FREEGOLD REBUTTAL: A Case For Much Higher Silver Prices

The folks at FreeGold (FOFOA) believe that when gold revalues to $45,000, silver would fall down to $1.85.  They stated this in their recent article, FOFOA: Silver Dollar.  Actually, FOFOA’s original calculation was done back in 2001, when they saw gold revaluing to $10,000 and silver down to a measly $.50.  At the time FOFOA wrote that forecast, the price of gold was $261 and silver $4.37. 

These would be impressive figures, if they made any sense.  Unfortunately, the folks at FOFOA do what I call as “Forecast in a vacuum.”  Basically, they arrive at their philosophy and metal price figures without considering certain outside influences.  When I say vacuum, I am referring to the vacuum used in science class when air and outside forces were removed. 

FOFOA is guilty of this in spades when it comes to their understanding of silver.  Why?  Because FOFOA and its hardcore followers look at the world through shiny gold-colored glasses.  Here is one of their excerpts from 2001:

When the coming paper illusion price of gold is destroyed, sending its trading price way up and way down, several times, before shutdown,,,,,,,,,,,,,, the thinner paper markets of lesser metals will be absolutely devastated. Yes we will see $50.00 silver in our time,,,,,, $50.00 for a hundred ounce bar,,,,, that is! No less a relative price decline for the other metals is in store. Even if these actual dollar numbers prove incorrect,,,,,, relative inflation adjusted prices will show the exact same ratios to gold. The gain will truly be in gold!

Again, the folks at FOFOA believe the future value of gold is heading to the moon, while silver gets flushed down the toilet.  Now, I am not going to get into all the details why I disagree with FreeGold’s position on silver, however I am going to challenge a few noteworthy items in their article.

Here is item number 1:

What would happen in this Freegold scenario is that the price of silver would decline to a level that constrained silver mining at the margin. Now there are two kinds of silver mine production. There is primary silver mine production, and secondary or silver production as a byproduct of mining other minerals. According to the Silver Institute website, 31% of global silver mining supply comes from primary silver mines at an average cost of $7.74 an ounce. So if the price drops below that number, then we lose the primary silver mines, but we still have the 69% of silver-as-a-byproduct mines, which brings us back down to production levels we saw when silver actually was less than $7.74 an ounce, which was as recently as 2005. And don’t forget that it got as low as $8.88 in 2008.

The folks at FOFOA believe the price of silver will fall even during a hyperinflation as demand for industrial silver declines.  Thus, the falling price will kill supply at the margin…. which are the primary silver miners.  Here is where they start to cherry pick data.

FOFOA states that the primary silver miners average cost per ounce is $7.74 according to the Silver Institute (data provided by Thomson Reuters GFMS World Silver Surveys).   First of all, the $7.74 is a “Cash Cost” and not reflective of all actual costs.  To arrive at a cash cost, the company excludes many costs and deducts by-product credits.  Thus, cash cost accounting deludes the unsophisticated precious metals investor into believing it only costs $7.74 an ounce to produce silver.  Most primary silver mining companies need their by-product revenue to fortify their balance sheet.  The silver mining industry may list their by-product metal sales as credits, but these aren’t credits if the company suffers loses without them.

Secondly, the $7.74 cash cost figure is based on 75% of the primary silver miners.  It says so in the 2015 World Silver Survey.  The sample size GFMS uses to get their cash cost was 207 million oz (Moz), while total primary silver production was 270 Moz.  Basically, GFMS calculated that $7.74 using the largest producers and top performing miners.

Regardless, cash costs do not represent the profitability of a company.  As I mentioned above, the miners deduct their by-product metal sales to arrive at a low cash cost.  FOFOA actually links one of my articles discussing cash costs back in 2011.  Since then, my work has become more sophisticated into calculating the “Estimated Breakeven” for the primary silver miners. 

FreeGold, FOFOA provides the example of Hecla’s low cash cost to justify their $2.75 price for silver after the big gold reset:

Hecla Mining Company, who claimed its “cash cost” for silver as a byproduct was only $1.15 per ounce in 2011, actually had a “complete cost per ounce” of $23.88!  … Wow! At a $1.15 per ounce, $2.75 would be a 139% profit margin!

Hecla has one of the lowest cash costs, because they have one of the highest by-product metal sales.  Hecla’s 2014 full year by-product metal sales were a whopping 65% ($325.4 million) of their total $500.7 million in revenue.  By Hecla deducting their by-product revenue, they were able to state an ultra-low cash cost of $4.81.  However, my estimated breakeven for Hecla in 2014 was $18.87.

Furthermore, cash cost accounting is not a GAAP – Generally Accepted Accounting Principle.  The mining companies even state in their financial reports that cash costs have no “standardized meaning” in the industry:

“cash costs per ounce of silver”, which are used by the Company to manage and evaluate operating performance at each of the Company’s mines and are widely reported in the mining industry as benchmarks for performance, but do not have standardized meaning.

So, if a company has the same cost structure as Hecla, but a much lower by-product metal revenue, their cash cost would be higher because their deductions would be lower.  For example, if the company only had 80% silver revenue and 20% by-product metal sales, their cash cost would be significantly higher as their deduction was much lower.  Again, this has nothing to do with the profitability of the company. 

Here is item number 2:

But if the author was right about the “break-even area” for silver, then how on earth did mines produce 20,000 tonnes of silver (and scrap refiners another 6,300 tonnes) in 2005, when the price of silver ranged from $6.39 to $9.23 per ounce? And how did we ever survive 2003, when the price ranged from $4.37 to $5.96?

FOFOA’s statement here shows their ignorance as they fail to factor in the price of oil and its relationship to the silver price.  I discuss how the rise in the price of oil impacted the price of silver in my upcoming THE SILVER CHART REPORT.  Here is Chart #24:

SIlver vs Oil Price & Ratio 2000-2015

I gather the folks at FOFOA believe the primary silver miners extract silver ore without the use of energy.  Quite clever of them.  Nonetheless, the price of a barrel of oil skyrocketed from $25 in 2002, to over $110 in 2011.  Did this not impact the cost to mine silver?  Are they kidding here?  Again, FOFOA is guilty of FORECASTING IN A VACUUM.

I would imagine FOFOA would say something like, “Well, if the price of oil falls back to $50 like it did in 2005, then the price of silver should decline to $7.32– its average price for the year.  That might make sense if we continue to analyze the silver market they way the folks at FOFOA, however things have changed considerably in the primary silver mining industry over the past decade.

This is also shown in detail in several charts in THE SILVER MARKET REPORT.

I gather the top primary silver mining industry’s 40% decline in average yield since 2005, may have slipped past the supposed critical thinking of the folks at FOFOA.  Which means, the mining companies have to either add new mines to makeup for the decline in production or process a great deal more ore to produce the same amount of silver.  This costs energy… which costs a lot of FIAT DOLLARS.

Here is item number 3:

But if you throw in a little economic deflation, what FOA called “our economic function” which will decrease the industrial demand for silver until much of the global malinvestment is cleared away, along with a little price overshoot to the downside and a sprinkling of all that supply overhang competing with the miners and scrap refiners, I think $2.75 might even be a little conservative. ;D

I don’t think silver will stay that low forever. As I said at the top of the post, it’s an exceptional metal with many great industrial uses. So, like America, where “a few solid economic ideals still exist and await the opportunity to rise like phoenixes from the ashes of a fiery transition,” I think silver has some fantastic industrial uses and will rise like a phoenix (more or less) after spending some time at around $2.75 per ounce (in constant dollars of course.

FOFOA believes the United States will rise like a phoenix from the ashes of a fiery transition, and consumption of industrial silver will increase putting value back into their low forecasted $2.75 price.  As we can see, FreeGold only values silver as it pertains to its degree of consumption as an industrial metal.  Silly people.

This goes against 2,000+ years of gold and silver’s STORE OF VALUE properties.  FOA believes gold will revalue higher as it will back all this worthless fiat money, but they fail to realize ENERGY IS THE KEY, not silly fiat money.  What happens to the global financial and economic system when the peak of unconventional oil production begins in earnest?

Does FOFOA make any forecasts to what happens to the value of the $105 trillion in global conventional assets under management when world oil production plummets?  How do they see the U.S. rising from the ashes when we finally witness the collapse of the highly leveraged shale oil and gas industry?  How does the U.S. run on 70% or half of the energy it’s used to?

The reason silver will increase in value in the future has nothing to do with industrial demand,  but rather as a result of investors moving out of increasingly worthless paper assets and into physical ones to protect wealth.  Silver is just as good as a store of wealth as is gold.  It just has less stored Economic Energy than gold.

Of course FOFOA will label me as a silver bug, but they fail to realize I am a STORE OF WEALTH advocate, who believes silver is the better value going forward.  This is due to a great deal less above ground silver in the world for acquiring as a store of value compared to gold.

While I base the value of silver currently on the price of oil, this will become less of a guideline in the future due to the implosion of the highly leveraged Treasury-Bond-Retirement-Insurance Fund-Derivative Market.  The world perceives there is a store of wealth in these supposed paper assets.  Unfortunately, they are (as I stated many times) nothing more than ENERGY IOU’s.  Energy must be burned to give them value.  And not only the same amount of energy next year, but even more or the entire house of cards comes crashing down.

This is not the same with physical gold and silver.  They STORE energy value in each coin.  No energy has to be burned to give them value.  They are ready to be traded for energy value locked in goods and services.  Gold and silver are true stores of value, while most paper assets are ILLUSIONS of value. 

FOFOA fails miserably in understanding this ENERGY = MONEY principle.

The Fed & Central Banks Prop Up The High Oil Price

Without the Fed and Central Banks propping up the economic and financial markets since 2008, the world could not afford high-priced unconventional oil such as oil sands and shale oil.  Without this extra oil supply, the Fed and Central Banks would not have been able to paper over the system.

Furthermore, the trillions in monetary liquidity on top of zero interest rates actually pulled future oil production forward.  This is why the world has experienced an eleven year global conventional oil production plateau.  Basically, money printing and debt allowed us to steal oil from the future.  This will come back to bite us hard when the U.S. Dollar finally collapses.  Why?  Because the decline in world oil production will be more severe when it finally arrives.

This will cause havoc to the majority of paper assets.  This scenario is not found anywhere in the FOFOA playbook.  Which is way they only value of silver by how much is consumed by industry.

Lastly, I actually believe silver will outperform gold in percentage terms in the future due to it being more rare and more affordable.   I explain this in my upcoming THE SILVER CHART REPORT.  There are 48 charts in the report.  Some of these charts are from my work over the past six years, all updated and including new ones never seen before.  There isn’t a single publication on the internet that explores the silver industry and market to the degree covered in THE SILVER CHART REPORT.

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101 Comments on "FREEGOLD REBUTTAL: A Case For Much Higher Silver Prices"

  1. I think that FOFOA’s argument can reasonably be understood only from the stock/flow viewpoint. Gold that is mined is almost all kept as a store of wealth [via bullion, coins, jewelry, or art]. It has very few other uses, and those are tiny. Most of the Silver mined, on the other hand, is used industrially, and a minor part of it is used as a store of wealth. This is pretty much axiomatic to FOFOA followers, and any further points must, rightly or wrongly, be understood as following from that ‘truth’. Arguments based on anything other than this need not apply for consideration.

