SILVER: The King of Future Investment Gains

While owning precious metals will be a very wise store of wealth and investment in the future, silver will actually turn out to be the “King of Investment Gains.”  A good barometer of the retail gold and silver market is shown by the eagle sales at the U.S. Mint.

In the first three months of the year, investors were purchasing silver eagles at an average ratio of 48 to 1 to gold eagles.  However, after the huge April 12th precious metals take-down, investors overwhelming purchased a great deal more gold eagles in percentage terms that month as the price of the yellow metal fell $200 in two days.

Silver Eagle Sales & Ratio To Gold Eagles

Here we can see the result of that price action as the ratio of silver to gold eagles declined from 54 to 1 in March, down to 20 to 1 in April.  According to the U.S. mint, 4,087,000 silver eagles was sold in April, while investors purchased  209,500 oz of gold eagles.

Below are the total amount of gold eagles sold each month in 2013:

GOLD EAGLE SALES 2013 (total oz)

JAN = 150,000

FEB = 80,500

MAR = 62,000

APR = 209,500

MAY = 70,000

JUN = 57,000

JUL = 36,500

Now, if we look at the chart above, we will see that the ratio increased after April and moved up to 49 to 1 in May and then to 57 to 1 in June.  However, something startling has taken place in the month of July.  Investors have been purchasing silver eagles at ratio of 95 to 1 compared to gold eagles.

This is indeed a very interesting trend taking place.  If we take the average price of gold and silver for the month of July (Kitco) and multiply it by the sales of each, we find that investors have purchased approximately $46.6 million in gold eagles and $68 million in silver eagles.  Investors are presently buying, nearly 50% more in silver eagles than in gold eagles in dollar terms.

Furthermore, silver eagle sales for the first seven months of the year are a staggering 45% higher than they were in 2012.  If we look at the chart below, we can see that silver eagle sales are setting new all time records:

SIlver Eagle Sales 2011-2013

In the first seven months of 2012, the U.S. mint sold 19.67 million silver eagles which were down 22% compared to the year before.  Not only have the sales (28.5 million) in 2013 surpassed 2011 by 45%, they are also higher than 2011 by 3.2 million or 13%… and this doesn’t include a final update to take place next week when the total July figures are posted.

The prior annual record for silver eagle sales were nearly 40 million in 2011.  If the present trend continues, silver eagle sales may reach 44-46 million in 2013.

SILVER: The King of Future Investment Gains

Even though gold is the king monetary metal, the real gains in the future will be made in silver.   Some of the more prominent precious metal analysts believe gold and silver are stores of value, and not true investments.  While I believe the precious metals are an excellent store of value, they will also behave as great investments in the future.

The reason why gold and silver will be more than just stores of value, is due to the serious misallocation of supposed wealth in the world.  I am not going to get into details here, but the world has invested itself into paper assets which only a fraction could be redeemed today.

The problem with these supposed paper assets, is that they are based upon the burning of energy to create economic growth in which these are settled or repaid.  Only so much energy can be burned in a year which means only a small fraction of these paper investments can be satisfied.  The quality of these paper investments will degrade substantially as the world is impacted by energy constraints in the future.

If we compare the total global investment in gold and silver over the past 5 years, we can see that silver is barely on the radar screen.

Global Gold Investment

According to the World Gold Council, total gold investment, increased from $69.5 billion in 2007 to over $234 billion in 2012.  Thus, the world has invested 3.4 times the amount of money in gold in 2012 than it did in 2007.

In the next chart, we can see just how much less investment funds have been flowing into silver compared to gold:

Global Silver Investment 2007-2012

In 2007, the world invested $500 million in silver, but by 2012 this amount increased nearly 16 times to $7.9 billion.  In addition, the amount of world silver bullion investment increased more than 5 fold from 40 million oz in 2007 to 253 million oz in 2012.

If we compare the data from the two charts, we can see a very interesting trend.  In 2007, there were $139 invested in gold for each dollar invested in silver.  However, in 2012 this ratio declined significantly when investors only purchased $30 dollars of gold for every dollar in silver.  I would imagine as the world’s fiat monetary system continues to disintegrate, the demand for precious metals will increase exponentially.

