Silver Prices in this First Decade of the 21st Century

Jan. 5, 2013 - PRLog -- Silver Prices in this First Decade

of the 21st Century!

Silver has been the Volatile precious metal for over 30 years. In this new decade, I believe that this situation will continue as the price vacillates between the low $30's and high of $50 per ounce. Once past $50, this will change to a trend market.

For over 650 years, silver (in 1998 US Dollars) has ranged from a low of $4.73 to a high of $806 per ounce. See chart below. Of course the chart should be updated to reflect the current price of $30 and date of 2012/2013 on December 31st, 2012.

650 Years of Silver Prices
This is a 650 year graph of silver prices and silver/gold ratio from 1344 to 2004.

See our website for graph of 650 years of Silver Prices at www.SheldonsFinestCoins.com on the news page.

Silver is very volatile since is thinly traded and easily managed by both long and short interests. This volatility will continue but the trend of the price direction may be more in one direction to the upside for the following reasons:

1) Central banks and large silver players have no large quantities of Silver to assist in takedowns. They use massive selling of paper contracts on Comex to rig the markets lower.

2) The COMEX has been slow to deliver silver to longs who want delivery. This lack of deliveries has now become acute and is market telling that the moves lower are about to end.

3) Investors are taking larger portions of silver off the market (coins and bars). In fact equal portions of dollars are going into silver as is going into gold. This is very bullish since the current gold/silver ratio of approximately 50/1 will be reduced to at least 16/1 (the old gold/silver ratio) and probably between 10/1 and par for reasons mentioned below.

4) The excess supply deficit of silver for over 50 years has come to an end. Ten billion oz. of silver held by governments in 1950 has been exhausted! The amount of above ground silver stocks is estimated at only 300 million oz. Silver consumption rates suggest that there are only 10 - 14 years of supply of silver reserve remaining in the Earth’s crust! What will that mean for prices in the future?

5) Demand for silver is inelastic since industrial applications use small quantities per application. Increases in silver prices do not translate into lower consumption. Silver’s superior properties are vital and necessary for our modern way of life. Demand by large industrial users have not dropped. In fact some large users are trying to obtain large supplies without success since large supplies do not exist.

6) Un-backed paper silver programs such as silver certificates and unallocated pooled accounts are the standard these days. These pools will scramble for physical metal when redemptions are called in by investors. The greatest known ETF for silver SLV has millions of ounces sold short. What will happen when these shorts are called upon to deliver or try to cover their positions will yield a price level sight to see. I am currently trying to secure a large size order for a large industrial user without success.

7) The CFTC regulatory body has announced position limits in the metal markets. When these limits are put into place, maybe the manipulation of the silver market (large and fast take-downs of prices) will come to an end. The CFTC has investigated the silver market for 4 years without coming to any conclusion. If they would open their eyes, they may be successful. The average silver trader could see the manipulation in markets in one day.In any event, when these limits and rigging of the markets come to an end, I estimate the silver price will soar to levels that exceed the 1477 yearly high of $806 per ounce at some point in the future.

After the large sell-off during the past 3 days, the bottom in silver may have been seen. In fact, I estimate that silver at some point (with the next 15-20 years) will match then exceed the price of gold (which is held but not consumed).

Visit http://www.SheldonsFinestCoins.com for additional information on Silver and periodic updates to this short report.

Ed Sheldon (CPA retired)