The Calm Before The Precious Metal Silver Storm

There is an eerie calm in the precious metals market as investors continue to pile into the broader stock indexes.  Precious metals sentiment that was flying high last year when the Dow Jones Index fell 2,000 points, is now at an all-time low.  Investors who are highly fickle, have no idea that they will lose a great deal of their “supposed” paper wealth.

The word out on the street, as it pertains the precious metals retail sales market, is that investors are no longer waiting on the price of silver to fall to start buying, rather they are now waiting to see what happens to the broader markets.  Speculation, is that if Trump is able to get the corporate tax cuts passed, then the Dow Jones will head up towards 25,000 or higher.

While this is a possibility, investors should realize the market is already seriously overextended.  Sure, it could continue to move up, but the correct way to invest in precious metals is not to make a perfectly timed purchase when the rest of the market is crashing, rather it should be done on an ongoing basis.  Investors should be purchasing metals over a period of time, not one large amount due to the timing of a market collapse.

If we look at the Dow Jones Index versus the Silver Price, we can see a very interesting trend that took place when the Fed announced QE3 back at the end of 2012:

At the end of 2012, the price of silver really started to decline as the Dow Jones Index continued higher and higher.  Some precious metals investors are worried that the next time the stock market crashes, so with the price of silver, as it did in 2008.  However, this time will be different because the silver price fell by more than 70% from its high in 2011, whereas the Dow Jones Index has surged toward the heavens.

As I mentioned in my interview on Crush The Street, there was a near record GOLD ETF Inflow (364 metric tons) when the Dow Jones Index fell 2,000 points during the first quarter of 2016.  The only other large Gold ETF inflow surge (450 metric tons) was during the first quarter of 2009, when the Dow Jones Index was crashing into the toilet to a low of 6,700 points.

What is going to happen when investors really get spooked as the Dow Jones corrects 5,000 points or more??

Well, I can tell you that we will see record flows in the Gold and Silver ETFs.  However, I don’t believe it is wise to go from one paper asset into another.  And, I am not the only one to believe this.  If we look at silver investment demand in physical bar and coin compared to ETF’s since 2007, this is the result:

From 2007 to 2011, total physical silver bar and coin demand was 687 million oz (Moz) versus 419 Moz for the net silver ETF (and similar products) inventory builds.  But, look what happened from 2012 to 2016.  Physical silver bar and coin demand nearly doubled to 1,152 Moz, while the net build in silver ETF inventories only increased 112 Moz.

Which means, investors put ten times the amount of money in physical silver than into paper silver ETFs.  Of course, when the markets finally crack, mainstream investors will move into the silver ETFs because they don’t know any better.  However, it will be the precious metals investors who will be buying physical silver hand over fist.

Unfortunately, trying to time the market crash and purchase silver when the situation gets really ugly will likely not work out as many expect. Rather, I see a silver market that is totally overwhelmed with very little available physical silver.

It is impossible to forecast when the broader markets will finally correct and likely crash.  But, I would not try to time this market to get into physical silver.  I am not giving out advice, but instead stating what is sound logical reasoning.

Lastly, it is not a matter of “IF”, but a matter of “WHEN” the stock and bond markets are going to crack.  Yes, the Fed and Central Banks have defied gravity for nearly a decade by propping a market that died in 2008, but time is not on their side.

Mark my words.

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42 Comments on "The Calm Before The Precious Metal Silver Storm"

  1. gman; what to buy with an ounce of silver when there’s nothing to buy?

    houtskool; i know gman, i know. But i won’t exchange my silver ounce for your worthless $.

    Now what?

    Show me your creditcard and i’ll show you mine.

    • Nothing to buy, but to trade with medicine produced from silver because big pharma will be unavailable too, check it out, colloidal silver.

    • “Now what?”

      simple. money is a medium of exchange of value, so get to work producing that value.

      (heh. I guess I’m “first”, vicariously ….)

  2. I have been marking your words for quite sometime sir.Unfortunately the markets are not. Noatt when silver was 50 not when 25 not at 12. Its almost like you have a single strategy-always say silver will go up. Gotta be right some portion of time. Net shorts on silver are at record highs and you call for a rise. well mark my words. Silver is going to fall and fall bad gettng to 100:1 to gold and in next couple of months.

    • austin rags – If you really believe that, then what are you doing over here reading these articles? Just go away and ignore us crazy silver investors.

      • Adam Rickman,

        I totally agree with you that we SILVER INVESTORS are quite crazy. You have to be crazy to put up what we have as well as sound and look like a complete lunatic when trying to share this information with our friends and family. Actually CRAZY is an understatement.

        That being said, I can guarantee that most STOCKS, BONDS and REAL ESTATE will have a future APPOINTMENT with the TOILET as the U.S. and Global Oil industry disintegrates… could be sooner than that. However, I don’t see it as a matter of decades, but rather, a matter of years.

        Welcome to the CRAZY BUNCH.


    • austin ragz,

      While you are correct that I have been saying the SAME OLD SONG AND DANCE for several years now, I also said the same thing when the price of silver shot up from $8 to $49. No one was complaining back then.. I can assure you.