This is when silver will outshine gold.  We are currently witnessing a run on the Global Gold banks of the world.  Rumors are that gold is being drained from the GLD ETF to help meet the insatiable demand since the price of the yellow metal has declined nearly $400 in 2013.

At some point in time, the availability of physical gold bullion will dry up, forcing large and small investors to purchase the next best precious metal… silver.  Because the price of silver is currently 65 times less than gold, any sizable amount of currency to flow into this metal will push its value significantly higher in percentage terms compared to gold.  (You will notice I used the term “currency instead of money… as fiat currency is not money).

Investors who believe that the FED may taper soon due to improving economic indicators, need to read my new article coming out next week on U.S. Energy Consumption vs. the GDP Growth Rate.  If the FED decides to taper to a large degree, the U.S. economy will receive a stroke and begin to fall into a coma in the following quarters.

Silver will be the KING precious metal as it pertains to investment gains.  Only a few realize this potential… but I bet my bottom silver dollar that in time, the world will find out this hidden secret.

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27 Comments on "SILVER: The King of Future Investment Gains"

  1. Dr. David Richardson | July 25, 2013 at 5:41 pm | Reply

    I conducted an experiment today where I placed huge amounts of generic and ASE’s into my account cart at two retailers. There is a popup if the order exceeds what is available. I put in tens of thousands of generic [selling at very low premiums] and ASE’s, which are not at high premiums, into my cart. No limitations on an order larger than a $500K if I had the $ and desire to order.

    Amazing how much is available at this low spot and low premiums [like 99 cents per ounce over spot]. That surprises me.

    • Dr. David… that does seem quite interesting. I believe this is part of the strategy of the Fed & member banks in curtailing investment demand. In 2008, we had a huge “V” shaped move in the precious metals, so people just kept buying because they knew the price was going back up.

      However, we have had a double take-down here in April and in June. Now, the typical retail investor is puzzled and is wondering if prices will go lower from here. Again, this is the psychology of NOT BUYING LOW… but rather BUYING HIGH typical of Joe-Bag-of-Donuts.

      That being said, premiums for Gold Eagles are currently at 4.2% while Silver Eagles are four times that at 16.7%. Gold Maple premiums are 2.8% while Silver Maples are 12.3%.

      We must remember, the amount of retail bullion buying is peanuts compared to what is going on in the LBMA and etc. Furthermore, I don’t believe its the typical publico who is buying silver eagles. I think what we are seeing here is large buying by savvy investors. They are not worried if the price drops, they realize silver is at a great bargain today.

      steve

      • “I don’t believe its the typical publico who is buying silver eagles. I think what we are seeing here is large buying by savvy investors. They are not worried if the price drops, they realize silver is at a great bargain today”.

        I am certain you are right about that. The majority of ASE sales [and generic] may be going to foreign buyers. Citizens in the U.S.A.. that are accumulating any amount, even a few ounces per month in a tight budget, are maybe 1-2% of the population.

        But when the price starts moving up rather steadily the buying will reach a frenzy. Maybe ten times as much by Americans at $35, 30 times as much at $50, until it is not available without long waits and high premiums.

        Asians who are not in poverty, but nowhere near wealthy, are much more aware of what an ounce of silver or a few grams of gold represents.

      • Dr. Richardson… I think I may have an answer to part of the reason why we are seeing an increase in bullion supply. I had an interesting conversation just a little while ago with an individual in the RETAIL BIZ, and they told me that HEDGE FUNDS were liquidating a portion of their physical bullion to these large online retailers.

        I didn’t realize hedge funds bought physical, but back in 2011, and 2012 they sure did. So what we are seeing is some large players liquidating physical to these online dealers such as APMEX and TULVING.

        Lastly, there is still large buying by other entities as SILVER EAGLE sales are hitting new records.

        steve

        • The hedge funds that are liquidating physical bought in 2011 or 2012 either need cash badly, or they are making a terrible mistake.

  2. i believe silver stocks behind silver ETFs like SLV and Comex and govt’ secret stacks are being depleted.

    so implied silver investment is inflated.

    the real situation could be much more bullish.

    i had a post on turd’s website about china’s private silver holdings is long gone.

