Silver undervalued or gold overvalued?

[evolve]

why? i want to here from anyone that feels that precious medals are undervalued....i seriously would love to be able to justify buying in right now, but the market seems waaaaay overvalued to me.

I believe that precious metals are currently undervalued.  More to the point, I believe that the US dollar is currently overvalued (which is the same thing).

The bull market in commodities in general, and PMs in particular, is driven by fundamentals relating to the US dollar, specifically US monetary policy.  The fundamentals have not changed.  If anything, they are accelerating.

As long as the Fed continues injecting liquidity (read: inflation) into the economy through quantitative easing, bailouts, and other programs, whilst simultaneously keeping interest rates artificially low, the USD is going to continue to undergo currency devaluation.

The bull market in PMs in the 70s correlated very strongly to the stagflation of the period.  The bull market in PMs only ended when they brought Volcker in as Fed chairman who raised interest rates to 20%.  I don't see the current bull market in precious metals ending until/unless we see a similar rise in interest rates.

this may be a stupid question (i am certainly not an economist)... but,  if USD is overvalued, then why is the exchange rate with the euro roughly the same as it was a few years ago? (it was @ 1.5 USD>Euro and it now exchanges @ 1.4) wouldnt an overvalued dollar trade at a better rate (ie 1 usd>1 euro) especially with the euro supporting the failing economies of greece, ireland, etc?


or am i completely missing something here?

[The_JMiner]

this may be a stupid question (i am certainly not an economist)... but,  if USD is overvalued, then why is the exchange rate with the euro roughly the same as it was a few years ago? (it was @ 1.5 USD>Euro and it now exchanges @ 1.4) wouldnt an overvalued dollar trade at a better rate (ie 1 usd>1 euro) especially with the euro supporting the failing economies of greece, ireland, etc?


or am i completely missing something here?

The Euro is in the shitter too because of all the bullshit with Spain, Italy, Greece and all the "bad" countries in the Eurozone.  So if both go down both stay equal.

[evolve]

but shouldnt the euro have sunk lower faster than usd, particularly since it is supporting multiple failing economies?

[The_JMiner]

but shouldnt the euro have sunk lower faster than usd, particularly since it is supporting multiple failing economies?

Last I read the Eurozone if it wanted to support Spain, Italy, Greece and all the other FAILs it would need to "Create" 1 trillion dollars. That amount is literally for every single country to be a-ok.  (No matter cause Greece has already done a partial default.)

USA has 14.7 trillion debt and climbing. We have just hit 100% GPD to Debt ratio which is what some economist consider the "tipping point".

(for comparison I think Greece was 160%)

[Fakeman]

I bought at $15 and had to sell at $7

Never again!

Better strategy would have been to buy more silver when the price went low rather than selling at a loss, but when you need the money you need the money though I guess.

[westkybitcoins]

I will *never* touch silver again because of the Hunt brothers debacle. It will happen again.

The Hunt brothers attempted to use margin. This was their weak point.

Nowadays, the world's silver inventories are being depleted by people actually buying real, tangible silver, paying in full, and physically removing it from the market. There's no singular target to go after anymore. A sudden change in COMEX rules won't stop folks from continuing to buy from their coin shops. And the internet is informing everyone of the true fundamentals. Even the Chinese are becoming eager buyers of silver.

The suppression of the price of silver will be the end of the global bankers.

It's wrong that they've been able to keep their ponzi scheme afloat for so long. But it seems clear to me that a change is imminent.

[Fakeman]

In answer to the original question, I don't believe there's anything magical about historical ratios of gold and silver prices. There are strong cultural reasons to believe that both metals will continue to be valuable but cultural ties to historical price ratios are probably much weaker in a lot of places. There seems to be a resurgence of interest in Islamic banking though which does operate on a fixed ratio of gold and silver prices from what I understand.

[GideonGono]

I accidentally voted for #4, meant to vote #1

[Steve]

I'm surprised that no one has mentioned that silver has been in backwardation for months.  That suggests physical silver is in tight supply.

[enmaku]

Seems like the general concensus is that silver will rise. Perhaps that's just optimism bias but if so optimism is a stronger force than I'd imagined

[netrin]

I think tin is undervalued, or rather the food preserved within.