      Of course, the precious metals analysts were taken by surprise on how long the FED and CENTRAL BANKS have been able to prop up the market. However, when Peter Schiff was regurgitating over and over again on CNBC, Bloomberg and Fox Business from 2005-2007, that the Housing Market and Banking System were going to collapse.. THEY DID. Hell, they did in FLYING COLORS.

      While the Fed and Central Banks used a few TRICKS to prop up the system back in 2009-2012, they have thrown in the everything along with the kitchen sink. So, the next time the market CRASHES… there will be very little they can do to stop it this time.

      Hyperinflation will be the only viable solution. But, hyperinflations don’t last long.

      So, instead of being caught OFF GUARD, precious metals investors better not try to TIME THE CRASH to get into metals. This will be very unwise.


      • GamblerOrInvestor | April 7, 2017 at 10:56 pm | Reply

        The more overvalued the stock market and the closer we get to a market peak the more you’ll receive the “YOU’RE WRONG!” comments. I kind of feel sorry for that kind of thinking because it’s purely based on short term gambling and feelings, the irritation comes from the feeling that you “missed out” or “missed the boat” to planet prosperity.

        August 20, 1931
        “………we discussed 7 or 8 other men to whom the same thing had happened. Not one was able to hold his money or to make it work for them. They knew absolutely nothing about sound investments and were not satisfied with a moderate return of 4% or 5%. I asked him what he would do again in the same circumstances. With tears in his eyes he said he would preserve and protect principal at all hazards. He would invest safely for a small but certain return.

        The Great Depression: A Diary’ by Benjamin Roth

        • GamblerorInvestor,

          Unfortunately, you are absolutely correct. I have heard the word out on WALL STREET is… THAT ARE QUITE WORRIED that something is SERIOUSLY WRONG. Nothing makes any sense in the markets any longer. Actually, SMART MONEY has been getting out while DUMB MONEY is moving in.



    • Austin – your entire post was invalidated when you stated that “unfortunately the markets are not”. Do you still not get that there are no markets. That is whole point, without markets they can set the price wherever they want and yes a 100:1 ratio is feasible at least for a short period of time. But whatever they do will ultimately backfire. The more they push on the spring, the greater the snap back will be. Nobody knows how long they can hold back the tide we only know that in the end they will fail as all manipulations eventually fail.

      • “your entire post was invalidated when you stated that ‘unfortunately the markets are not’. Do you still not get that there are no markets.”

        correct, he does not. and what you don’t get is that there is no “spring” – as long as there is nowhere else for all the new fiat debt money to go, it’ll go to the stock market, and the stock market will go up.

    • You’re one of those that probably bought silver at it’s high point then watched it melt. The point is that today you have ZERO silver because you’ve lost your nerve, sold at a loss and can’t buy anything here while it’s on sale. Otherwise why are you here if you’re convinced of your forecast of 100:1 silver to gold. You trolling? Or just another former PM moron that lost his nerve AND his stack?

    • @AUstin rAGz. If you read anything about silver, you should know what the current pricing mechanism (COMEX and LBMA) for the pas. As long as these are “operational” price is meaningless, since there is no real fizzical PM market, 99 out of 100 bucks in the sector go into “paper-vehicles” of which the big boys can create as many as they like to take the other side of the trade. But not with the fizzical metal, that’s where the rubber will hit the paper road hard – the eastern exchanges (SGE) and the stackers along the BRICS road are draining the fizz inventories of the west. It’s going to happen, because is HAS TO HAPPEN, only WHEN is the question. And if I get another 10 years to accumulate – GREAT !!! AND, your financial decisions are YOURS and YOURS alone, so don’t blame anyone for their opinion or forecasts, right or wrong they are/were. Nobody told me to buy above 30 yet I did. Am I sour about this? I was at some point, not anymore though. Now I embrace the low prices and the time given to double (actually more like triple and soon quadruple) down. Crazy folks we are, them stAgkers… …having seen through the paper ponzi that surrounds us all around.

    • $500 barrels of oil, $100 silver and $10K gold? Okay… but it sounds like a time to buy silver. How many ounces of silver can I buy per day of work, up or down? Got food?

  3. Ragz

    You better hope not.

  4. Precious metal silver storm headline.

    Makes me sick Steve. What happened?

    • houstskool,

      You have to provide me with a bit more detail on what makes you sick, and what happened. If you are referring to the title taking some CREATIVE LICENSE, yes… that is true. However, I came up with the title after talking with some folks in the industry who say there is this CALM in the retail precious metals market. Kind of like the EYE of the Hurricane…. calm before the storm.


      • Thanks Steve, now i understand your choice for this headline.

        SRS doesn’t need such headlines. You’re better than Silverdoctors or KingWorldNews. Way better.


  5. I think Trump falling for this OBVIOUS FALSE FLAG in Syria adds much more potential for a gold and silver POP than speculating on how long the US equity markets can continue to be manipulated upwards… this along with the democrats going full retard over everything he says or does… JMHO, but check out this article… interesting…

    • Unfortunately, I think he has fallen before his true masters that pull the strings… …and as such has just shown the world that he is nothing but just the next PotusUPPET, which is REALLY SAD, or rather scary, and the potential outlook and implications for mankind rather dire. I hope Putin keeps his cool vis-a-vis the US aggressions and provocations, as he has masterfully done the last few years.