    • judejin… yeah I remember you stating that. So, do you really think China’s silver is gone? Or rather, do you think the Chinese public silver is gone, but the govt has their own growing stockpiles just like their increasing gold hoard?

      Also, I guess you noticed that the Shanghai Silver Stocks have now fallen below 600 tonnes as an additional 17 tonnes were removed yesterday bringing the total down to only 587 tonnes.

      What a change from earlier this year when there was 1,125 tonnes of silver at the Shanghai Exchange… aye?

      steve

      • steve,
        i believe both china’s private and public silver is mostly gone. there’s a chinese article estimating:
        1. silver stock in china was 1.7 billion ounces before china went off silver standard.
        2. after china went off silver standard, 70% of that was melted down and exported to USA and became US treasury’s silver stock
        3. another 100 million or so was moved to taiwan when china’s nationalist party lost the war against the commies in 1949.
        4. 90%+ of the remaining was bought or confiscated by the commies after 1949 and sold off to the west during the 1960s and 2001-2006.
        5. so there’s around 50 million remaining old silver coins hidden in mattresses in china.

        the best evidence of there’s little old silver coins left in china is that i don’t see any significant turnover of old silver coins anywhere in china. in the USA, there are significant turnover of 90% or 40% coins bags.

        i have never met anyone in person or online who claimed that they still have lots of old coins passed on thru generations in china. silver is almost “worthless”, so i don’t think ppl will refrain from disclosing it if they do have.

  3. Very informative article with great charts.

    Detroit is default and bond yield is down. Crazy world. I think people know the economy is sick but not as serious as we (the PM stackers) picture.

    I have sold all my paper shares (including pension) in April and converted into physical gold & silver as I just cannot see any fundamentals supporting the recovery theory.

    50% in physical gold
    25% in physical silver
    25% in gold & silver mining stocks

    I have bet more than my bottom.

  4. Comments above don’t really address the core issue of whether we have a physical shortage of pm’s or not. Several months ago, all the experts were stating that we already had shortages, and that any significant pricing drops would cause a collapse due to delivery defaults. That has occurred in part, but as the Dr. has pointed out, an average guy can still go buy a million dollars worth of gold or silver(physical) if he so desires. I am trying to figure out the disconnect of the pm experts claiming physical shortages vs being able to call up Apmex right now and order any quantity I want at relatively low spot prices.

    • Bradford… you bring up an excellent point. Let me see if I can shed some light on the situation.

      As the price of gold was taken down from $1,700 in JAN to $1,550 in March, there was a run on the Global Gold Banks. This is when ABN AMRO announced that they were going to HALT PHYSICAL DELIVERY of gold from their vaults:

      Dutch ABN To Halt Physical Gold Delivery

      http://www.zerohedge.com/news/2013-03-24/another-gold-shortage-abn-halt-physical-gold-delivery

      Well, then in the next month of April, we had the BIG $200 take-down, in which we had huge demand which investors where buying gold hand over fist. This is when the U.S. mint sold a record 209,500 oz worth of gold eagles.

      There were shortages. And, there is still a great deal of tightness in the WHOLESALE market out of the LBMA in London. Well, then we had the next take-down in June which dropped the price down below $1,200. This time there was still a large amount of buying, but you see, the typical investing public becomes wary of buying LOW… they rather buy HIGH.

      It is the savvy investors, and large Eastern buyers who are purchasing most of the gold today. The investing public’s psychology is not to buy LOW… so that is why we are starting to see more retail supply come on the market. Again, retail supplies are PEANUTS compared to what is going on in the global wholesale market.

      Andrew Maguire stated that nearly 500+ tonnes of gold was sold during that June take-down. This is approximately 16 million oz with a price tag of $20.8 billion at $1,300 oz. The gold GOFO rate is now negative.

      Now compare that amount to say what was purchased by investors from the U.S. Mint in the month of July at approximately $115 million. You can see, its chump-change compared to the huge wholesale buying by the East.

