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Recently
many of my readers have been asking, "Why is silver lagging
gold?"
After
all, in March, 2008, gold hit $1020, and silver exceeded $20, yet here we are
now, with gold now above $1145, and silver at $18.33, not even at $19!
The
really funny thing is the way the popular media spin the price relations.
When
silver underperforms gold, they say, "Silver is not confirming gold's
rise, therefore, gold prices are due for a fall."
And
when silver outperforms gold, they say, "Silver is exceeding gold's
rise, therefore, this bull run is overdone, and thus, gold prices are due for
a fall."
In
other words, we have a manipulated market. Not only is the price
manipulated, but so
is the news coverage!
Of course, the media could give opinions the other way, and say,
"With silver lagging gold, it shows that gold has much further to run, and
also silver is due to catch up and exceed gold's pace, thus making silver the
much better buy now." Or, after silver outperforms,
they could say, "Silver's outperformance has confirmed everything
the silver bulls have been saying for the last ten years." But
they never do that, do they?!
As it is, the price ratio changed from 64 on Friday to 62 on
Monday, so silver far outperformed gold on Nov. 16th.
Gold moved from $1118.50 on Friday to $1139.80, a rise of $21.3/oz., or a 1.9% increase.
Silver moved from $17.42 on Friday to $18.40, a rise of $.98/oz., or 5.6% increase.
Silver sure didn't lag behind gold on that day!
So, is all news that is bearish on silver evidence
of "manipulation?" Of course not. Some
commentators are not colluding on purpose, they
are simply willfully ignorant.
For
example, here is an independent Christian newsletter writer named Gary North
who writes:
Why Silver Is a Poorer Investment Than Gold (Nov. 14th)
http://www.garynorth.com/public/5700print.cfm
You'd
think he could have timed his article better. He published on Nov.
14th, and was proven wrong in less than 48 hours!
Nearly everything Gary writes in that article is not really
the whole truth. I'm shocked to read his take on silver.
After all, he has written perhaps the most thorough economic commentary on
the Bible that exists (very long, quite good, but could use a bit of
improvement).
http://www.garynorth.com/public/department57.cfm
So I don't think he's an agent of the banks, so I think it must be ignorance
that is distorting his judgment, or perhaps his age. I've
tried to answer his questions on silver over the years, but he has not
replied with reason, but rather with emotion, so there must be something
more at work here, but I don't know what it could be. He wrote last
year:
Jason Hommel Tells Me Off: I Do Not Understand Commodities, Silver, and
Especially the Bible. He Demands That I Answer Him.
http://www.garynorth.com/public/4002.cfm
So, this and his other essays go to show he is not unfamiliar with my work,
but rather, he has some sort of emotional rage against it. This is
why I cannot excuse Gary as simply being ignorant of the statistics that he
mocks, but rather, he is willingly
ignorant.
But that's in the past. I want to refute his recent article,
and get to the recent ten year relative performance of silver vs.
gold. All we need is a gold/silver ratio price chart.
A quick search on google reveals a source. I trust
gold-eagle.com: Here it is:
http://www.gold-eagle.com/charts/gegsr.html
The
silver to gold ratio is the red line. You can see it topped out at 100
in 1990, when it took 100 oz. of silver to buy 1 oz. of gold. This
ratio dropped to nearly 50 in 1997. It went back up to 80 both in 2003,
and 2009, and now has gone back down to about 64, and now 62 today.
So, depending on the time frame, silver has out paced gold, or gold has out
paced silver. As the red line goes down, silver is better. As the
red line goes up, gold is better.
But if you use a selective time frame, only 10 years, you can see that the
silver to gold ratio was about 60 ten years ago, and is 62 today, showing
that gold slightly outperformed during that selective time period in
question. But what is the main thrust of Gary's argument? That
the future must be like the past? And that the past only consists
of the last ten years? Clearly, neither premise is not even
remotely true, and the entire argument would deny the reality of
economic cycles. Clearly, Gary is not ignorant of the economic cycle,
so why did he forget that his argument would not be valid? Did
emotionalism get the best of Gary?