    For a few more years, there will be plenty of industrially available Silver [until mines play out and/or energy becomes too expensive to use in mining]. At that point I would expect more of the Silver mined to be saved as a store of wealth. As Silver becomes nearly as rare as Gold, FOFOA’s Gold-only philosophy should begin to leak badly. Until Silver becomes significantly more rare, FOFOA’s arguments have some merit, at least as an intellectual exercise.

    My 2 cents worth.

    • Ed Kaminski,

      I appreciate your TWO CENTS. However, as I commented to Craig, FOFOA totally blew their $1.85 assessment of silver due to their lousy superficial analysis. They fill in the blanks using assumptions rather than fact.

      Regardless, the elite control the price of silver just as much as gold. And for gold to revalue to $45,000 while everything else falls lacks total understanding that ENERGY DRIVES the MARKETS, not FINANCE or GOLD.

      This is what’s precisely wrong with FOFOA’s assumptions on gold and silver.

      steve

      • “Regardless, the elite control the price of silver just as much as gold. And for gold to revalue to $45,000 while everything else falls lacks total understanding that ENERGY DRIVES the MARKETS, not FINANCE or GOLD.”

        And when gold goes up the S to G ratio changes, i.e. silver’s rise valued in fiat currency increases a higher percentage than gold.

      • Another consideration is the following:

        Around 90% of the time [perhaps greater than that] when gold goes up silver does also. A 90% correlation rate over time is statistically significant. But when both go up the gold-to silver rate changes; they move closer than the current ratio. In other words silver goes up faster.

        So the idea that gold will explode measured in fiat currency units while silver falls doesn’t make sense based on historical valuations.

      • What in the world do the FOFOA guys think people of moderate means are going to do when gold is on its way to $45,000 an ounce? Do they really think that a small businessman with, say, $5,000 to spend will go to his local coin dealer and say, “Oh, gold’s $20,000 an ounce? That’s too much for me. I guess I’ll just sit here with my fiat currency paper and do nothing.”

        What contempt for people you must have to be so devoid of understanding of how people will act in such a circumstance.

        • When you have 5K to buy 20K/oz metal, buy 2 1/10th coins and a thousand bucks worth of silver. So, you now have 2 tiny dime-sized gold coins and almost a hundred 90% silver pre-1965 dimes. Good job in Zimerica! That man has preserved his wealth.

  2. Steve,

    Do your homework. I know again that that this is somewhat conspiritorial but please study the ‘protocols of the elders of zion’ and you will discover that those in power (you know who i’m talkiing about, the big elephant in the room) value one thing and only one thing and that is gold. So forget about your fundamentals, this is historical and traditinal.

    Please don’t take this comment as a lack of respect as I admire most of your work. All I ask is that you look outside of the box, sometimes.

    Regards.

    • Craig Moodie,

      Didn’t the Roman Emperors devalue the SILVER DENARIUS? Furthermore, if you read any of Charles Savoie’s work on the Pilgrims, you will see that the ELITE have spent a great deal of time manipulating the price of silver.

      Craig, this goes well beyond the elite. Also, this doesn’t address any of the FOFOA’s items I refuted in the article.

      While I believe conspiracies take place, I am sick and tired of LOUSY CONSPIRACIES. The elite are worried about the price of silver just as much as they are the price of gold. Are the elite controlling the record 3,000 metric tons imported into India in just the past 4 months.

      There’s a lot more I can say… but I will just leave it up to others to comment here and share their TWO CENTS.

      steve

      • bear in mind that the Elite, while INFLUENCING prices cannot always control everything. If they could, there would not be periods of massive capital destruction as they would be able to increase their wealth through less volatile and thus certain means.
        When imbalances are just plain stupid, they can still control the herd. but when the imbalances are totally absurd – as in the case of $45k gold / $1 silver – the herd will run wild, and whatever the ‘advertised price’ you would be utterly unable to find phy silver to purchase.

        FOFOA has a great historical global perspective – but they really lost me on this one (unless they are only talking the paper price collapse – which may also happen to gold /comex contract prices)
        The reason for this is – what is the purpose of sudden massive reprice of gold? Its to be able to 1) extinguish colossal amounts of debt, but also to 2) detonate an inflation bomb so that wages, other commodities etc catch up to gold so that workers and businesses, are making inflation adjusted profits with which to continue settling legacy debts and deleverage

        So to suggest silver or any other commodity would be held down to the price of peanuts defeats the purpose of the ‘great reset’ from the perspective of the Elites. Unless they think they can settle enough debt with 1) and dont need mechanism 2)

  3. Hi Steve,

    1. You are right, in that FOFOA and his “forefathers” are NOT aware of Peak Oil and this is a serious shortcoming. It harms the credibility of the whole concept, which is 15 – 20 years old.

    2.FOA is not FOFOA. Another and FOA (Friend of Another) are FOFOA’s anonymous founding fathers, who wrote in an english speaking gold forum around the year 2000, allegedly central bankers, involved in the making of the Euro. The “cult” is an extreme gold buggery. FOFOA unearthed these writings and is acting as a contemporary interpreter to Another + FOA.

    3. The concept is logical in itself. They are critical of a gold standard, but maintain, that there has to be a new world financial architecture, in which the US-Dollar has to give up its role as international reserve asset and will give it to gold, in a managed transition.

    Only Gold will function as an universal store of value, but will not be directly linked to the currencies. As media of exchange (MoE) there will be unbacked fiat currencies (paper, eletronic), which will be managed by central banks in a more or less inflationary manner, according to the (perceived) needs of the respective economies. This system does not need a backed currency, nor does it need another reserve asset besides gold. Gold derives its high value only partly from its undervlauation in the paper gold market. More than two thirds of the projected increase will be due to its new role as a universal asset medium both for states and individuals.

    4. And that’s exactly, where the divergence between gold and silver comes from. For Freegolders gold is the chosen asset. For them the demetization (“de-assetization”) of silver in the 19th century is irreversable (which is supposedly shown by the fact that central banks still have gold as an asset, but not silver).

    FGers do not try to value silver by looking at the balance sheets of its producers and the market, as you do. They are not interested in a seperate appraisal of Ag (but yes, they like to provoque silver bugs a little). For them silver and everything else is NOT the new reserve asset and the hugevalue overshoot of what you call paper assets will, after the transition, be mopped up by gold and only gold.

    5. I think,that there are some flaws in their assumptions and especially their link to the Euro might be outdated. But it’s a legitimate line of reasoning. and there could be other strands of FG reasoning, which are not known to the public. Prhaps Mr. Savoie would attach the FG theory to the group of individuals, he labels as “silver squelchers”: interests, which pushed for the replacement of silver by gold in the second half of the 19th century.
    Just my 2 Cents. Cheers, Andreas

  4. FOFOA needs to put crack pipe away. I love in his article where some DB says silver will be .50 as gold crosses it’s first thousand. Well?????

    Just ignore that part.

  5. When paper gold goes up in $ or €, silver follows. And that’s not because of a sudden explosion in the use of industrial silver. It’s because silver too is a monetary metal, next to her industrial use. The elites can’t use silver to ‘refund’ their soon to be worthless fiat, because the industry NEEDS it. In percentage points, silvers ‘profits’ will exceed gold imho, after the shtf. Officially, only gold will be supported by the cb’s and other giants. In the streets, that’s another story.

    The first bail in won’t be enough to drag $555 trillion in derivatives out of the swamp. Mr. Hyde will open his eyes for a few more months, and he will ask Dr. Jekyll (from Jekyll Island) to provide a solution.

    • theres a lot of commentary flagging this figure, or thereabouts of a quadrillion or half a quadrillion derivatives.
      Remember that many of them are mutually exclusive. If theres $100 trillion in bets saying rates will be above 1% by 2016, theres another $100 trillion betting they will still be sub 1%. Obviously both cant be triggered, and i would imagine most entities trading them have hedging derivatives to the ones they think are more likely to play out.
      Im not for a moment saying derivatives arent the largest potential source of systemic risk – just sayin, lets qualify this $555 trillion figure a little

      • Agreed Carlos. It’s not the total amount of derivatives, but the complexity that is a risk. No one knows who owns what to whom. $10 trillion can cause a lot of damage if you don’t know where to run or hide.

  6. Steve,

    Genuine question.

    People talk about China and India purchasing all this gold.Which institutions ih these sovereign states are actually acquiring this gold?

    If it happens to be their central banks then does this not mean that this gold is actually moving into private hands? It’s no secret that most central banks are privately owned.

    • It is well known that in addition to central bank acquisitions, gold and silver are being bought by individuals in China and India. They are not as enamored with paper currency as Westerners are

      • We are 15 years away from FreeEnergy.
        Silver is a stupid long term investment and a dangerous short term bet, because it will not be revalued!
        Anyway, do what you like. I can afford gold!

  7. Nice Andreas

    All I could come up with in this midsummer state is.., when the f#ck did any governement reprice silver? well maybe happened, maybe not.., but, could it today in this global economy? Who would gain? Name one government that has silver as a reserve!!!!

    Repricing of gold on the other hand.., FDR, Nixon.., etc.., name today one country that would not benefit..,

    I think it is just trying to get leverage to buy silver instead of gold..,

  8. Steve,

    Those idiots at FOFOA – Ain’t no cure for stupid!

    Wrestle not with pigs. You get dirty and the pig enjoys it.

    Silver is still the best value.

    Buy for cash and stash.

    Thanks, for all your hard work.

    SteveW

  9. Silver and gold

    Which is needed in society more? Which will be first to “run out” from mining? Both are rare and only found concentrated near surface level sporadically. Colored paper has close to zero intrinsic value. The thought that silver would value a lot lower with inflation is ignoring the Weimar republic history – a wheelbarrow of marks bought a loaf a bread and the silver dime bought a week’s worth of groceries.

  10. Great job Steve!

    And if these creeps do drive silver down so low (not happening), I know full well I will not be the only one liberating these idiots of their silver.

    One metric tonne would be in reach.

    In a world of 7 billion people consuming silver almost daily – these fools seem hardly worth the effort.

  11. Silverwillwin | June 19, 2015 at 8:19 pm | Reply

    Thanks Steve for your investigation regarding one more entity that instituted and still uses funny math.
    I say put a fork in them ~ they’re done !

  12. I think it is difficult to even imagine the systemic effects of reduction of oil supply. Oil supply drives the global mining and transport complex — any distortions in supply of diesel fuel will break it apart, not just distort metals prices. And that includes sea trade in thermal coal (powered by diesel and fuel oil), which literally drives economies via electric generation. Feedback loops of such complexity and magnitude will create epic social effects, followed by epic political moves to secure supply or take it from someone by force before others do. How will such epic changes affect silver price, will there even be a silver price — it is impossible to say. What can be said is, in such a situation, silver is guaranteed to have a greater purchasing power than promises and expectations, even if it no longer has a ‘price’ as such.

    There are quite recent historical examples of what I wrote above, but none is comparable to reduction of available energy. The closest one I can think of is the Late Bronze Age collapse (around 1200 BC), during which a global trade ceased to exist, all cities between Greece and Egypt (the ‘world’ then) were destroyed or abandoned in less than 50 years, and Greece (the beacon of civilization then) lost literacy for 4 or 5 centuries. What happened was a simple reduction in available energy of the era (crops and timber), followed by collapse in trade (tin for bronze, timber for ships, food, etc) and the rest inevitably followed. What happened to gold and silver prices then is of a marginal academic interest only.

    • Yes, Reader. When some energy hub blows up somewhere, close your eyes and pray. Or fight. I have those nightmares in wich i need some paper to start a fire.