      Then we had ABN AMRO come out with this forecast:

      ABN AMRO Gold forecast sees prices to average $840/oz during 2015

      http://www.commodityonline.com/news/abn-amro-gold-forecast-sees-prices-to-average-$840oz-during-2015-55620-3-55621.html

      This is quite hilarious. The bank that has halted GOLD DELIVERY to their own customers who have allocated accounts, now believes that gold will hit $840 by 2015… but they are still bullish on the base metal market.

      Don’t you all see what’s going on here?? The public is being fried to death from the Central Bank policies, and due to the fact that they believe gold could go lower… THEY ARE NOT BUYING as much. Again, JOE-BAG-OF-DONUTS buys when the price is HIGH.. not LOW.

      Things are going to get interesting going forward.

      steve

  5. Admiral Ag Bar | July 26, 2013 at 8:00 am | Reply

    Bradford,

    Yeah but HOW MANY millionaires would be able to pile into PMs right now if they tried? How long would it take for the retail supply to dry up if these high net worth folks all tried to trade their clown dollars for real money at the same time???

    I suspect not many. That’s why us PM holders are well positioned for the coming mania.

    We aren’t wrong, we are just early to the party. We got a good parking spot and a comfy chair. It will be the late-comers who will be panicking and driving the prices up to dollar values we can’t even begin to understand.

    Keep up the good work SRS Rocco!

  6. Modern Alchemy | July 26, 2013 at 9:21 am | Reply

    Thanks SRSrocco! I read recently at TFMR that the sales of ASE are in a very narrow range from month to month:
    Month
    January 7,498,000
    February 3,368,500
    March 3,356,500
    April 4,087,000
    May 3,458,500
    June 3,275,000
    July 3,456,500
    And remember, the statute was changed last year to allow the production of ASEs at the discretion of the SecTreas. (http://www.law.cornell.edu/uscode/text/31/5112) No longer must The Mint manufacture as many ASEs “as the public demands”. They must now only manufacture as many as “the SecTreas determines are sufficient to meet demand”. Does it look to you that the SecTreas has determined that about 3.5MM per month is “sufficient”?

    What is your take on this? Do you think this is already happening? If there is a restriction on production of ASE would we be seeing that now in the form of shortages at our LCS?

  7. Well said and an excellent piece of work…I might add that only Jeff Nielson to date has speculated as to why the silver is not flying out of the COMEX and SLV- indeed, it is flying INTO the JPMorgan vaults there.
    http://www.bullionbullscanada.com/gold-commentary/26288-no-one-wants-paper-called-gold

    We are not the only ones that can appreciate the investment potential of silver over gold….Could we see JPM attempting to do a Hunt Bros style corner on physical silver supply in the West – or are they just worried about covering their remaining delivery obligations when (not if) a run develops for the white metal?
    FWIW,
    G.

  8. This is addressed for Steve and Bradford:

    Really just a question/comment about how an average guy manages a purchasing scheme for buying physical gold – at million dollar lots (average?) – when the government passes bail-in legislation. This is NOT discussed at all on forums or in articles and all my concerns are ignored…

    But right now in order to buy in size, one has to (in Canada anyway) move currency (by law) ONLY out of bank accounts to a dealer or brokerage in order to be an active investor. Most countries in the West have anti-terrorism or anti-money laundering legislation in affect that forces vetted funds to move out of banks only into the institutions of markets.

    So how does one support a physical gold bull market when people become afraid of keeping funds of size in a bank when bail-in legislation is the law of the land?

    When talking to James Sinclair about a month ago on the phone I happened to ask him about the possibility that the bail-in threat may be a form of MOPE? I explained that if you consider that money NOW in the equities markets and futures markets and potentially building to enter a physical gold and silver market is only at risk if one cashes out ones position IN SIZE back into the greedy hands of the banks, the system would have a motive for using the threat of bail-in…Of course it would short circuit new investment INTO the equities etc. too…But it certainly would dampen the physical precious metals investments. That would slow down the collapse of the USD. Would the central planners consider this a good trade-off – to extend the dollar reignÉ… Oh, and lest I appear too wacky in this, Sinclair did say that bail-in as a MOPE play was possible…

    Essentially the root of my concern questions the possibility of a market economy functioning under the threat of a banking system that would rob the largest accounts? Again, I am concerned that there is NO discussion about this at all!!!!