[sven]

electronics use copper for pretty much everything
silver only conducts slightly better and is barely used at all in electronics

[netrin]

My understanding is that 40% of available silver is used in industry and that reserves are at historic lows. Perhaps alternatives are readily available? Anyway, here are recent gold/silver price ratios:

[foggyb]

electronics use copper for pretty much everything
silver only conducts slightly better and is barely used at all in electronics

Anecdotal evidence suggest there is one ounce of silver per 1000 cell phones. So yeah, there's barely any silver in ONE cell phone.

The point is, everyone has a cellphone or two, and we replace them probably once a year on average.

So, lets say one third of the planet owns a cell phone. 2 billion phones. That's 20,000 ounces of silver gone every year. Most of it will never be recovered.

That just for starters. Photographic film, solar panels, TV screens, ipods, microwaves, GPS, the list is endless. Is 200,000 ounces lost per year a reasonable number? That's two million ounces every 10 years, and the numbers will creep upwards.

The other problem is that because the amount of silver used is so small per device, even a large spike in the silver price would not cause a rise in electronics prices. So consumers will continue to buy, and factories will continue to produce.

How much silver is left in the ground? 100% of annual silver production is consumed in some form. There are no mining reserves left over.

[bitminers]

Silver Has Risen Well today in Australia

[S3052]

silver and gold sre overvalued and will soon drop in dollar terms.
Silver will fall faster snd deeper than gold

[bitminers]

silver and gold sre overvalued and will soon drop in dollar terms.
Silver will fall faster snd deeper than gold

How is that so S3052? please explain?

How are they overvalued also?

[S3052]

let me briefly try.
(I am on my mobile device and can't post graphs that would be needed to illustrate.)

Silver has been underperforming gold since april 2011 and has been shown above in this thread via the gold/silver ratio
Silver is also a very good leading indicator fir the broader financial market (stocks, etc). This underoerformance is a key element which I use in firecasting.
As long as silver remains below the 50$ mark,silver is in the first stages of amultiyear bear market.
Gold will remain a little strongezr than silver because gold is a safer heaven than silver in the financial crisis #2 we are already in.
But gold will also at least initially fall hard due to the needed deleveraging of financial institutions and individuals.
Basically I am saying that in this second leg of the financial crisis, all markets go down together, just some will fall a bit less

Target for silver is first the 27-30$ zone and then single digits by 2014-2016.
Gold will likely at least test the 1000$ mark before moving to record highs into 2000-5000 and even higher..

[The_JMiner]

I am sorry I do not agree. The Feds will continue to print fiat money and pumping it into our system.



Gold 75 to 2011



Silver 85 to 2011


They are heading all one way UP!

Personally I find it ridiculous that gold is where its at but the market does have a "herd" mentality and every crisis sparks everyone running to gold. When silver is in tighter supply than gold.

If you look at the data for silver in 2008 just as we were going into the recession it dropped. Personally I feel we are walking into another recession so if silver drops it will create a great BUY opportunity because when the economy of the world takes off the industries mentioned will need silver and will be willing to pay big bucks for it.

[S3052]

I am sorry I do not agree. The Feds will continue to print fiat money and pumping it into our system.


They are heading all one way UP!

Personally I find it ridiculous that gold is where its at but the market does have a "herd" mentality and every crisis sparks everyone running to gold. When silver is in tighter supply than gold.

If you look at the data for silver in 2008 just as we were going into the recession it dropped. Personally I feel we are walking into another recession so if silver drops it will create a great BUY opportunity because when the economy of the world takes off the industries mentioned will need silver and will be willing to pay big bucks for it.

Fully disagree and we can at least agree to disagree :-)
What you are saying is what 99.9% of people believe. Hence, it is too late now, and the opposite will happen. I will bet 5 BTC with you that Silver will drop below 30 $ by Jan 12 and another 5 BTC for a drop below 10 $ somewhere between 2012 and 2015.

And by the way, you do not show the full (and most important) chart history: The previous Silver high of 50 $ in 1980. This means that Silver did not gain at all vs. this high, and when accounting for inflation, Silver today is down massively vs. 30 years ago..