  13. Robert Happek | June 19, 2015 at 9:18 pm | Reply

    In the former Soviet Union, prices of products and commodities were set and kept artificially low. Everybody had plenty of paper money, but the shops were always empty, so nothing could be bought for paper money. To buy something on the black market, a different currency was in demand: vodka.

    If silver ever falls back to $2.50 per ounce (which I do not believe will ever happen), I am sure there will not be a single ounce of silver available for sale at that price. That is Gresham’s law in action.

    Since the collapse of the Soviet Union in 1990, something very strange is happening. The west has gradually drifted to socialism and communism, while Russia and China became the free capitalistic societies. The takeover of all financial markets by the western central banks is only one manifestation of this catastrophic trend. Putin seems to be the defender of human rights and liberty, while the west seems to be turning into a monster supporting military intervention and terrorism – something which we accused the Soviet Union of at the height of the cold war.

  14. CFO point of view | June 20, 2015 at 12:11 am | Reply

    I studied FOFOA’s work quite a lot. I must say it is very reasonable in short run. I might very well imagine the world were gold was repriced to $55k and silver which along with gold – treated by paper by ratio of 1000:1 was beat down to $2,75. It may happen, as gold few hours before repricing might be at price of $300…

    But what then?

    Most of silverbugs own some gold – I do 🙂
    I would immediatelly start looking for any source of almost 2 metric tonnes of silver, which I could purchase for 3 ounces of gold 🙂
    I don’t think I would be alone 🙂

    What’s next?
    At what level people would stop their efforts to aquire as much silver as possible?
    IMO well above $500, where GSR<100 🙂

    And really cost of mining is NOT IMPORTANT AT ALL!

    • At 2,75 per ounce? I buy 20 tons if anybody wants to sell… At 1$ per 1kg? I will buy any quantity you sell…

  15. philip townsend OBE | June 20, 2015 at 3:21 am | Reply

    I liken the whole “Freegold” concept to intellectual masturbation. Gold is money. Period.

  16. Thanks for the rebuttal Steve.

    I read that ‘Silver Dollar’ article and FOFOA ended with an apology about closing the comments section!!.

    Having read all Charles Savoi’s articles,one of the comments I would have made,refers to the demand in both India and China for silver……….

    Both countries economies were deliberately destroyed by de-monitizing the silver Rupee,in the 1925/6 period, British India caused the deaths of millions of Indian people who had used silver for centuries.

    The coin melt was dumped on the open market reducing it’s $US/GBP price and a few years later destroying the purchasing power of China’s people.

    As Steve pointed out in one reply,this year India is on track for 9,000 tons,last year over 7,000 tons,up from over 6,000 tons in 2013.

    Rural people in India value silver highly and throuhout India culturaly, No Gold = No Wedding!.

    There are 100’s of applications for silver and growing,China is importing huge amounts and stockpiling for it’s Photo Voltaic solar panel program…….

    Watching the daily lockstep of AGX & AUX against the dollar index it is clear why the US/UK still consider gold and silver to be competing currencies.

    Although the manipulations upset many hard money people, the US ‘Exchange Stabilization Fund’ and the British ‘Exchange Equalization Account’ ,are legally allowed to intervene to support their currencies.

    I’ve got mine and I am happy!!

    cheers

  17. With an astronomical gold to silver ratio I would gladly swap a few ounces of gold for a few TONS of Silver. Never in history has the Gold to Silver ratio been that out of whack and IMHO if the ratio ever increases above 100 to 1 again, silver will disappear because there are too many knowledgable investors who would take advantage of this ratio.

  18. confederate miner | June 20, 2015 at 6:48 pm | Reply

    Silver will be money because it already is money. There are already millions of 1 ounce bars and rounds and coin that will be able to be readily utilized. Only gold and silver hold this distinction. Sure there are some (very few) platinum and palladium bars coins but basically just a novelty. Silver was money silver is money and always will be.

  19. Jacques Rueff | June 20, 2015 at 10:00 pm | Reply

    Hi Steve,
    I understand a great deal of Freegold and you have misrepresented or misunderstood much of it – judging by what you have said in your article.
    One of the most glaring omissions is how you are not differentiating between the two PMs. Yes, Silver IS a commodity, but Gold, certainly is not – in any practical sense. Gold is neither used extensively or is a necessity in the marketplace. Silver, as you know, has multiple uses and demands; Industrial, consumer, medical etc.
    This is a key point that only helps destroy the supply/demand paradigm that you, and most all PM analysts, require to fulfill their, consistently flawed, thesis. Mint sales of coins, China, India, Russia buying PMs should make the price rise. Guess what? – it doesn’t – and the Sprotts, Morgans, Sinclairs, Keisers, Poneys etc etc. have been nothing but incorrect in the past 4-years, expecting this seemingly obvious equation to come to fruition. As it stands, Gold is not supply/demand – it is Stock/Flow. Physical demand and paper price (that which denominates the price) are mutually exclusive and all the ravings about how much China is buying, reduction in mining, Mint sales records – will not budge the paper price. If nothing else, GET THIS.
    If the paper price will attain its intrinsic value – that price will approach zero. You certainly know paper Gold is not redeemable for physical and that the LBMA estimates the ratio (paper to physical) at 112:1. So, gee whiz, what do you think physical gold is really worth?
    Well, since is has no Industrial demand, its price is totally arbitrary. Silver has a ‘demand’ value. Gold has, virtually, none. So looking at this ass-backwards, Gold’s price can be anything without it inflicting its value on the marketplace. This is not true of Silver – at all. Silver can’t go up in price without it affecting many facets of the marketplace. Silver goes up – a lot – so does everything else. Gold goes up 100X – so what?
    But let’s imagine what happens when Gold goes up, say, 100X.
    1) Okay, you don’t f$ck-up the marketplace.
    2) Who holds Gold? Sovereigns, CB, the elites. Who is going to win-out in this coming shift? Them? or a bunch of fist-shaking tin-foil hard-money Libertarians?
    3) It increases the money supply without money printing (magic). Rickards gets this. Great way to counter deflation. No?
    But what about the miners? Taxed or nationalized.
    Why an overnight revaluation?
    Gold is a Giffen Good – as it goes up it gets scarce (hey, reverse of supply/demand! – how about that). Goldbugs might tell you it competes with the dollar. But shrimps (like us) are not going to make Gold scarce. The meg-wealthy control this market. Gold is not going to be allowed to go up slowly. It will have to be a huge leap – so that it doesn’t conflict with said dollar, said marketplace, said Apple stock etc. It’s a hard concept to come to grips with…so why CAN this happen?
    How about because it CAN – and it is the only thing that will modestly work to save this unsustainable system from us turning into The Road. No doubt pain is coming, but civilization will be saved (I hope).
    Consider it the hole-card for the system. Greece can’t pay its debt, Mr. Martenson? I beg to differ. They can, and then some, at €80,000 ounce Gold. Doesn’t matter what Silver will be at, does it?
    GSR? Irrelevant – we are in unprecedented times – history will not be your guide this time, Stevey-boy. Uncharted waters. You know that. One thing you can ‘bank on’ is that CB’s are NOT going away. How can they? They set interest rates and create the Medium of Exchange out of thin air. Do you think any entity with that power would throw it away? Do you see your government giving up ‘fiat’ so you can buy groceries and gas with junk Silver? I mean – that is funny. At worst, they will give you new fiat – and the masses will use it! Do you think if you buy enough Silver coins that you can crash J.P. Morgan? Who is the crazy one now?
    Once FG establishes Gold as the true Store of Value that it has been for 99% of human existence – we don’t need this corrupt, dysfunctional financial monetary smoke and mirror show we have now… the ultimate wealth reserve will balance trade. Silver is far too important to be that wealth reserve. FG will happen because it is the only solution. Silver going to $100 or more – will only screw-up the system. Silver is a bet on the common man, a bet against the CBs… Gold is a bet on the old-money system, elites, Rothschilds, CBs, a continuation of paper money (in whatever inflated form that takes), ME Oil, and moving away from the dollar without war… embrace it, Homies. They win, liberty dollars lose. Get on the right side of this… or continue to gamble by leveraging up with silver, or stocks, or cash, or RE or whatever. Remember you trade Silver for currency (TRADE!!!), but currency revolves around Gold. It is the Sun of your monetary Universe… get you some, while you still can

    • Jacques,

      mostly I understand, what you are saying and partially I accept it as true. It is a very sophisticated and at the same time simple concept. I, too, cannot fathom, that CBs are “just going away” (nor the megarich gold holders of old). But they (probably) are human and humans do (have to) change plans. It might be elegant and carefully thought out, but FG is NOT written in stone.

      I think you are spot on with this assessment: “Silver is a bet on the common man, a bet against the CBs… Gold is a bet on the old-money system, elites, Rothschilds, CBs, a continuation of paper money (in whatever inflated form that takes), ME Oil, and moving away from the dollar without war…”

      But as you say for yourself: “We are in unprecedented times – history will not be your guide this time”. How then can you be so sure, that the elites will win out once again ?

      Regarding stocks to flow: There IS a massive flow of physical to the East/China. Do you really think, that this flow is a natural market event (new production plus investor driven, “private” western dishoarding) ? Or is it maybe facilitated by huge “public” gold hoards (western CBs), which squander physical gold, in reality “unambiguous wealth”, which they supposedly hold as a trustee for “their people” ?

      • Jacques Rueff | June 21, 2015 at 6:25 am | Reply

        Hi Andreas,

        You say “But they (probably) are human and humans do (have to) change plans. ”

        How could the plan possibly change from the natural law that is Gold? The choice (of Gold) has already been made by those that count. Ask Aristotle. There are other wealth reserves (land, fine art) but how can you settle trade with a portion of a Renoir? Gold is different….
        “All modern digital currencies do not go into an investment, they move THRU it… There is an alternative. Gold! It is the ONLY MEDIUM that currencies do not “move thru”. It is the only Money that cannot be valued by currencies. It is gold that denominates currency. It is to say “gold moves thru paper currencies”. – Another

        You say “There IS a massive flow of physical to the East/China”

        ‘Massive’ – as compared to the total? There are 180,000 tonnes of above ground stock of Gold. 95+% of Gold lies still – it does not move. But the gold must flow. When it slows to less than a trickle – then you will have the revaluation. This will co-incide with the paper price severely declining (possibly trading halted), but the metal getting scarcer and scarcer – till you cannot buy it anywhere. Will we see $1000 Gold? $700? $500? Yes, but that is the paper price – and paper gold is worthless, no? The prophecy that ‘all paper will burn’ will be coming to fruition. You should cheer it. But at some point on its journey down – you won’t be able to buy any Gold… or that may be right before the collpase of the paper gold market. Hard to know how this will exactly play out, but best to own now – buying slowly over time… rather 10 years too early than 10 minutes too late.

        You say “How then can you be so sure, that the elites will win out once again ?”