    FWIW,
    L.

    • Galearis… you bring up an excellent point. Of course, we cannot find an answer as everything is a great secret held in the bowels of the banking industry. Anything is possible here and the notion that BAIL-INS might be mope sounds plausible.

      However, I find solace in the fundamentals going forward. While this lousy FIAT MONETARY CHARADE can go on for a bit longer due to the machinations of central banks, the real threat to their hegemony is the ENERGY SITUATION.

      The annual world oil decline rate is 4-6%, which means at 76 mbd of conventional oil & condensate production, the world has to bring on between 4-5 mbd each year just to keep production flat. Oil runs the worlds economies and allows FIAT MONEY to survive. But, if the world can’t grow its oil supply, it causes huge dislocations in the fiat monetary system which we are witnessing today.

      However, there aren’t many good conventional oil sources left, so the industry is now left to producing the SCRAPS such as SHALE OIL & GAS. These two energy sources have decline rates of 40-50% per year. Which means you have to add 40-50% of new production each year of this source to keep production flat….LOLOL

      This will end badly with or without the BAIL-INS or other fine techniques the bankers come up with. In the END… I say:

      YA BETTER HAVE YOUR PHYSICAL GOLD & SILVER IN HAND.

      steve

  9. Steve,
    As always, a well researched and insightful article.

    I would like to better understand the central argument you are making in below para.

    “The problem with these supposed paper assets, is that they are based upon the burning of energy to create economic growth in which these are settled or repaid. Only so much energy can be burned in a year which means only a small fraction of these paper investments can be satisfied. The quality of these paper investments will degrade substantially as the world is impacted by energy constraints in the future”.

    Thus, if I interpret above correctly, the equity prices of most public listed companies, which trade at multiples of forward earnings, will be severely impacted in the face of energy shortages, as these companies will find their costs escalating higher (e.g. petro chemical, freight/distribution sectors). Won’t that apply to miners too, or do you anticipate that the appreciation of PM prices will offset crude oil prices?

    • Rationalmind… BINGO. You hit the nail on the head. I believe the real reason why PEAK OIL has been attacked and discredited by MSM, is that the reality of the situation would DESTROY MOST VALUATIONS going forward.

      This is indeed the Brontosaurs in the living room.

      Shale Energy is a ponzi scheme that as I stated before, Charles Ponzi would be jealous not being apart of. Without ongoing financing and deals by Wall Street, Shale Oil and Shale Gas would have imploded a year or so ago… because it can’t PAY FOR ITSELF without additonal funding for its huge CAPEX spending. It is in Wall Street and the Govts best interest to keep this charade alive as the WHOLE HOUSE OF CARDS would come crashing down.

      While valuations would be hit in all sectors, I actually believe the primary gold and silver miners would benefit as they use a fraction of the overall energy consumption in the mining industry, but will be providing what I call “TRADE-ABLE ENERGY VALUE” which is locked in each 1 oz coin. That is real “economic energy” coined by Mike Maloney that is real wealth creation.

      I would say the primary silver miners would have the least worry as their energy consumption is a fraction of the primary gold miners, but the BIG HIT will be in Base Mining Industry. So, as you can see, it would impact silver more than gold because 70% of silver production comes from base metal mining. This is very good for those holding onto physical silver.

      More about this in future articles.

      steve

  10. Hi Steve,
    Would be very grateful for your opinion on 2 things, given your persuasive peak oil/gold/silver thesis

    1)SLW
    Will Silver Wheaton prove to be the BEST PM mining equity, as they are able to “mine” at a fixed price of $4/oz, as silver does a moonshot? Will any other “physical” silver miner perform as well as their costs escalate?

    In general terms, are silver mining equities likely to grossly outperform gold mining equities due to the greater upside for silver compared to gold?

    2)What do you think of FOFOA, and his absolute contempt and disparagement of silver compared to gold? He seems to think it will be “business as usual” after a brief monetary transition involving hyperinflation of fiat currencies, breakdown of the paper gold markets and “rescue” revaluation of physical gold to >$50,000 (2009 $$). He predicts that the the gold silver ratio can go to 500:1 or worse (e.g $100 silver, $50,000 gold).