As we can see from the big picture, Gold would have been a better investment
than silver until 1990, the key turning point. Gary's claim
to the foundation of his "correctness" is being good
at making interim market calls, and that he is old. Did he
tell his subscribers to load up on silver in 1990? I have no
idea. Did Gary tell his subscribers to load up on silver when it hit
$8.50/oz. in the last year? No. I know. I've been
a paying subscriber of his since he tried to discredit me. In
his own words, "His
"market calls" were utterly useless when it mattered."
Furthermore, the dollar/gold price charts, and dollar/silver price charts do
not "tell all" as he claims. Such charts contain zero information
about how many dollars have been printed up in the past, and have yet to show
up in futures prices of the metals. Such charts contain zero information
about how much silver has been consumed and lost in the age of electronics
that have ended up in landfills at concentrations too low to
economically recover. It is only bad
theory that the price charts contain "all the
information" you need to know to make a future prediction on prices.
The charts Gary chose to present are not even "objective
facts". All gold/dollar and silver/dollar price charts are
misleading, as the
dollar is not a constant measuring tool, but a varying
one. What if I showed you a growth chart of my 15 month old boy, but
used a ruler made out of silly putty and stretched it at different rates at
varying intervals? Certainly, nobody would call such a chart
an "objective fact". Charts are also not "objective
facts" when you can produce them over select time frames to distort the
overall picture. Gary's price charts from the year 2000 are not as
useful as the long term ratio chart above, if you want to try to use a chart
to make long term predictions.
Is anyone here planning on living for longer than a time frame of the
next ten years? (Well, Gary might not, he's old,
remember.) If you plan to live longer, you might want to consider
longer time frames. I know I want to. After all, I'm only 39, and
if I live to be 90, I can use an investment that might not pay off in 10
years, or even 20, but should come to fruition within my time frame of up to
the next 50 years. For me, silver is it.
After Gary claims that non-facts are facts, he then tells his readers to
beware of statistics, because the long term statistics that the silver bulls
have been presenting for the last 10 to 40 years have not yet shown up
in relative price performance (even though they have).
But the facts from the ratio chart prove that silver has been outperforming gold for 19 years now,
and thus, perhaps Gary should have been paying attention to both the facts
and statistics for silver.
In fact, it might be considered somewhat of a miracle that silver has outperformed gold for
the last 19 years, while no nation on earth has yet returned to using silver
as money! Think about that!
Since Gary seems to not want to be bothered with either facts
or statistics, I'll just paint the broad picture, with
limited numbers, so that maybe he can wrap his mind around the major
changes that have happened during his lifetime.
Nearly 300 years ago, back in 1717, the Bank of England started
devaluing silver, in favor of a "gold standard".
http://goldismoney.info/forums/showthread.php?t=401484
This was really a change to a paper standard, since gold was valued in terms
of paper money, no longer valued in terms of real silver, but only
"token" silver. This continued until Germany left silver in
the late 1800's. This created a glut of silver, which continued to
devalue silver, until all nations on earth stopped using silver as money, and
as each one left silver, it created a glut of silver on the world
marketplace. This reduced monetary demand has continued to make silver
a bargain for the last 100 years. The last great mintage of silver
coins was in the US in 1964. After that, the US only made 40% half
dollars for a few years, (we have three $1000 face value bags
of 40% silver for sale at 6% over spot, that's 295 oz/bag x spot x
1.06). Call us at (530) 273-8175 to own a true
"abomination", a real life example of an "unjust weight
and measure" from our own nation's recent history, today!
You can see the declining value for silver over a 600 year inflation adjusted
silver chart:
http://goldinfo.net/silver600.html
You may note that this chart is in stark contrast to the flatline chart
showed by Gary North.
But something interesting happened towards the end of this multi hundred year
long trend of demonetizing silver.
At the end of World War II, the age of electronics began. Prior to
WWII, most families in the US did not have many electrical devices.
After the second great war, homes began buying things like refrigerators,
washing machines and dryers, dishwashers, blenders, toaster ovens, electric
can openers, TV sets, air conditioners, and much more, of course.