        I’m not 100% sure that the sun is not going to turn into a giant bran muffin tomorrow either .
        The race is not always to the swift nor the battle to the strong, but that’s the way to bet. ~Damon Runyon

        Others:
        “Will silver hold 1/70th gold price? It seems outrageous”
        Not to all of us. How about a GSR of 1:10,000? Unprecedented debt levels require unprecedented responses… or outrageous debt levels require etc. … We’ve never been here before – and the alternate solutions are can-kicking, political procrastination – as most of you are aware. Time is running out. FG will transpire as it is the only solution that will work (and those that hold massive gold already know this). You can include the SDR is those stop-gaps approaches that won’t last… if attempted. Just hold gold and live your life… stop pot-watching your time away. It will happen when it happens. It always feels like it is right around the corner – especially if you immerse yourself in the words and voices of those who sell PMs for a living. From Sprott to Turk to Silver Doctors… quite the prognostication track records there for timing [/sarc]

        “Silver definitely has at least a tiny monetary component attached to it. If people miss the gold train, they’re going to go to the next best option they have and buy silver.”

        This harkens back to control. Who moves this market? Shrimps buying some Silver won’t be enough to ‘remove’ this overhang – plus many will sell to survive the deflation. With an overnight (or over-weekend) Gold revaluation – the train has been already been missed for AG. It won’t be a slow rise, dragging Silver with it. There is no next best option for this ultimate Store of Value. Silver’s price will continue to be denominated in the paper market. Supply/demand by a bunch of liberty-minded shrimps be damned.

        US shrimps buying a bunch of coins and bars (Silver or Gold) will not collapse this market. The elites demanding tonnes can. And they do it in the significantly smaller market of Gold. They don’t mess around with Silver, or OJ, or wheat, or pork bellies…

        “You’d also get a lot of guys in gold with hundreds of ounces of gold who would be happy to convert a few ounces of their gold into tonnes and tonnes of silver at its $2.75 price.”

        And do what with it? Store it in their basement? like steel girders? and what if they do – you are again presuming supply/demand will affect the price to the upside. If what you say is true – Silver will be flowing like water – poor people selling it (to survive) and ‘rich’ people buying it. No. Not going to happen that way, IMO. Silver goes too high and so will many other things that rely upon it because of its link to the marketplace – nominal gains at best.

        In what HI have you seen Silver jump in value? Ask those who lived through such an episode. It’s cash people run out of and necessities they need in a hyperinflation… the SGR in Wiemar went from 30:1 to 160:1 in one week. What idiot will trade much needed food and water for Silver in HI. But there are always the, well-stocked, rich who will take your gold off your hands in HI. THEY want gold… not silver.

        Lastly this ‘Silver is Money’ mantra I keep seeing here. Anything can be ‘money’; live chickens, sea shells, cigarettes… we all hate the government but officially mandated fiat is not going to be allowed to be replaced by Silver, or sea shells, or Lima beans… it is going to be replaced any another paper currency as in every HI event in history. Maybe with another zero of two added. You’ll require it to pay your taxes, good citizens… although it feels like we live in a prison, they won’t take cigarettes as payment, although I wouldn’t put it past them to, metaphorically, use toothpaste as a lubricant.

        This may be unpalatable to most – who hate the current system, but
        Mundus vult decipi, ergo decipiatur.
        (The world wants to be deceived, so let it be deceived.)
        – Petronius, Roman satirist ca. 1st century

        • You seem to know who is buying silver and who is not. How do you get to that knowledge?

        • JR; “Silver’s price will continue to be denominated in the paper market. Supply/demand by a bunch of liberty-minded shrimps be damned.”

          Your comments are typical hardcore (Fo)foa, i agree with most of it. Don’t forget the energy cliff we’re approaching….

          When paper gold dies, paper silver will die with it. Maybe even the whole commodity complex. That’s why silver is the pain in the ass for the giants.

          Guess they will tax your brains out when buying silver for wealth storage purposes. 🙂

          • Jacques Rueff | June 21, 2015 at 5:19 pm |

            🙂
            Look at the attempts at being Silver Giants…
            1) Bankrupted (Hunt bros)
            or
            2) Total capitulation (Buffet)
            THEY make more playing the Silver paper game. This won’t change much.
            Definition?
            Silverite – Generally the same moral outrage and conspiratorial stance as many Goldbugs. They also consistently cite supply/demand data including, highly inconsequential, coin sales and silver’s extensive industrial usage as a form of evidence that the paper price should/will advance. Few Silverites can define the difference between AU + AG – seeing both only as ‘monetary metals’. They are usually more exclusive to physical ownership, as opposed to the Goldbug, and to Silver ahead of Gold, extolling the former by referencing the historic Silver:Gold Ratio as evidence of its superior investment potential. They share Goldbug idealism with their expectation of a collapsed Central Bank, less thought-out Gold Standard solution and less-rational expectations such as their unified ability to ‘crash JP Morgan’ with their, relatively puny, personal silver coin and bar purchases or to paying for groceries and gasoline, during a financial crisis, with their junk silver stashes. Like the Trader they myopically only see dollar denomination profits. Many are also fervent Preppers. Examples are everywhere on the Internet and include Chris Duane, John Embry, David Morgan, etc.

          • Jacques Rueff,

            I see you’ve spent a lot of your time here trying to LEARN us all something. While I appreciate your comments, you still haven’t addressed any of the items I challenged in the FOFOA: Silver Coin article. It’s one thing for FOFOA to have a certain ideology and forecast how the value of gold will play out in the future, and another thing entirely to state false truths and lousy assumptions about silver.

            For FOFOA to state a CASH COST as the cost to produce silver makes me wonder what else they are ignorant about as it pertains to silver mining.

            All of the items I challenged were not disputed by any of the hardcore FOFOA followers here.

            I am not going to spend anymore time debating this issue ONE on ONE, as its a lousy EROI – Energy Returned on Invested. However, you are more than free to continue spending all the time you need to RE-LEARN us all here….LOL.

            steve

        • Hi Jacques,
          1.) “The choice (of Gold) has already been made by those that count.” Yes, maybe, maybe not. That’ what’s called an assumption. I agree though, that the choice of gold as a store of intergenerational wealth would be a good one. It’s portable, divisible, etc. But this does not mean, that this decision has been made (will be upheld).
          2.) “Massive’ – as compared to the total?” As compared to new production for example. Physical uptake via Shanghai is quite a portion of it. Obviously new production is not enough to satisfy aggregate demand from the east, so the big question ist, where does the rest come from. And what if dit did not matter, if there was no flow any longer ? “Gold has to flow” – that’s within the basic raster of Freegold. Says who? Another. You just have to believe it. As a shrimp I am not able to observe substantial evidence for this flow.
          3.) You say “How then can you be so sure, that the elites will win out once again ?”
          “I’m not 100% sure that the sun is not going to turn into a giant bran muffin tomorrow either.” – Granted, that would be quite unlikeley 🙂

          Cheers, Andreas

          • Jacques Rueff | June 21, 2015 at 5:12 pm |

            Hi Andreas!
            You said: “That’ what’s called an assumption.”
            Perhaps, but even if it is – it is a pretty soundly based one. These same elites (let’s call them ‘Giants’) would have had to get together and unilaterally changed what the new wealth reserve would be. So what, I wonder, could that be? Silver? Oil? Galapagos turtles? I have already stated how none fit the bill like Gold – because they are all consumed. Even fine art can be destroyed – no AU. Aristotle’s definition. And I have recognized how Gold is different from everything else. The only thing currency does not flow through. It is only gold that denominates currency.

            “Currency prices everything (but gold) because currency is simply that middleman between their known relative values. Everyone knows that an apple is worth two bananas. So currency between apples and bananas prices those items. But there is no intrinsic, calculable relative value between an ounce of gold and a men’s suit. Their relationship is arbitrary… it can be whatever subjective value the superorganism takes it to without affecting anything else. No chain reaction will happen.”

            You said: “this does not mean, that this decision has been made”.
            Well, it has been historically made (past tense), but I assume you are suggesting that there is no proof that it hasn’t been altered? is this what you mean?
            The secret of Gold – has been pretty well kept. Aside from the occasional fancy watch, broach or wedding band – most own NONE. PaperBugs out-ratio GoldBugs 10,000:1. Even here in a supposedly enlightened Forum half the people are talking about Silver. I can’t see a reason why it would change from Gold – they already have trillions-worth tucked away. What would be the reason to change?

            You said “As compared to new production for example.”
            Andreas, it is peanuts – if used to keep the system going for another X time-frame. Ditto for our Mint coin sales data. Totally meaningless. And we still get 2,000 tonnes a year new Gold. 2% to China, (all of new production!) to keep the charade going. Even the 600 tonnes lost to GLD isn’t that much when you are talking of 180,000 tonnes in existence. I think CBs have about 30,000 tonnes – used to be 37,0000 (and Knox etc. US supposedly 8,000, Europe 10,000). Let’s do some math 1 tonne = 32118 troy ounces at 100K reval that is about 3 trillion. No? 10 tonnes = 30 trillion / 100 tonnes = 300 trillion / 1,000 tonnes = 3 quadrillion. Am I wrong? Gee, that could soak up a lot of debt – well, the debt it would want. So, those with the gold end up owning… everything they want in this deflation.
            I’d be real careful of what the numbers really bear out. There is a reason the Gold markets are not transparent. I often think Koos has a big wheel he spins to get his numbers. Bottom line – irrelevant.
            “How then can you be so sure, that the elites will win out once again ?”
            There is a reason they are the elites and they have had obscene generational wealth for 300 years… they have seen the cycles – know the game – be like them – own gold.
            BTW, Another was reputed to be Baron Guy de Rothschild.

            I guess you should determine which is more likely?

            1.) A bottom-up shift in value perception as millions and even billions of small savers use their meager dollars all at once to bid up the price of gold.

            2.) A top-down shift in risk perception as the very few physical gold holders of size in the world all at once withdraw their physical from the marketplace.

            Andreas, I am assuming you know the answer – so what will be the next reserve currency?
            Cheers,

          • Jacques Rueff | June 22, 2015 at 5:15 am |

            Steve, you said:
            “The reason silver will increase in value in the future has nothing to do with industrial demand, but rather as a result of investors moving out of increasingly worthless paper assets and into physical ones to protect wealth.”
            Yes, I used to believe this fantasy, exported by most of the PM Gurus. So, you see #1

            1.) A bottom-up shift in value perception as millions and even billions of small savers use their meager dollars all at once to bid up the price of physical assets.

            Where I see #2:
            2.) A top-down shift in risk perception as the very few physical gold holders of size in the world all at once withdraw their physical from the marketplace.

            That is fine. I’m sure you realize that your scenarios requires a pretty massive suspension of belief.

            I understand here you are coming from, because I used to be there. The PM Bug mentality can be so dogmatic that it believes that everyone will end up as enlightened as they are. I’ll bet most here have tried to convince friends and relatives of their financially enlightened ‘hard money’ position. How has that turned out for you guys? What is your conversion rate? Not very good I expect. Mine wasn’t.
            No, Steve, you won’t change the masses. They will be told to use a different form of paper currency in a HI crisis (just like every HI since). Believe it or not, they won’t all rush out to the coin store chanting along the way “Steve was right, after all” – although it is an amusing concept.
            I’ll repeat: “In what HI have you seen Silver jump in value? Ask those who lived through such an episode. It’s cash people run out of and necessities they need in a hyperinflation… the SGR in Wiemar went from 30:1 to 160:1 in one week.”

            You said: “Silver is just as good as a store of wealth as is gold.”
            I again refer to my first point – you refuse to acknowledge the differences between the two metals, but more to the point – the functions of Store-of-Value and Medium-of-Exchange. As far as Silver being as good a store of value – the past 4 years certainly are not supporting that statement. Gold down 35%, Silver down 300%, making the latter a ‘better deal’ at present (your argument being). But recall Gold is not valued by currency. Silver IS valued by currency but Gold is the ONLY MEDIUM that currencies do not “move thru”.
            Your Store of Value can’t have conflicts. With Silver it conflicts, with both the MoE (it is denominated in), and with the Marketplace (it’s vast usage). Gold will not.