    Look forward to your opinion

    • John… you bring up some great questions. Those two questions are probably the most important ones that I would ask myself….LOL.

      1) Silver Wheaton does stand out because of its bottom basement silver stream agreements of $4 silver. However, they can too be impacted as gold mines could shut down from low gold prices, thus they would receive less silver revenue. I know SLW has agreements with these companies if commercial production does not occur (i.e. Pascua Lama) or if a mine goes on care and maintenance. But still, lower silver revenues from these sort of mining causalities will impact SLW, but they still will stand out from the rest due to their unique pricing situation.

      Furthermore, there are several miners that I would buy when things turn around. They are the best performing and most profitable miners. I planned on providing a subscription service to give investors a good FUNDAMENTAL LOOK at break-even, costs, etc and etc, but the subscriber model today is in the TOILET. But, I do plan on doing SINGLE PAID REPORTS that I believe some investors would fork over a little fiat currency to help them make decisions on miners and protecting their wealth in the future.

      That being said, First Majestic is by far the best SILVER MINER out there that has a very low net-income break even of $18-$19. On the opposite side of the spectrum we have U.S. Silver and Alexco which had net income break-evens at $35. So we can see why both of these companies are making big CUTS and MINE CLOSURES.

      I caution investors in purchasing JUNIORS. The impact of peak oil will soon be felt and that it is wise to purchase either producers or soon to be producers such as TAHOE.

      Lastly, if silver prices do in fact move up much higher in percentage terms compared to gold, then yes we will see the silver miners outperform the gold miners. I say “IF” because I mean in the short term. I believe silver’s value in percentage terms will do much better than gold in the medium-longer time frame.

      2) I am a bit skeptical of the FOFOA’s of the world. This includes folks such as Alex Jones and Lindsey Williams. Don’t get me wrong, I don’t think Lindsey is a bad fellow (he seems like a nice chap), however he is being misinformed about the energy situation. And yes, Alex and Lindsey do put out some TRUTHS.

      But, you never hear Alex Jones or Williams talk about peak oil. Believe me you… I have the data to show we are about to hit the ENERGY WALL.

      This is the reason why I disagree with FOFOA. If we were talking about the 1930’s or 1970’s, well then yes, we might see something like what they are forecasting of much higher gold to silver ratios. BUT… this is the 2010’s and the world no longer has a growing energy supply. We must remember this important FACTOR:

      ENERGY IS THE POWER THAT DRIVES ECONOMIES…..
      …GOLD & SILVER ARE THE BATTERIES THAT STORE THIS “ECONOMIC ENERGY”

      Fiat money can only survive in a growing energy supply system because it does not store ENERGY VALUE like gold and silver, Fiat money borrows energy from the future. The reason why we have this trouble today in the banking industry with all these central bank clowns printing money and buying bonds is to keep something ALIVE that should be DEAD. The global oil supply has been in a plateau since 2004. Without energy growth the FIAT MONETARY SYSTEM starves to death… so it must resort to printing and other foolish activitites.

      Thus, if Gold and Silver are Batteries, then silver is just a smaller battery that holds a certain amount of this economic energy. Don’t worry, I will explain more about this in future articles. The problem is that there is so much misallocated wealth in the world, when people are forced to try to protect what they have, silver will actually do much better than gold in percentage terms because there is less of it and it is more affordable.

      So it is due to the ENERGY SITUATION that FOFOA fails in all regards. They might be better than many gold analysts on gold theory in a vacuum, but they do not factor in energy in their forecasts. This is by far the biggest problem that most precious metal analysts make.

      steve

      • Hope you are still reading…(Rhody says, `Hi“). But in regards to FOFOA, I sent your article via url to Jeff Nielson with the following:
        Thought I’d send a link and some comments I made about the article at the end of the link:https://srsroccoreport.com/silver-the-king-of-future-investment-gains/silver-the-king-of-future-investment-gains/#comment-1566