If you look at the "statistics" you can see that the per capita
consumption of silver in the USA increased by about ten times in about a 3
year period, and it has stayed rather high at about 6 tenths of an ounce
per person per year ever since.
Another funny thing happened. The age of electronics was not limited to
the USA, but went out to many nations, even our former enemies in WWII, and
even other nations around the world began to industrialize, and they, too,
began consuming silver in electronic gadgets.
Gary has written a lot of crazy things like "you can safely ignore"
arguments because it would show up in the price if true. Well, it
already has, and it probably continue to do so, even more so, in the
future! Trends well established for over 100 years that get hit by
another major counter trend that began over 60 years ago might take a
bit of time to show up, and it appears it began to, 19 years ago. It
did show up rather spectacularly in the 1980 spike, where a tiny bit of money
from one man who tried to buy some silver on leverage was smashed by the
paper money powers. That was merely the foreshadow warning of
what will happen when many billionaires or tens of thousands of
millionaires demand real money (silver).
But Gary ignores all that, saying that the only thing that matters is recent
price performance over 10 years as measured by a bad measure, the
dollar. Wow.
He also has the gall to claim that men like myself issued no
warnings about the decline in the silver price. Again, another
example of his willful ignorance.
I have been warning that the gold and silver markets are manipulated by the
selling of paper futures contracts for at least 8 years now.
In fact, I specifically warned about the manipulation when silver hit
$16/oz., on the way down from $20 from early 2008. The article is very
easy to understand, even for an old man, even though it does include a
few numbers.
A
Tribute to 7th Grade Math August 31, 2008
In that article, I pointed out that two banks sold 40 times as much paper silver as
physical investors buy silver, in one month, which crashed
the price. What followed was other paper longs selling out of their
positions that continued to crash the price. This real world market
action utterly refutes the textbook lie that futures contracts are supposed
to help smooth out market prices. No, they do not. In actual
fact, and truth, futures markets manipulate prices to great exaggeration, in
both directions.
The manipulation of the markets by selling too much "paper gold and
silver" is one of my main themes as a writer. See here:
Controlling Gold with Paper June
10, 2002
The Moral Failures of the Paper Longs Jan
22, 2003
Major Frauds of the U.S. Monetary
System Feb 26, 2004
Silverstockreport.com: Silver Users Fear Silver
Shortage Oct 27, 2005
The Silver ETF: What's the Deal? Feb
23, 2006
The Money Chart: The Fundamentals of
Gold & Silver Feb 25, 2006
No
Excitement by $800 gold
November 2, 2007
Silver: There's Never Enough!
January 15, 2008
I Don't Trade Futures April
4, 2008
Here's another good
one for Gary:
Silver Keeping Pace with Gold; Set to Outpace Gold
January 9, 2008
The last article, from Jan 2008, makes a good point:
The dollar, as a measuring stick, is broken. Gold at $850 in 1980 is
not a valid price number as a reference, because a dollar in 1980
was worth more than today. We must adjust for inflation. And
there are two ways to do that, first with lying government "consumer
price index" statistics, which would give a price of about $2500/oz., or
you can measure by money creation, which gives a price of about $7000 to
$14,000. The $14,000 figure is if you include the recent $11 trillion
in government bail out promises. By the time those prices are hit,
adjusting for future inflation might give us even higher numbers. and a
higher level of public participation in the gold and silver markets, and
thus, higher relative silver prices to gold.
After all, let's remember that most Americans are trend investors, and gold
and silver are putting down a nice, safe, solid, trend!
I'd also like to point out what I was saying in nearly every article I wrote
in 2003-4:
"Long before 1%
of U.S. paper dollars tries to buy gold, gold will be going up well over
$1000/oz., and silver will be headed up over $50/oz."
Now that we are well over $1000/oz. for gold, we can easily measure how much
US money is flowing into gold, and, in fact, I just measured that in my
recent essays:
Grass
Valley Buys 12 Times more Gold than National Average November
9th, 2009
Historic Gold Mine Area Residents Know Gold Prices are Too Low November
6th, 2009
America spends
00.013% of annual wealth (GDP) on less than 2% of the world's annual gold
production.!!!