            You say: “This is due to a great deal less above ground silver in the world for acquiring as a store of value compared to gold.”
            This is irrelevant. How about Platinum? It is 30X more rare than Gold and was once a monetary metal also (for 300 years).
            Isn’t Platinum, then, also a SoV?
            But then you will go back to the argument of Industrial usage being better for Silver. Sigh.
            So, its not about how rare this SoV is, right? For you is it this:
            “Energy must be burned to give them value.” ?
            The real issue with Gold is that the value is already there. You know this. It doesn’t require burning of energy per-se – it requires the Gold paper market to stop being supported. Physical Gold itself doesn’t have to do anything to gain immense value.

            You said: “you are more than free to continue spending all the time you need to RE-LEARN us all here….LOL”
            Yes, very amusing. Not up to me though. That is each individual’s personal responsibility. Educate yourself. It’s a big Internet. Pontificating after reading only a fraction of the course probably isn’t prudent though.

            You said: “I am not going to spend anymore time debating this issue ONE on ONE”

            I think that would probably be your best course of action at this stage.

            Good luck to all,

          • Jacques Rueff,

            While I appreciate you spending all your time replying to other assumptions, you still did not respond to the THREE ITEMS in which I refuted FOFOA’s lousy analysis:

            All you have to do is go back to the article and read ITEM 1, ITEM 2 and ITEM 3. Very simple. If you care to waste more of your time Analyzing in a VACUUM, please address those three.

            steve

          • Jacques Rueff | June 22, 2015 at 6:14 pm |

            Hi Steve,

            There is no point in me blurting out the fundamental weakness of your arguments as it would be meaningless without the grounding of the FG concepts I have be trying to impart. Yes, this includes understanding the differences in Gold and Silver and which is a commodity and which is not… and much more. Try to think of it this way – the world could get along just fine without Gold being mined. Your energy-related thesis is radically altered if:
            1) Miners are taxed 97% (how much is it to profit from mining Gold then?)
            or
            2) All gold in the ground is property of the government (as is in many countries now)
            or
            3) Gold in the ground can have equivalent ‘value’ to a Sovereign as gold already mined.

            These concepts can sound ridiculous to you and frankly I am not up to going through the entire FG playbook to help you digest them. I’ve left the links. Maybe some wish to read them.

            Lastly… how I came to Freegold? I read all of Another’s comments of almost 20 years ago. Then I ready all of FoA’s. Then I read much of FoFoA. There no way I could reconcile that the former two individuals did not have insider knowledge. They were accurately predicting much of the future in front of them. Not in a subjective, interpretive way – it a realistic way, indisputable way. I resisted FoFoA at first, but the arguments are not only compelling, but undeniably logical. It wasn’t simply a light-bulb moment (that we have all had about ‘money’ and the metals) – it was a Lighthouse beacon of knowledge.

            I have no desire to teach anyone anything. You may not believe this is sincere but I truly wish you the best with your Silver investment. Acknowledge that it is an investment denominated in, potentially, devalued dollars. This is not going to play out like the 70’s – not with Silver nor the miners… One of the beautiful things about NOT investing in anything (owning physical Gold is, in no way, an investment, IMO) is you sleep like a baby. Simply the word ‘investments’ is a joke to me now…

            I think Freegold is essential, if you understand our monetary mess deeply enough. Without this massive revaluation of Gold… and Gold alone, I think we may be f@cked as a civilization. Silver, nor hard money will save us now – we are far beyond that.

            Best to your education and your website,

          • Jacques Rueff,

            While I appreciate you continued FOFOA handbook response, I still did not get a reply on the 3 ITEMS I challenged FOFOA, via their SILVER COIN article. You folks at FOFOA have supposedly thousands of hours of reading material as you say, so why can’t you use your wonderful repertoire and reply to those 3 simple items?

            steve

          • Jacques Rueff | June 23, 2015 at 10:28 am |

            Hi Steve!
            I have tried to depart graciously from your Forum after you said:
            “I am not going to spend anymore time debating this issue ONE on ONE”
            But you continue to prod with multiple posts of
            “… you still did not respond to the THREE ITEMS” (in shouting caps no less!, LOL) Okay, okay…

            Before tackling this, I think it would be best to appreciate my view on Silver. I do not care about Silver. It is another commodity. It is no longer ‘money’ although it once was. It can be sold like chickens, and Lima beans – sometimes at a cash profit – sometimes at a loss. It is another ‘investment’ that you express is undervalued and will rise in price. You, and other PM analysts, believe the masses will flock to it after paper fails. I happen to strongly disagree… but ‘I get your stance’.

            In the new article posted you are quoted:
            “By the end of this year, or let’s say by September/October, I think it’s a perfect scenario for things to get out of hand. If people don’t buy silver right now, I really don’t think they’re going to be able to find it in the future.”

            My, my, my… personally I feel it is not prudent to time things (all ASIDE from that fact that I am at odds with the validity of the statement). Let’s file this one away for a few months (or the bottom of my post), shall we?

            ITEM 1 – You seem to dislike/disagree with FoFoA’s analysis of “cash costs” in regards to the least amount of AG coming into the market via miners and other sources after a massive economic shift. I don’t think these ‘PRIMARY silver’ miners you refer to are as adamant about hard-money or the Constitution, or bringing back ‘real money’ as you may surmise. They are in a business that returns them a profit. Silverbugs and hard-money Constitutionalists be damned. So if the price drops enough, they leave the business and stop mining. They won’t continue a losing venture. Agreed? So, what about SECONDARY silver miners? Who, by the way, happen to be mining over 200% more AG than these Primary ones as a by-product of their mining businesses. That’s 18,833 tonnes in 2014 being produced by the NON-silver mines. So, that’s the supply total for “silver-as-a-byproduct”. Combine that with 6,326 tonnes of recycled silver (2005’s number which coincides with fewer primary silver mines competing) and you get 25,160 tonnes of silver produced on “cash costs” alone.

            By comparing that 25,160 tonnes of silver to 2014’s industrial demand (not counting coin and bar minting for the ‘Chris Duane et all’ ‘investors’), and we come up with a “shortfall” (27,082–25,160=1,922.) This shortfall of 1,922 tonnes could be easily met by the estimated overhang of 30,000 tonnes of ‘Stacker’ stashes (30,000/1,922=15.6) for 15.6 years, or until 2031. You can go to the broader silver overhang charts from Zerohedge sourced from “The Gold Standard Institute”, “Sharelynx.com” and “Earst Group Research”, which includes silverware and jewelry in addition to bars and coins, then we could theoretically do with “cash cost only secondary mine production and recycling” for (536,130/1,922=278.9) about the next 279 years, or until 2294AD.

            So much for not being able to buy Silver in November of this year.

            I don’t think the difference between low price difference ($8 or $2) really matters here. You dislike the lowness of FoFoA’s number; $2.75, but any number below $16/oz. makes silver a worse investment than toilet paper right now.

            From FoFoA’s article
            “So how much supply overhang would be there if investment demand suddenly disappeared. Well, according to this which is a couple years old, 1.4 million tonnes of silver have been mined throughout all of history. Of that, almost half has been lost forever, leaving about 777,000 tonnes of above-ground silver currently in existence. Of that, about 96% is in jewelry, silverware, electronics and other forms that are not easily accessible by the silver industry, but about 4% is. That 4% is about 30,000 tonnes of silver known to be in investment-grade bar and coin form, which would be easily accessible by the silver industry should investment demand suddenly vanish.”

            Like a Ponzi scheme your Silver demand from shrimps needs to grow and grow (exponentially) to maintain this ‘investment’ cash-value. And this is where you see the masses flocking into Silver… that’s a pretty tall assumption, especially if Industrial demand is waning. I understand that some don’t see Silver as the commodity is it – but as some form of revolutionary money concept that they can proudly use to fight the system and destroy CBs… will the masses become as ‘enlightened’ as your following? No, I highly doubt it. The ‘sheeple’, as some refer to them, don’t revolt – they get sheared. They will use the new currency despite the number of zeroes. That is our recent (100 years) HI history IF you think we are going that, inevitable, route. No one wants Silver in a collapse, Steve. Paraphrasing the Soup Nazi: “No hard money FOR YOU!”.

            ITEM 2 – Your claim is that FoFoA fails to factor in oil prices (essentially meaning, to me, that he is not as passionate about Peak Oil and EROI as you are). But even on the surface, Helca’s “cash cost” was negative in 2010 when oil was about $71/bbl. (unbelievably it was all profit and then some – no additional cost – selling their byproduct to Max Keiser’s Silver – ‘Crash JP Morgan’ – Army that year, or so they claimed in official filings, and what was it in 2011 when oil was about $87/bbl? And oil at $50/bbl. like it was recently, as well as back in 2005, but, wherever you go – there you go. So much for ITEM #2.

            ITEM 3 You seem not to relate the monetary system collapse to coinciding with a cleansing of global malinvestment. This could mean a (relatively-temporary, but probably dramatic) decline in the demand for industrial inputs like oil and silver. FoA and FoFoA both wrote about it. With 2014’s GFMS (Thomson Reuters consultants in precious metals) supply and demand numbers, it would only have to be a 7.1% contraction to bring industrial silver demand down to a number that is reasonably supplied by ONLY SECONDARY silver mining and recycling, which leaves the overhang of the stackers’ stashes untouched and left out to dry, with nothing to do but drive the price down even further.

            Not comparing you to him, Steve but here is another stalwart PM analysts who is missing entire swaths of PM research,

            December 30, 2011: Dr. Stephen Leeb: Expect $5 Gas, $60 Silver & $3,000 Gold in 2012

            December 5, 2011: Dr. Stephen Leeb – Expect Gold Price to Double in Twelve Months

            November 22, 2011: Dr. Stephen Leeb – Expect QE3, QE4 and 40% to 50% Inflation

            November 7, 2011 Dr. Stephen Leeb – This Will Drive Silver to $100 Rapidly

            October 25, 2011 Dr. Stephen Leeb – China Will Send Gold & Silver to the Moon

            Meanwhile FoFoA predicted the decline in the paper Gold price back in 2011-2012, where all the rest of the parade of PM Gurus where saying:
            Jim Sinclair: “Gold will never go below $1500”
            David Morgan: “Silver will never go below $30”
            Sprott: “We’ll see new high by the end of the year” (he says that every year in the Spring)
            So, please don’t be offended if I don’t take this prediction to heart:
            “By the end of this year, or let’s say by September/October, I think it’s a perfect scenario for things to get out of hand. If people don’t buy silver right now, I really don’t think they’re going to be able to find it in the future.” – Steve St. Angelo

            and this really is my swan song for your site. I continue to wish you the best of luck…
            Regards,

          • Prem Satyam | June 25, 2015 at 7:47 am |

            Maybe I can take a shot at Your points.

            1.) “The choice (of Gold) has already been made by those that count.” Stated by Jacques to which u say “Yes, maybe, maybe not.”
            – My take is that the CBs are the ones that count and I fail to find CBs holding physical silver. Gold on the other hand..,

            2.) Agreed with both of u. The flow is small or big depending on referencepoint and if the numbers out there can be trusted or not. Paper cannot rise since that would make gold rise in demand as a safe haven and as speculation. Money is searching for places to park safely so much that it even gives up yield and is prepared to pay the holder of it some interest as long as the counterpart is deemed reliable.