        Some fifteen years ago (gee, has it been that long!?) I got a lot of my insights from a pundit on the original Kitco forum (I think there was only that one forum on these markets in those days). He went by ANOTHER(Thoughts!) – and continued at the USAGOLD forum with the help of the famous FOA poster there. Incidentally, “FOA” was an acronym for “Friend of Another”. And you might recall the Blogger FOFOA – which is an acronym for Friend of Friend of Another. So some history here….At any rate Another summed up your thinking way back then with the sentence: “in the end paper gold will be sold at a discount”. I know it is somewhat cryptic but he has been mostly correct in everything he wrote back then…. He is still in an archive at USAGOLD: http://www.usagold.com/goldtrail/archives/another1.html

        FOA was the chief pundit on the USAGOLD FORUM (during the days when there were few others…) and the whole management was anti silver…FOA was infamous for his comment that gold would go up and up and silver: “Bah“, $0.50!). Which led to several temper exchanges by me and others and ultimately a bunch of us getting thrown off the forum…It was not a web site to suffer free expression of posters… But that is where FOFOA comes from – and he has the same anti silver bias….

        So I do not read FOFOA much either…When one has such a glaring blind spot about the history of money, then all of the thinking is questionable….Curiously the poster known as ANOTHER(Thoughts!) never really mentioned silver at all so we will never know where he thought it fit into the monetary system, but I still consider him one of the great minds on the subject area.

        For example: he predicted that we would have a price collapse of paper silver. That was around 1998….Amazing!
        G.

        Best,

        L.

      • Hi there. The trouble with trying to sum up FOFOA and his blog from the outside looking in is that without reading and absorbing a minimum of 50-100 posts it is very hard to understand the theory in full. Almost everyone thinks they get it after a post or two until they keep reading. Then they realize they didn’t quiet know what they thought they knew. I am a loyal FOFOA reader and only after a couple years did it all start to sink in. You should e-mail him your thoughts on the flaws in this theory. You would be amazed first at the long detailed response he will probably give you, and second about how deep his actual understanding of the history of money really is. He may not change your mind on anything, but his perspective is an excellent lenses to have in your travel bag

        • Sam… that actually sounds like a good idea to contact FOFOA and exchange thoughts on how ENERGY would impact their theory. I do realize there has been a great amount of work that has come out of the FOFOA blog…. I have read several entries. However, I still believe the energy situation does change things to a large degree when it comes to STORES OF WEALTH.

          Anyhow, it would be interesting to see what side of the fence they sit on the ENERGY = MONEY issue.

          steve

  11. Hope you’re right Admiral.

  12. At these prices silver production is shutting down in Canada and the U.S.

    Mexico and Peru [to name two large Ag producing countries] need cash flow and also have lower costs for labor, insurance, and government regulations [OSHA, Obamacare compliance, environmental impact, regulations on refiners, and probably several others]. Without imports from those countries the physical shortages would have been severe a long time ago.

    But with the Indian government discouraging gold importation and purchasing, silver imports have soared. According to what I read global production is about 2,000 ton per month. That will drop some as US and Canadian mines & refiners scale back..

    In April India imported 720 tons. In May they imported 920 tons, almost half of the entire world’s production for a month. I haven’t heard the figure for June. If this continues and China imports in a big way that is where the serious shortages will come from.

  13. You are the first person to my knowledge to link pm with energy. Energy production key to everything and I totally agree with your analysis of the current world energy supply situation. I have a rule of never investing in anything I don’t fully understand. Gold and silver is one of these. I’ll be reading your articles with interest. One quick question: if you could pay down a loan on an investment property saving 3% per year on interest or buying gold or silver, what would you do?

    • Ed…. I don’t like to give out investment advice as I am not a professional. However, I can tell you what I would do. It would depend on what kind of investment property I owned. You see the next leg down in the housing market is going to be worse than 2008-2009. I don’t know when its coming.. but it is, for sure.

      If I had an inexpensive property that renters could afford to pay in the coming next big down-leg in the economy, I might keep the property. But, if it wasn’t a modestly priced property, values are going to come down BIG TIME, so I might steer towards the precious metals.

      I believe Real Estate in most markets and sectors, Residential, Commercial & Industrial are going to get HIT BIG TIME in the next 2-5 years. While it won’t be the end of the world, I would imagine we will have more Detroit’s and a great deal more vacant buildings dotted the country.

      steve

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