writings about these big 8 needing to cover. If they hand over their metals, they are out of the metals business. If they keep the metals, they may have to hand over dozens if not hundreds of billions of dollars in losses. This, at the same time Elizabeth Warren wants to designate Blackrock “too big to fail”. Start looking for these institutions to reach out for help in Washington. Most will need it.
So unlike in 2011, you can’t really have a JPM paper this down. All of the algos will be going long.
3. Cannot raise interest rates
You cannot pull a Volcker, in this environment. So the main driver for gold and silver, negative real rates, cannot go positive. For years, if ever again. Meaning, as time goes on, and governments print more money, they then have to continue to artificially push down rates – whilst ignoring rising inflation rates. This is because the ONLY way out of government debt, ever again, is to inflate it away. Meaning..there’s no “off” switch for gold or silver in the next decade.
So what is silver worth?
Just imagine there’s people out there who THINK they have 5-19 billion ounces in silver exposure. They THINK they have these ounces, if they want to take them into their own possession. The problem is the paper systems created these fractional reserve instruments which give the APPEARANCE of these 5 billion ounces. And…many of these people are now waking up. Assume tomorrow, these 5 billion ounces are cashed out by the owners, at a rate of $25. This then means there is $125b in cash with owners who will then chase a market that is perhaps only $80b in size. Please, please understand the implications here. This does not mean the market cap is then 80b+125b. As the $125b chases the 6b in bars, coins, rounds – the price rises. A lot. The demand could then take this perhaps to a $500b to $1T market. If there are actually 6b ounces, that $167 per ounce. Or……………..about 6 times current price, on par with perhaps Palladium price move after the paper price broke of 5x. So let’s do a 5x from now and have the market cap at $400b. That’s a $67 price.
If you simply look at the GSR, perhaps this turns back to 20:1 again. If gold is forecasted by BoA to hit $3000 at some point in this cup and handle cycle, that’s $150.
If the all time high in 1980 was $600 in today’s cash using the original CPI formula, perhaps inflation does drive it to $600 by the end of this decade?
What if a lot of stackers get rid of their stash at $50? What if higher prices unlock a LOT of silver supply over the next 2-5 years from mines that had a much higher cost to mine? Perhaps we are looking at $40-$50 silver?
I want you to also consider that the games played with silver, also are being played with gold – at a much higher level. What if all of these pension funds are in on a lot of unallocated accounts with “financial instruments” created by banks for them? What if they all wanted to switch to allocated? What would that do to the gold price?
Some have suggested that the price of gold, over the next few years could get to $10,000-$40,000 if they were to consider re-pricing gold to use as a monetary backstop again. What about a 30:1 GSR in that scenario? $1,000 silver?
I have heard gold has a 100:1 paper claim to physical where silver had a 500:1 claim. I could suggest we are in the initial stages of unwinding these, and as these get more unwound, this is more cash chasing physical
The ultimate truth is this…no one knows. We all have educated guesses. I felt that the $50 price run up in both cases were warranted, and in both cases, were artificially smashed down. I believe “this time it’s different” because everyone is now chasing physical and not looking at paper prices and working to get out of unallocated. If the price has been artificially pushed down from $50, the suggestion here is that by taking possession of physical, it makes it virtually impossible to keep silver below $50 at some point very soon.
From $50, we may see the Palladium 5x move to perhaps a $125 from today. This is where I’m very comfortable. A range of $50-$125, for now.
If gold derivatives untangle and inflation keeps on going, that $125 might end up being cheap.
So. I saw yesterday silver was $24 something, and Apmex had eagles at $37. Today, down to $34. If you are buying silver for the protection of your family in junk silver, no one cares about premiums. GET THE OUNCES IN YOUR POSSESSION.
As for anything else like Eagles and bars – you have to make this decision for yourself. There’s massive upside potential, and somewhat limited downside potential. To me, this is a no brainer. To YOU, if you are looking to buy silver for $25 to flip at $40, then paying $10 premiums isn’t a great idea.
If you get your survival silver and do NOT want to pay crazy premiums on bars or eagles, simply buy PSLV. THEY will buy 1,000 oz bars. And, if you have enough shares, you can redeem your silver from them. Like crypto? Look at Kinesis money, where you can redeem your cryptos for silver.
Conclusion
In my video, I laid out a lot of things coming down the pike. I also did make mention of a few things that could derail my end of March madness I was hoping to have. The big thing was a crash. Obviously, we saw in March 2020 that a massive crash can take everything down with it. The second was the 10yr. What I mentioned with that was while short term this is BAD, in the long term it is GOOD because it forces the fed to implement a more formal Yield Curve Control at some point to prevent the entire system from collapsing.
When I put out my time estimates, they were based on a chain of events happening. Those chain of events are still in play, we are just in the speed bump phase of the 10yr. Any time now a form of YCC will come into play, and when this does, it’s a countdown until $50 silver.
And I don’t believe this will be short lived. I believe $50 will be the new floor, not to go below. Silver is needed by everyone, and they just can’t mine enough at $20 silver. The higher prices allow for more exploration and to spin up mines with higher AISC. Gold was once $35 per ounce, and today, it costs a company $900 per ounce to pull it from the ground. As these resources become more scarce, their price inevitably has to go up to support the demand of the systems. For the price today to be 50% of the nominal high in 1980 is pretty much laughable. And…the more energy used to suppress this price makes this all the more explosive on the way up.
Edit: someone commented on twitter –
He makes a point that I wanted to address. The $50-$125 I feel it legit within 1-2 years. Could be this month? No one really knows – the big deal here is the 10yr clogging it up.
If the DXY tumbles. Perhaps Russia and China de-dollar and moves across the world have dollars coming here for goods to export there. We could be flooded with dollars, importing inflation and making goods unaffordable. Maybe there is a Weimar event and hyper inflation and collapse of currency does take place. I don’t think this is highly likely because of the prevalent usage of USD. High inflation – yes – and potential for collapse, but probably a “planned move” to a fedcoin type of system.
That being said, what is silver valued at in a Weimar-type of situation? At first, high amounts of USD, which could then pay off fixed debts like mortgages. Let’s say I had 100 oz of silver, and through a hyper inflation silver went to $1000 USD. I could cash in that $100k and pay off a rental property I own in full. This hyper inflates silver, which then pays off the fixed rate mortgage.
But – in a really bad situation, that silver is worth….silver.
The two dimes scenario I use is a perfect analogy. If you have 2 dimes, it’s about 1/7 an ounce. About $1.40 face value is one ounce of silver. Let’s ballpark this at 14.2% of an ounce. Or, .142 oz.
If I were to use a system like kinesis money, I could possibly pay someone in silver down the road. Perhaps I want to buy a gallon of gas. I knew that before the hyper inflation, about 2 dimes bought a gallon of gas. Perhaps with the new system, I could pay with .142 KAG crypto, or about 1/7th an ounce of silver.
This KAG down the road could probably be converted into any country fiat you want, but having the SILVER to pay with might actually be the price. Forever. Meaning, a gallon of gas 50 years from now may be .142 KAG then as well. The price in silver would not change. Fiat, however, is where you get inflation.
So in a hyper inflation scenario, if you wanted to buy a gallon of gas from your neighbor, you could pay in 2 silver dimes or .142 KAG silver cryptos. These are backed by silver and convertible to silver.