            3.) You say “How then can you be so sure, that the elites will win out once again ?”
            “I’m not 100% sure that the sun is not going to turn into a giant bran muffin tomorrow either.” – “Granted, that would be quite unlikeley :-)”

            Of course they will win in the end. If u can create a tradingmedium (cash) that the market immediately prices higher than the cost of producing cash u get a pretty good tradingedge over the rest of the crowd. If TSHTF u can always price physical, in your pocket, higher. Or just withdraw supply. Anyway, the once making the rules will win, not the ones trying to defeat the rulemakers (CBs).

  20. Will silver hold 1/70th gold price? It seems outrageous.

    It does not take 1/70th the energy to extract an oz of silver than to extract an oz of gold and coin.

    From ore to coin, it seems that gold takes more energy (70x more?, naaaa), but what if the “byproduct” silver mining sector is included, rather than just primary silver miner energy costs?

    When are we going to talk about the different kinds of “energy”? Electricity from a light water reactor or a dam are not the same as electricity on Oahu that is liquid petroleum fueled. Rates reflect this, somewhat. BTU’s per dollar are about equal for heating purposes, but not for city or industrial purposes when “quality” of power is included. Commodities-in-hand are not actually “fungible” like digital bank money, and energy is a commodity, THE commodity that can make or mostly-make all others.

    If gold goes to (some multiple 10x, 50x, whatever), without tracking by silver, I will take my small gold holdings and buy large amounts of silver if it is available. This is called a “ratio trade”. If it’s not available, hold on, because the SWHTF pretty darn soon.

    pdxr13

  21. There is a VAST OVER SUPPLY (OVERHANG) OF SILVER in the markets, and there is no denying that irrefutable fact.

    Silver obviously has nothing whatsoever to do with money or currency. Most silver is PRODUCED AS A BYPRODUCT and the production costs for silver as as low as nearly zero per ounce and average cash costs for production are now around $7.50 per ounce..

    WORLD DROWNING IN EXCESS SILVER INVENTORY OVERHANG…

    Silver inventory reaches 16-year high after worst rout since ’81 – Mineweb

    http://www.mineweb.com/mineweb/content/en/mineweb-silver-news?oid=224379&sn=Detail

    Silver Cash Costs $7.50

    https://www.facebook.com/photo.php?fbid=299130080236881&set=a.106912896125268.17143.100004196737865&type=1

    Silver could easily plummet to $4 per ounce where it was in 2001.

    Silver is the most volatile of all of the metals and there is a VAST OVERSUPPLY OF THE STUFF.

    During the GREAT SILVER CRASH OF 1980-2001 the price of silver plummeted 90% from $50 an ounce in January 1980 to $4 per ounce in 2001.

    Historically, the price of silver for hundreds of years was around $1 an ounce and went up to around $2 per ounce before the manic metals speculation began in 1972.

    • Is it your first time in this site?

    • Adam Price,

      You are profoundly ill-informed about the facts surrounding silver; supply, price of production, etc.

      “Silver inventory reaches 16-year high after worst rout since ’81 – Mineweb”

      That is on the Comex in early 2014, and bears no resemblance to real world supply/demand. It says so at the beginning of the article, so why would you try to mislead readers?

      I’ll bet silver that the cost of silver on the COMEX NEVER drops a dollar from where it is now. I’ll also bet my geology degree on it, and I do know a few things about real-world supply.

  22. Silver definitely has at least a tiny monetary component attached to it. If people miss the gold train, they’re going to go to the next best option they have and buy silver. To think of it as only a commodity makes no sense. Of course silver has a monetary element to it. It has been money for as long as gold. So what if the elites only like gold? That doesn’t mean the peasants (and wealthy) won’t move a portion of their wealth into silver. Even if Silver were only 10% monetary metal and 90% commodity, people would still buy some silver to compensate for missing the gold train. You’d also get a lot of guys in gold with hundreds of ounces of gold who would be happy to convert a few ounces of their gold into tonnes and tonnes of silver at its $2.75 price. I know I would. This is looking at it from a psychological point of view. Silver will rise at some point after gold does, there’s no doubt about it.

  23. I don’t follow the PMs as a store of energy argument. It is undeniable that there was an energy cost paid to go from ore/earth to a gold or silver coin. But that energy was spent – mostly dissipated as heat by the mining, refining and transportation stages – it is not possible to extract energy from the refined metal in any quantity comparable with its energy cost.

    The value of gold or silver depends on the desire/demand for it, otherwise, if it just has embedded energy value, it’s price will always be a simple function of oil prices…

    Am I missing something?

    • Can’t edit comment, so a reply instead.

      Guess it looks like I answered my own question saying that the PM prices are a function of oil prices. But what I meant was: since the metals don’t have actual energy embedded, energy prices could in fact provide a floor for the price since that would be the minimum cost to produce more metal. However this is only true if there is demand for the metals.

      In a depression it could well be that actual energy is more valuable/desirable than PMs, because they do not have embedded energy but only a already spent energy cost associated with their production.

      • Google “Cost of opportunity”

      • Robert Happek | June 21, 2015 at 6:28 pm | Reply

        Regarding “actual energy is more valuable/desirable than PMs, because they do not have embedded energy but only a already spent energy cost associated with their production.”,

        this is actually not true. According to electrochemistry textbooks, metals can be converted to electricity in a battery made of these metals. In that sense, all metals contain stored electricity. Conversely, using electricity, salts can be converted into metals. This is standard procedure used in the refining process of precious metals.

  24. Silverwillwin | June 21, 2015 at 6:56 am | Reply

    “Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants – but debt is the money of slaves.” Norm Franz

    I’ll bet you a dollar to a donut that silver’s worth has moved up since this quote was originally made.

    The U.S. dollar is clearly going to have to be replaced. IMHO silver will play a big role in educating a hungry mass of people what true worth is.

    The oligarch can only do so much when things get desperate. They don’t own physical silver like they own the present day currency. Once that goes down all bets are off.

    There is allot that physical silver will do in helping. Don’t be mislead.

  25. confederate miner | June 21, 2015 at 8:50 am | Reply

    If there is a financial crisis and the people go to the coin shop and the all the gold has been bought you think they will walk out empty handed if there is silver left?

  26. Thanks. You convinced me to sell my silver and get me some Gold 🙂

  27. lets not forget that Canada Goverment scrap copper cent was costing more to be produced than the real value one cent .now if silver wood go back to 1.00 per once wood be in the interest of the Goverment to make the dollar in silver to show the world CANADA pride any nation in the world wood like to have satch pride in today,s day,s it never going to happen never less they cant afford to do pipes in copper they wood do in silver lets not fooled our selves this is never going to happen any smart Goverment wood buy all the silver in the world in one day and inrace there defecit in one week i dont have a future clock but i no if silver keeps going down peopel will be buyers and wen stocks will fall like a rock all over the world and interest rates will go 8% peopel will buy silver i will tell any one out there if you are not going to get few coins now you will pay much more later if you can get it for low price i see copper to $10.00 lb silver going to$500.00 oz and gold $5000.00 oz there is to match welt out there in fiat monney the elites will bring the world markets to near 80% down senario
    real astate will fall like a rock int rates rise north American wages have to come down to world levels or devalue fiat monney to be able for companies do export world wide the new world order fiat money will always be there for Goverments to take in taxes peopel will be buying copper silver gold us it was for centuries .

  28. Larry Galearis | June 21, 2015 at 2:43 pm | Reply

    I stopped reading FOA and FOFOA many years ago. The $0.50 silver price statement, the infamous statement, actually got me angry enough to finally get me thrown out of the USAGOLD Forum. This is ideological thinking at its worst.

    Keeping the argument simple, and just looking at the fiat realities during a hyperinflation we should not expect a cup of coffee to retail at $1.85 let alone silver. We will see $10 coffee very soon, perhaps, but I seriously doubt we will see any silver sold at all at $100 per ounce. In fact, I have my doubts that the USA will even be importing the metal – and will have to rely on its own domestic production (if any). This is a roundabout way of saying that for silver to remain cheap as compared to gold, the price will have to be still rigged.

    Or never mind hoarding silver, hoard coffee – and keep on reading FOFOA so you won’t be tempted to buy metal over liquid.
    L.

    • exactly – its a price comparison excercise in any circumstances. Right now, i think its ridiculous that one oz of the finest purest refined minted silver can only buy me one bottle of average quality wine.
      In roman times 40 oz would be the annual salary of an upper-middle class professional.

      If TPTB let gold go to $45k but suppress silver to $1, its tantamount to to clearing the debt of the oligarchy while leaving the poor and remaining middle class no ability to repay their debts. The social unrest that will result from such a policy will be a trigger for overt orwellianism
      but if they let silver float up to meet a repriced gold, they will ameliorate unrest
      so their tactics in this reset will tell us whether mass population reduction is their design

  29. It all comes down to opinion. For myself, I don’t believe there is any new paradigm and thus I strongly doubt ‘it will be any different this time’.

    Governments/Rulers/Dictators/et al, have through time immemorial debased their ‘currency’ and inevitably they fail and a new monetary order has to be established.

    As for the argument above regarding the Gold/Silver ratio – again, I strongly doubt it will be any different going forward.

    If one takes a 55-year view on compounded annual growth rates in prices (using the figures from the 1960 World Bank data on commodity prices) what do we find?

    By my calculation at current prices the CAGR’s are as follows:
    For gold ~ 6.6% per annum
    Silver ~ 5.4%
    Crude oil ~ 6.8%
    Sugar ~ 3.2%
    Copper ~ 4.5%

    If one foes back another 50 years to the early 1900’s – it’s a similar situation.

    Clearly the common factor is the underlying debasement of the currency in which the ‘good’ is priced.

    Along the way there is (and will be) peaks and troughs, but the underlying trend is clear. And with Gold and Silver we see Greshams law in operation as humans naturally preserve a proportion of their wealth in ageless hard assets (ie the c. 80% of gold that is NOT held by CBs – I don’t have a figure for silver in private hands).

    If we were able to revisit this conversation 50 years hence I suspect that the GSR would be broadly within the historical range (ie 15 – 75), and CAGR’s for the two metals will have likewise maintained their steady average appreciation against whatever have become the leading currencies of the future.
    CPDLC

  30. I could very well imagine that we could eventually see a Silver price of 2.75 per ounce.

    The cartel will do “what ever it takes”, to drive investors out of Gold and Silver or to avoid getting them into PM investments in the first place. Such happenings should not be ruled out as long as governments can print Fiat and then dump the Silver price at will with paper contracts via CRIMEX or LBMA. I believe we truely might see unbelievably low PM prices just before the whole scam goes bust. However if that happens, demand from the eastern part of the world would run red hot and threaten the CRIMEX and LBMA’s ability to deliver physical metal.

    In case that we would experience a reset of the monetary system with a (partially) gold backed Yüan as mentioned by some analysts, we would likely see Gold at a multitude of today’s fiat price. That would would mean serious troubles for all fiat currencies with no doubt. If the purchasing power of fiat currencies evaporate at record speed, we would experience a panic flight into physical investments such as Gold, but Gold would then become quickly unavailable or at least unaffordable for most people. Logic tells me that the previously ignorant man on the streed would desperately look for substitutes and one very attracive one could likely be Silver.