  6. Thanks Steve, regards

  7. Yesterday i reat an article that trumps Minister for financial(Goldman Sachs) wants to establish again an seperating banking system.

    I beliefe it, when i see it.But a total suprise.Is the housing bubble a short time before bursting.Asked when he will do that he replied:”immediately”.

  8. In other news, the big boys are currently short about half a billion ounces of paper silver and 17 million ounces of paper gold. That translates into roughly 17 000 metric tons of silver (7-8 month of global yearly mine supply) and 500 metric tons of gold. Needless to say that this is more than the entirety of the pizzicato inventory of the CONeX. But surely, the prices of precious metals are never ever manipulated, they are the poster child of honest, transparent and fair markets… (/sarc).

    I don’t know how the boys get out of this hole; they just seem to dig deeper and deeper, maybe hoping to come out on the other side whole ???

      • Well, financial war (including sanctions against Russia) of all sorts have been and are raging as we speak. I still hope they are not the precursor to a hot shooting war, but sadly, history tells us that they often are. As long as they don’t pull the MAD nuclear option, there is hope… …but then again, who knows what these Einsteins have in mind… …may cooler heads prevail.

    • “I don’t know how the boys get out of this hole”

      they’re not in the hole. everyone else is. that’s the plan.

    • I believe the boyz are both sides of the trade, they monkey hammer the price down on paper, then stand for delivery. It will stop when there is no more to be had.

  9. Steve,
    I think if you plotted a regression of the dow with silver, you would get a very low r square coefficient. It seems to me that silver and stocks are not correlated. Silver appears to go it’s own way. I still like you cost of production theory. Also, you cannot discount manipulation by banks and the Fed. In a world where it seems all assets are correlated due to low interest rates, silver stands apart. Apparently cheap money does not affect silver. Kinda bizarre? It’s a durable and cheap asset that is easy to buy and store. I cannot figure why more investors don’t buy.

    • Why? Because people are mentally feeble. Be proud of yourself. Now suffer, and be hated when we are all proven to be correct. Such is our fate, those who endure.

  10. I had an extra 50k in the bank making .010 interest, I purchased 100s, kilos, and 500 one ounce bars. Now, tracking silver and waiting to first sell the 100s in the low 20s, the will recoup most of my money. Hold on to the kilos and one ounce bars for a rainy day in the next 10 years.

    • Ed,
      Congratulations on your purchase but why, in God’s name, would you sell? Sure, you would have nearly 1000 ounces cost free but what would you buy? And why? You clearly seem to be treating your purchase as an investment – it’s not, it is insurance for all the other shit that you own, your stocks, bonds and real estate for when the paper house of cards collapses and the collapse is coming. You would be far better off taking the 100’s you bought and use 5 to buy 10’s (10 ounce bars), 5 to buy 5’s and 15 to buy 90% “junk” silver coins in a balanced face value array of dimes, quarters, half dollars and silver dollars. Then secure them in your possession and forget them until you need them.

      This all assume that you have a defensible place to be when the shit hits the fan, that you have food and water stored or good sources and that have what you need to defend you and yours. If not, when you average out, start there.

  11. If it is true that JP Morgan have been accumulating massive amounts of silver – what is in their best interests with this potential corner? To sell if the price rises as they lose control of the paper market or let their USD golden egg collapse. I think that their currency scams in a privileged dollar earns them more than one off possible profit in silver.

  12. Thanks Steve. Another great article. I think the title sums it up.

  13. There are many pro-silver pundits here and many against and what each has in common is that they are viewing silver as an investment. That’s the problem. The true economic value is in its movement in the currency application as a debt-free medium of exchange …. much the same for gold and likely more so.

    • “There are many pro-silver pundits here and many against and what each has in common is that they are viewing silver as an investment. That’s the problem.”

      well, silver as an infestment is reasonably sensible. the core problem is that in their normalcy bias they think that when everything spirals down there will still be markets in which to spend their silver – and thus, as a bonus, they imagine that they will be the ones who “have the gold and make the rules”. “everyone else is feebleminded, but I was wise ….”

  14. Since the pm mkts are manipulated, it very likely those doing the manipulating do value pms or they would not bother.

    It is also resonable to assume they will drive price down so they can buy cheap.

    Pretty good gig, sell short, payoff with govt paper, use printed currency to buy physical at low price.

    When the dust settles, I bet their still around.

  15. Why not mention the etf inflow in first quarter of 2016 in Silver if it is to be compared to gold for the same causation?

    Silver use is mainly a commodity in so many industries. If the global stock markets tank it will directly correlate with the broader economy. A tanking economy means industrial silver demand will dry up knocking silver price down.

    What you are saying is that while silver production continues and industrial demand drops is that monetary demand for physical will be large enough to not only take over physical supply but also overtake derivative pressures?

    Since when has that been allowed to happen in the last 2 decades?

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