by Steve St. Angelo, SRS Rocco:
The best reason to own silver is based upon underlying market fundamentals. However, most of the markets today aren’t being valued by fundamentals, but rather on Fed and Central Bank interventions. This has destroyed the ability for investors and markets to properly value most assets.
I, as well as many precious metals analysts have received some ridicule for getting it wrong on the price movements of gold and silver since 2012. Of course, no one was complaining when the silver price moved up from an average $6.67 in 2004 to $35.12 in 2011.
Sure, we precious metals analysts deserve some criticism for not foreseeing how much monetary printing the Fed and Central Banks would do as well as the massive corruption and deceit conducted by the top banks in the world.
For example the recent announcement that Deutsche Bank Confirms Silver Market Manipulation In Legal Settlement, Agrees To Expose Other Banks. And… this is just what we know about. How about the stuff we don’t know about?
NOTE: If you haven’t checked out our new PRECIOUS METALS INVESTING PAGE, please do.
People need to realize the financial markets and global economies are in serious trouble. When I took a drive to a major city this weekend, I noticed that Nissan is financing cars for 0% for 84 months. I imagine there are plenty of other auto dealers doing the same thing.
When I was a youngster, the normal financing for vehicles was for 24-48 months. Anyone financing a car or truck for 60 months was a real REAL LOSER. Today, you are a LOSER if you ask the car salesmen for a 24 month plan. The last new vehicle I purchased, I put down 60% of the settled price and financed the remainder for 24 months. I gather I was a LOSER back then too because they said that sort of payment plan was rare (most put very little down and financed as long as they could)… and this was only a little more than ten years ago.
I don’t buy new cars anymore. I drive an old beat-up Ford ranger. Oh sure, I could go buy a brand new car for cash, but why?? I’d rather own physical precious metals and drive a beat-up old car.
Anyhow, my point is this…. the majority of Americans are living a very highly leveraged pay-for-it-later-&-later lifestyle that isn’t sustainable. The U.S. economy has been propped by one bubble after another for the past 3+ decades. However, the present bubble since 2008 is much worse. It’s a bubble being propped up by extreme leverage by getting Americans to buy things they can’t afford for nothing down with and longer and longer payment plans. This has DISASTER written all over it.
So, it’s extremely hard today to forecast what the market will do based on fundamentals when most Americans have thrown sound financial planning out the window. That being said, we can look at some underlying fundamentals that offer the precious metals investor some important clues.
World Silver Bar & Coin Demand Explodes Since 2008
One of the fundamentals that tells us something just isn’t right in the financial markets is the explosion of Silver Bar & Coin demand since 2008. As we all remember, 2008 was the year the engine stopped and the wheels came off the economy. This was due to the mortgage-backed housing bubble that allowed many Americans to buy houses they couldn’t afford. Furthermore, if Americans weren’t buying homes they couldn’t afford they were using their homes as an ATM machine. Basically, they were extracting the supposed equity from their home to buy more garbage they didn’t need.
So, to keep the U.S. and world economy from imploding and entering into a new Great Depression, the Fed and Central Banks starting the digital printing presses and pushed Trillions of Dollars (liquidity) into the system. This had a profound impact on the value of most assets… such as silver. The price of silver jumped from $13 in 2007 to a high of $49 in 2011.
Savvy investors realizing the Central Banks were insane, starting to purchase record amounts of physical silver. If we look at the chart below, we can see the difference between the two periods:
From 2000 to 2007, total world Silver Bar & Coin demand was an estimated 375 million oz (Moz). However, from 2008 to 2015 it nearly quadrupled to 1,422 Moz or 1.42 billion oz. The World Silver Survey only provided Silver Bar & Coin demand since 2004. So, I had to estimate the figures for 2000-2003 as they only provide Official Coin sales.
Regardless, this is one of the fundamentals that gets better every year…… just like a gift that KEEPS ON GIVING. Even though the price of silver has declined from a high of $49 in April 2011 to $17 currently, demand for physical Silver Bar & Coin continues to be in record territory. For example, Silver Eagle sales will likely reach 19 Moz by the end of April compared to only 15.9 Moz during the same period last year.
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