    Steve is right, that the physical Silver market is way smaller than the physical Gold market. It would take a relatively small amount of Investors to demand physical delivery of Silver in order to trigger a possible delivery default of either the COMEX or LBMA or both. Once that happens and the cartels manipulation scam is broken, Silver will be back again on the stage of the premium safe haven assets. It will seek it’s fair market value likely somewhere around it’s historic ratio to Gold, eventhough i believe it coud overshoot that historical mean for a short amount of time (release suppressed sping effect).

    We don’t know however what the elite is up to should such an event ever take place. We would most certrainly not have the liberty to use (buy, sell, ship or transfer) our PM as we can do it today. They would most likely ban, overtax and inhibit commerce with PM whereever they can. We know that they want to eliminate cash and that is to take away people’s ability to escape their control and their taxation. Gold and Silver would serve exactly for that purpose and must therefor be shut down as well in order to close that possible door for escape. I don’t know yet how they could do it but if they somehow manage to do that, it could have a negative impact on the price of PM as investors won’t be able to trade their PM when they most need it.

    • Just to add some numbers to the LBMA comments above:

      Since Oct 1996 (224 months) the average DAILY net transfers in gold on the LBMA have been 21.95 Moz/day (ie c. 683 tonnes).

      The average net transfers in silver have been 140.76 Moz per day (ie. c. 4,378 tonnes).

      The average value of these trades has been US$15.43B for gold and US$1.78B for silver.

      These are net figures. Gross figures are estimated at somewhere between 4 & 9 times the net figures according to a reply given by the LBMA CEO to an EU request some years ago.

      Clearly there is considerable leverage to actual physical supply given that worldwide available fresh supply in gold is only c. 6-7 tonnes per day and c. 82 tonnes per day for silver.

      Arguably, there may already be difficulties in meeting physical withdrawal demands as the LBMA has recently reduced it’s already minimal information that used to provide an indication of current backwardisation in the metals.

      It would appear logical that fresh mined supply to the LBMA is very likely to trend lower in the future given the increased trading on physical markets outside London and the high probability of reduced production from over-stressed producers, many of which who are now operating below all-in, break-even costs. Quite how this translates across to the LBMA will be interesting.
      CPDLC

  31. Steve, one very simple question if I may.

    Let’s leave all the FG-arguments aside for a moment. Let’s forget FOFOA even exists, ok?

    Just answer me this: Why store your wealth in silver when you can store the same wealth in a much smaller package (Gold)?

    Thank you

    • JN,

      Actually, that’s probably the best question to ask. Simply put, why would someone take their family on vacation with say 5 or 6 $500 bills? Now, if I was going by a $20 price of silver at 70/1, it would be $1,400 gold. So, in that vein, it would equate to 2-3 $1,000 bills. Why would anyone use that sort of monetary unit when much smaller ones are more appropriate?

      I believe gold and silver are stores of economic energy or energy value. One is not better than the other. Each has its purpose. Gold can’t go up 30-40 times without impacting the value of silver, or even other commodities. Unfortunately, FOFOA look at gold in a vacuum. Gold can’t increase in value by itself due to the laws of nature, conservation of mass and thermodynamics.

      So, the best and most simple way to answer your question is this… gold is for big purchases, while silver is for smaller. You need both. I actually believe in owning gold. However, I think it’s wise to own both. That being said, silver is more affordable and actually more rare, so I believe it’s value will increase more than gold in percentage terms when we finally get the WAY OVERDUE REVALUATION.

      Lastly, I am not saying we will be exchanging a silver coin for goods (but it could happen), however I look at both precious metals as different degrees of Economic Energy. When the Great Paper Ponzi Scheme implodes, both precious metals will be sought after in a big way. I just think silver will be a better value, even though Gold is excellent as well.

      steve

      • Steve, I believe you misunderstood the question. JN asked about gold vs silver as a store of wealth, not a medium of exchange. Can you please answer the question again?

        • Alan,

          I was using my example as a metaphor. The production of a gold coin takes about $1,100 to produce and silver about $17. Yes, I am referring to primary silver production. While 69% of silver comes from by-product base metal and gold, these miners aren’t making much in the way of profits on copper, zinc and lead. So, they need they need their by-product silver revenue to help fortify their balance sheet.

          KHGM Polska Miedz is a perfect example. They are a big copper producer in Poland that has 40 million oz a year of by-product silver production. Their revenues and profits have been declining for years and they need their silver metal sales to keep them in the green. KGHM Polska Miedz had a large silver hedge book in 2011-2012, however in 2013 and currently, its totally closed out. Which means KGHM does not believe the price of silver will fall that much from here on out.

          This idea that the base metal and gold miners produce silver for free or on the cheap is not true. Sure, some gold companies have silver-stream agreements to sell their silver at $4. However, they received capital for this arrangement. And, this is not all of their silver, but a portion. For example, Penasquito mine run by GoldCorp only sells 25% of their silver to Silver Wheaton at $4.

          So, the difference between GOLD & SILVER as a store of value is the ECONOMIC ENERGY in each. Again, there are $105 trillion in conventional paper assets under management, trillions in outstanding Treasuries and Bonds, and a lot more if we include Real Estate. These values will implode in a Peak Oil environment.

          When silly folks say the world is awash with a glut of silver, they are making an insane argument when we realize the world is awash in soon to be increasingly worthless paper (and physical) assets. So, in that vein, owning silver will be just as important as owning gold due to their relative stores of value.

          Silver as a store of wealth is more affordable to the masses, than gold. Both are stores of wealth. I am not saying to own all silver, but a mix is appropriate.

          steve

          • “Silver as a store of wealth is more affordable to the masses, than gold. Both are stores of wealth.”

            Now we come back to JN’s original question. Why store wealth in a large package when you can store it in a small package?

            What do you mean that silver is more affordable? Someone with $10,000 can get a heavy pile of silver or a handful of gold, but both will store that $10,000, right?

          • Alan,

            You tell me how many folks you know that can drop 10 GRAND for eight ounces of gold?? As I stated several times, silver is more affordable to the masses. This is not a tough concept to understand here.

            steve

          • Oh, the masses can come up with the money. So much is wasted on frivolous items that could be put into precious metals instead.

            So, let’s go ahead and scale back that example to $1000 or even $100. For $100 you get a couple of grams of gold or half dozen ounces of silver. Sure, the final products one purchases will be small, but the cash they spend will then be stored, no? Storing that wealth in a tiny package is still storing wealth. How is that not “affordable”?

            Apparently, this is a tough concept for you as well.

          • Alan,

            I see we are going nowhere on this issue. Let’s do this. Let’s drop it and wait around for say, 2-5 years. Let’s see how things unfold. I don’t care to continue debating this sort of TIT for TAT nonsense. Silver like gold have been stores of value for thousands of years. Indians are on track to import over 9,000 metric tons of silver this year, up from 7,050 mt in 2014.

            A large percentage of this is the huge increase in Silver Bar demand. Indians imported 63 million oz Silver Bar just last year. I would imagine it will increase to over 75 million oz this year. Why don’t you go lecture them on why they should by more gold than silver.

            Singing off,

            steve

          • You still haven’t answered JN’s original question. Sigh. It’s disappointing that you upbraided Jacques Rueff for not commenting directly on your 3 points in the article (which I now see he has generously done for you).

            Anyway, yeah, let’s wait and see how things unfold over the next 2-5 years.

          • Alan,

            You’re right… enough is enough. Why don’t you go tell the Indian’s to stop buying silver Bars and purchase gold instead. I don’t think they would care to listen. Why? They don’t need to be taught COMMON SENSE.

            LOL,

            steve

          • According to Steve, common sense is believing that it’s more affordable to hold 1000 pennies than 40 quarters.

            LOL

          • Alan,

            Looks like you are confusing Copper with Silver. Again, go bamboozle the Indian people about the FOFOA ideology. They are the ones buying silver hand over fist.

            steve

          • LOL

            Don’t you mean zinc and copper (and plating)? 😉

            How about common sense meaning it is better to hold 1000 one-dollar notes instead of 10 one-hundred-dollar notes?

            I’m not talking about FOFOA, just like JN. You refuse to answer a simple question and prefer to misdirect your readers by looking at Indians buying silver. Who cares why they are buying silver. Americans are also buying silver hand over fist.

            Why is it more “affordable” to buy silver than gold?

          • SilverSeeker | June 24, 2015 at 2:47 am |

            I would add the most absurd mis-estimation made by fofoa is that in SHTF/revaluation situation and turmoil accompaniyng it industrial consumption of zink, lead and copper won’t drop a single bit and the mines producing it will be fat and happy running at full capacity, with oil and electricity keep delivered on time, even when not paid for, as well as workers workers not paid but working for pure joy of extracting silver to made fofoa prediction come true while their families starve [to death]. Quite contrary, this copper and zink and lead mines output will drop like a rock.

          • I wasn’t planning on posting with a photo of my head next to the posting but the Internet (WordPress?) knows my mail apparently. Spooky. Whatever.

            Thank you Steve for your answers and Alan for your comments.

            It is true, many people seem to be buying lots of silver. It’s what all the dealers tell me too. I’ve seen Goldbugs swap gold for silver on the “black market” so to circumvent the 20% VAT you have to pay on Silver around here. There is no VAT on Gold, though and that is odd! Think about it: It’s a thing and the government isn’t taxing it? Something’s fishy, yes?

            Maybe FOFOA has done a good job provoking silverbugs after all. I do own silver too, because why not. But swapping Gold for Silver or even _only_ owning Silver seems foolish to me.

            If ones strategy is to own silver instead of gold so to “leverage” any kind of “revaluation” that might or might not come in the future, I’d say it is one risky strategy. I have been there, in my head, believe me! We all have, I guess.

            If the best argument for Gold as opposed to Silver is it’s “official” recognition as a “reserve asset” (and really our only chance to get out of the fiat mess we’re in, as JR has very well explained) and the best argument for Silver as opposed to Gold is that it is “more affordable” for the masses, then I’ll stick with Gold.

            Steve, the reason “the elite” like Gold is precisely because it IS “affordable” for the masses! It has always been and wouldn’t be where it is today if it hadn’t.

            Cheers, JN

  32. Silver is just as good as gold? Please take the time to read about Shelling Points and ask yourself, after the worldwide economic collapse brought about by the destruction of the dollar, where will people store there purchasing power? (Remember I didn’t ask where people would invest. Storing purchasing power and investing are two separate choices)

    https://en.wikipedia.org/wiki/Focal_point_(game_theory)

    Now ask yourself why silver and gold have been tracking each others price for the past multiple decades? Why are silver and gold in a small range lock step? Answer, because that is what is expect of them. The traders expect silver and gold to be in sync so they trade accordingly. The computer algorithms that trade silver and gold expect this same relationship so they trade accordingly and the relationship is maintained. But what happens after the crash? What will humans and computers do? Can the correlating relationship between silver and gold be broken so that one can soar to the heavens while the other falls from interest? You seem to think that just because the relationship existed in the past that it must exist in the future and you extend this relationship past the destruction of the International Dollar Monetary System. Why?

  33. Hi Rocco,

    Just a couple questions:
    1) you say “Gold can’t increase in value by itself due to the laws of nature, conservation of mass and thermodynamics.”

    Are you saying revaluation is impossible? Pretty sure there’s been revaluations thoughout history.

    2)”That being said, silver is more affordable and actually more rare, so I believe it’s value will increase more than gold in percentage terms when we finally get the WAY OVERDUE REVALUATION.”

