Precious metal prices - Is the spot price lower than it should be?

General Questions
#1

Maybe there are some informed opinions out there such that this is the right place to ask …

The local coin, card and comic guy tells me that spot is artificially low particularly for silver.

He says that big institutions determined that no more than 2% of the silver that is held in certificate form would ever have to be delivered. As a result, they’ve sold more than really exists and are keeping the spot price low so as not to get hurt.

Seems like somebody could make a ton of money by buying low and demanding delivery… therefor I don’t believe him.

Anybody got the straight dope?

#2

Both Gold and Silver are high right now due to speculation and the economy. They just fell off a little, however. Yes, if the economy goes bad they could go back up. Or not.

#3

We might have to move this one to IMHO. I’ll let it ride for now.

Gold and silver, IMHO, are two separate things. Silver is a commodity, much like aluminum, copper, oil, etc. It had been rising for the last 2-3 years as the general level of commodities rose. It’s industrially useful and, with a worldwide booming economy, it had to go up. Whether it deserved to go up to $20 US is open to debate.

Gold, while useful, is more likely to go up due to a falling dollar, and to a lesser extent, economic uncertainty in the world. For instance, gold in 1998 had fallen to about $250-290. US. This was when the dollar was king, and the newly formed Euro was about 89 cents US. When the dollar fell to new lows in the last year or so, and the Euro was over $1.50 US, gold rose to $600-800 US.

Silver does tend to follow gold somewhat in general upward and downward movement, but it isn’t quite seen as the international hedge against economic uncertainty that gold is.

Just because a guy calls himself a coin dealer doesn’t mean he knows squat about economics. Perhaps he knows more about comics and cards(one hopes).

#4

I spent a good while buying precious metals for industrial use. I never found a time when the spot price was low. I think your friend the coin dealer needs to be clear on the price of commodity metals and coins. Does your friend melt down the coins he gets for the metal content? I doubt it.
Unlike hedge buys of gold…people actualy take delivery of precious metals…we use them. Never had a problem with quantity. In fact, the more I wanted, the better.
Supply, demand…it all works out.

#5

So how much is he paying for silver?

#6

One of the issues that is driving this, and fueling suspicion, is that the U.S. Government has been limiting access to their bullion coins:

http://www.coinlink.com/News/gold-silver-bullion/american-silver-eagle-supply-and-demand/

#7

If the guy knew so much about metals markets, he probably wouldn’t need to work in hobby shop. Timing markets is a fool’s errand.

#8

Hey, no need to insult the poor guy… I already expressed my own scepticism (sp) :slight_smile:

Is info available on the quantity of silver that exists in physical form vs. the amount that is held on paper at any given point in time?

#9

In the early 80s when I was getting a mining engineering degree one of my professors related an interesting bit of information. (Sorry, that’s as good a cite as I can provide.) A difficulty in speculating in silver is the huge amounts of it that are in private hands in India. He claimed that when the price rises too much, people will trade in jewelry and pieces that may have been passed down for generations. He made this claim in explaining one of the factors of the Hunt brother’s failure to adequately corner the silver market around that time. I don’t know if it is a valid claim, but I always thought it sounded reasonable.

What I’m saying is that you can obtain the figures for how much silver has been mined recently, and how much trades hands publicly, but it has been collected for several thousand years and it is unlikely that anyone could come up with a good estimate of how much actually exists in private hands.

#10

The only reason that the Hunt’s didn’t corner the silver market in January 1980 is that the government changed the rules of owning commodities late one week and, without the continued buying of the Hunts and their partners, there was no one left to buy the silver at the next highest level, so it started plummeting.