America needs to buy
about 77 times more gold than at current rates, to exceed the spending
of 1% of U.S. paper dollars on gold!!!
"One percent of $14.4 trillion is $144 billion. In a gold market
that sees annual production of 80 million oz., such buying could double or
quadruple the price, depending on how tight the market gets from competition
from other nations buying."
Yes, I see, silver is not over $50/oz.!
But neither has 1% of the money in the USA started to buy gold, we are not
even close! So just wait.
I did not buy silver to wait for the day that 0.013% of USA money would
be flowing into gold. Did you?
No! I bought silver for the day when the dollar would become like
toilet paper, and this implies that well over 50% of dollars will try to
buy gold and silver at some point.
In
actual fact, gold investors are buying silver. I know. We
sell silver for gold! Furthermore, no customers have given us silver
asking for gold. But we have had many customers trade their gold for
silver!
I
suppose i should not have tried to "tell it to Gary North" as he
seems to suggest his retort will be to "tell it Jerome
Smith". I know, I know, Jerome Smith was a silver bull who
died. Maybe Gary is brain dead, too.
Gary
is also such a fool that he has no idea that his own recommendation
to buy 80% gold, and 20% silver, would cause silver to move up far more than
gold. After all, the gold investment market is a $92 billion
market. (80 million oz. x $1145/oz.). The silver market is 600
million oz. produced per year, which, at $18.50, is an $11 billion
market. If you spent 1/4 of $92 billion on silver, (20/80), that would
be $23 billion.
Please Gary, please tell us all how $23 billion will fit into the $11
billion silver market without the price moving up far more than for
gold? And let's remember now, that the statistics show that most silver
is consumed by industry, so if investors bought $23 billion worth of silver
and consumed all new mining production, then no new mining production could
go towards any industrial consumption!
The silver investment market is a much tinier $2 billion market (100 million
oz. out of 600 million oz. produced x $18.50/oz.). Gary is suggesting that more
than ten times as much money should go into silver as currently does!
If everyone followed Gary's advice, silver would probably have to move up at
least five to maybe ten times higher than gold, just to accomodate
the 80/20 investment that Gary suggests! Of couse, that's mine
production. But if we consider above ground supplies, well, I'll let
Gary try to research that. He may well find that above ground supplies
for silver are more rare than gold, and I did say I was going to try to stay
away from such statistics.
I'll leave out the numbers, and I'll note that all the gold ever mined
in all of human history would fit into two Olympic sized swimming
pools. And probably less silver than that is remaining!
So ironic. Gary's analysis is so poor. But if it were any better,
would silver prices remain so low? When men like him continually mock
silver, while speaking out of their own ignorance, is it any wonder the price
remains low?
But since I'm a silver investor who has 3 times as much silver as
gold, I really can't complain. After all, if the world knew what I
knew, silver would already be several thousand dollars per ounce, or much
higher!
===============
I strongly advise you to get real
gold and silver, at anywhere near today's prices, while you still can.
See
the JH MINT, and some of our gold inventory, at Youtube here (we
also now have Gold Buffalo 24k coins):
http://www.youtube.com/watch?v=9-ocXNbdEeU
Call us today.
Yes, we sell silver, and gold at the JH MINT!
Buy it
now! Buy Silver or Gold Now!
Inventory & Price List
Call the JH MINT, 10AM to 5PM Pacific, Monday to Friday:
100 oz. silver minimum, USA shipping, wire transfer only!
(530) 273-8175
Janelle (530) 913 0553 silver_support1@vzw.blackberry.net
http://www.jhmint.com/
Active, live price quotes list:
http://jhmint.com/cgi-bin/ssrbidask
Sincerely,
Jason Hommel
www.find-your-local-coin-shop.com
www.silverstockreport.com
www.miningpedia.com
www.bibleprophesy.org
Read
all the other articles written by Jason Hommel
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