    Wait.What? What will be revalued?

    • tom thumb,

      The great revaluation occurs when investors move out of paper assets and into physical to protect wealth. Most paper assets (including many physical assets) get their wealth from a GROWING ENERGY SUPPLY. The world has suffered a 10-11 year plateau of conventional oil production. Which is the very reason we saw the FED and Central Banks infuse trillions of Dollars of liquidity to give the illusion of growth, when there wasn’t any. The only growth came from inflation.

      The evidence is clear when we look at the EIA – U.S. Energy Information Agency stats. The U.S. consumed a record 101 Quadrillion BTU’s of energy at its peak in 2007. This collapsed to 94 Quad BTU’s in 2009 during the recession. We are back up to 98 Quads, but no where near the 101 Quads. So, how in the hell did our GDP grow. And don’t tell me that our fuel economy increased since 2009… it hasn’t I have seen the data.

      So, when we start to see the decline of UNCONVENTIONAL crap oil such as Oil Sands and Shale Oil, it will put severe stress (and is doing so currently) on the highly leveraged financial system. Backing fiat money with gold and then pushing its value up to some stupid number like $45,000 does nothing to solve our energy problem.

      Thus, the NET PRESENT VALUE of most paper assets will implode as the world realizes growth is impossible. We must remember, most paper assets derive their value from FUTURE EARNINGS put in a stock price today. Without a growing energy supply, these assets are TOAST. Basically, they implode as investors get out before the next POOR SLOB wakes up.

      Which is why the FED and CENTRAL BANKS are propping up Stock Prices….LOL. Oh God, what a fricken mess.

      This is when we will see the GREAT REVALUATION of gold and silver. The world has funneled its funds over the past two decades in paper assets, which totally mis-priced the value of physical goods and services. When investors start moving their wealth back into physical assets (and not all physical assets will be good stores of wealth, such as Real Estate), then the values of gold and especially silver will rise to crazy levels.

      Lastly, when I say that gold can’t revalue by itself… I mean that gold can’t increase in value without impacting silver or other commodities. Sure, gold was revalued 75% in 1933, but this idea that gold will increase 30-40 times while everything else stays the same is insane. We also must remember, the United States had nearly 40 years of growing energy production in the 1930’s to pull itself out of the Great Depression. We don’t have that luxury today.

      steve

  34. “The great revaluation occurs when investors move out of paper assets and into physical to protect wealth. Most paper assets (including many physical assets) get their wealth from a GROWING ENERGY SUPPLY. The world has suffered a 10-11 year plateau of conventional oil production. Which is the very reason we saw the FED and Central Banks infuse trillions of Dollars of liquidity to give the illusion of growth, when there wasn’t any. The only growth came from inflation.”

    Will you please expound on this premise? If the paper assets crash, what mechanism do you see for “revaluing” gold, silver?

    • Jeff,

      Why do you think there is hyperinflation when trust in a fiat current vanishes? This is the same with the NET PRESENT VALUE of most paper assets. Investors believe their is a store of wealth in paper assets. They are not. They are ENERGY IOU’s.

      Just a 2-3% of hedge funds and large investors piling into GOLD and SILVER will send it soaring. Again, gold and silver are stores of economic energy, whereas most paper assets are ENERGY IOU’s. When the world realizes that… we have BEAR STEARNS and LEHMAN BROTHERS for paper assets, and the opposite impact on the precious metals as investors move into them in large numbers.

      steve

      • Thanks for the reply. I guess I was confused. When you said PAPER assets crashing, I took that to mean “paper” GLD and SLV crashing because of loss of confidence in converting the ETF’s into physical.

        So if i understand you correctly, you don’t see GLD or SLV crashing, but rising exponentially during HI?

  35. SRS: You talk about investors moving into precious metals and the consequential rise in price as the mechanism for the ‘revaluation’. This is not what FOFOA writes about. The revaluation occurs when there is not enough physical on the market to meet demand at the paper gold price and the paper gold market separates from the physical gold market. The moment of separation is the moment of revaluation. When paper gold goes towards zero because of lack of bid so goes the dollar. This is the dollar crash. Now in order to reestablish the dollar ‘Dollars’ must bid for gold in size. A ‘Giant’ somewhere must be convinced that buying Dollars with his gold is an equitable purchase. (please read that sentence again because it is vitally important, gold must bid for dollars, repeat, gold will be buying dollars, not the other way around). So, after the dollar crash, a Giant buying dollars with his/her gold will set the new price of physical. This will be the first true example of supply and demand.

    “The great revaluation occurs when investors move out of paper assets and into physical to protect wealth.” Actually, the great revaluation happens without investors moving anything. The revaluation will happen when physical gold in size no longer wants to buy dollars, at the current diminished price. Every investor in the world could remain in paper assets and still the revaluation will occur when gold in size no longer bids for dollars. Physical gold must flow to support a currency.

    An old quote from FOFOA Blog, “It is good to see gold being traded for fiat. This proves the currency still functions.” A currency only works if it can be exchanged for physical gold and the revaluation happens when this is no longer the case.

    A currency’s worth is determined by how much physical gold it can be exchanged for.
    Silver plays no role in this calculation.

  36. SRSrocco said, “As I stated several times, silver is more affordable to the masses. This is not a tough concept to understand here.”

    I must have the wrong definition of the word ‘affordable’. If someone has $100 they would like to store in a physical item that will preserve purchasing what is the difference between storing that $100 in silver vs. storing the $100 in gold? Why is silver more affordable? Perhaps there is another word you would now like to substitute for the word ‘affordable’. The person with $100 can afford both. The person with $1000 can afford both. The person with $1,000,000 can afford both.

    What you are talking about is the fact that people can choose between one or the other because both will store your purchasing power. I choose to be my own Central Bank because the Central Banks of the world chose gold. I’m pretty sure they could ‘afford’ silver but they chose gold.

    So can you please expand on what you mean by ‘silver is more affordable’?

    • Indenture,

      Go argue with the Indians who are buying record silver bullion. Can’t change people who have made up their minds.

      steve

  37. SRSrocco: It appears you have made up your mind that silver is affordable because Indians have purchased more silver in the past year than they ever have.

    http://www.arabianmoney.net/gold-silver/2013/12/07/india-will-buy-22-of-world-silver-production-and-44-of-investment-silver-this-year-as-taxes-hit-gold-consumption/

    This is from 2013 but the impetuous for silver purchases is the same. India has heavily taxed gold imports because it has a direct effect on the value of their currency. The Indian Government desperately wants Indians to reduce their gold purchases and have implemented various controls to stop the flow of gold into their country (which stops the flow of Rupees out of the country). As a result an Indian can either buy silver or gold(+the tax, which means they will store more purchasing power in silver). In this case I can see silver being more affordable than gold in India.

    But that is an isolated case and has nothing to do with the storing of purchasing power in the United States or anywhere else where gold isn’t taxed so heavily. Why is silver more affordable in the United States?

    • Indventure,

      India imported 102 million oz of Silver Bar in 2008 (GFMS). Did India have the same gold tax problem in 2008? No. India also imported 60 million oz of Silver Bar in 2011. Did they have the same gold tax problem in 2011? No.

      Listen, we can do this all day long and just waste each others time. Let’s just see how the next 2-5 years unfold. If I am wrong, you can come in here and tell me “I TOLD YOU SO” all day long.

      steve

  38. Or, I would phrase out differently how this assumption made by fofoa is so piramidally absurd: industrial demand for silver dropping like a rock to total zero… while industrial demand for other metals… not even budging one ounce lower. So for example the same iPhone that uses up zink, copper, steel, silver, and many other materials… stop using up silver but requiring the same quantities of other metals nonetheless. If industry could make it up, it would already have done it.

  39. Silverwillwin | June 24, 2015 at 7:15 am | Reply

    There is a big part of what will be reality when and if this present day system caves.

    No matter what anybody today does in trying to convince anyone else who will listen , ” gold is worth this and silver is worth that ” (!) , it won’t matter when TSHTF .

    It is at that time that holding physical gold and silver will stand for what it truly is and will be one of the best insurance policies to hold.

    Dickering over value , percentage terms , revaluation , or anything else in exact terms will not apply for a period of time.

    What will matter , will be the party who holds the precious metal , offering it to the party who has a physical asset to exchange with. The determination of agreement for a fair exchange will be the determining factor. It won’t always be exact , but respectfully understood , or there will be no deal.

    It would stand to reason that an intelligent person would be the one who at first holds precious metals when all hell breaks loose. They would be able to intelligently educate parties that would be involved in fair exchanges as to the growing value for such physical metals /money , moving forward.

    Countries like China and India have gone through some pretty horrific periods before and know the implications of not having bargaining chips such as the precious metals. They are clearly moving into position present day.

    Get with it , or be without it ~ NOW !!

  40. FofonyFreegold is not elegant as it requires a decree to come into being. A truly free gold is free of paper representation – nothing more nothing less – a physical only free market. Simple. Felonygold is by decree, it is fiat gold, by govt action. As such seashells could be money by govt decree.

    The real form of true free gold is a failure of the gold paper market. Fonygold requires a law to exist, and an unnatural status that MUST be provided by govt. Failuregold is both unnatural, and without historical precedent. One needs to know the difference as to what real free gold is, and the fofoafreegold plan/scheme/thesis. The two are totally different things.

    The gsr. If phoneygold happens, the rush to exchange for silver is the end of the govt decreed experiment. Thesis over.

    Steve some good work here. Move on. Don’t feed the clown.

    • You are pretty close to freegold the concept more than you realize. FOFOA is only writing and sharing from his point of view of Another and FOA writings.

      Below is the link where the three paragraphs come from. I like the history that all three men have discussed ever since the late 90’s. It is the historical aspect that will make the final solution elegant. Obviously the mathematics is catching up to end this present system so the decree will be from all of us not the US

      http://fofoa.blogspot.com/2014/06/fiat-33.html

      FOFOA wrote:

      “””””I know that some of you are skeptical about what I am saying. You’re probably thinking that Freegold relies somehow on gold and whether or not it is embraced by the masses. But here’s another thing that will probably surprise you in the end. Gold has little to do with “Freegold the monetary system”! Gold is not a key part of the monetary adjustment mechanisms in Freegold. The price and physical movements of gold won’t even matter to the monetary system. Any movements of gold in price, ownership or location will be irrelevant to the monetary system of the future.

      Freegold is the true unshackling of gold from the monetary system. In Freegold, a properly functioning monetary system requires nothing of gold. In Freegold, the international monetary system won’t require gold to change price or location in order for it (the new IMFS) to function. That’s why it’s called Freegold. Gold is finally and truly set free from its shackles to the monetary system.

      There is an idea floating around that, because gold and money used to be directly linked, that Freegold essentially means the opposite, an inverse link between gold and money, such that an oscillating price of gold will have a damping or stabilizing effect on the monetary system. But Freegold is neither a direct nor inverse link, it is the complete severance of gold from its former duties as part of the monetary system. “””

      regards

  41. Silverwillwin | June 24, 2015 at 10:47 am | Reply

    Nothing stays the same and that goes for the value of physical silver as well. It’s amazing how physical silver has been stereotyped incredibly. Once the truth comes out by way of the phony paper trades which have helped to obscure the true whereabouts with accurate prices of the physical , will we then know. Say what you want , think what you want , do what you want . The facts will speak for themselves. We can only observe what will happen regarding this dynamic.

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