Silver: The “Five Year Plan” and the Great Leap Forward

Five years ago paper silver contracts on the COMEX hit a multi-decade high over $48 on April 29, 2011.

At the end of April 2016 the silver price is bouncing around $17, down about 65% from its April 2011 high.  The low occurred at about $13.60 in December of last year, when paper silver prices were down about 70% from their April 2011 high.

Let’s review significant prices roughly every five years back for 30 years:

Date                 Low Price        High Price       Comment

Dec 2015        13.60                                        Major low

Apr 2011                                  48.58               Multi-decade high

May 2006                                 15.20               Multi-decade high

Nov 2001        4.01                                           Ten year low

Jly 1997           4.18                                           Low

Feb 1991         3.50

Apr 1987                                  9.79

Examine the following log-scale graph of COMEX silver.  The red lines are 4.75 years apart.  The green line shows a long term exponential trend upward.

 K-silver - 30 yr

What this tells us:

  • Silver prices trend upward exponentially, in the long term, just like debt, military expenses, prices for potatoes, cigarettes, devaluation of fiat currencies, the S&P 500 Index, and expenditures to purchase a Presidency.
  • An important high occurred in 2011, and an equally significant low occurred in December 2015.
  • The December low was about half the exponential trend price and the April 2011 high was about double the exponential trend price. Silver prices rise to extremes, and then fall to crazy lows.
  • The December 2015 low may have been the lowest silver price for a very long time, given the ongoing devaluation of currencies, Chinese physical markets that will compete with the COMEX, the incredible debt that doubles about every eight years, the increasing investment demand for silver and weakening supply, and the price suppression during the past three years.

WHAT WE KNOW FOR CERTAIN:

  1. Central banks want inflation and devaluation of their currencies. One way or another they are likely to create price inflation since they own multiple “printing presses.”  The results, for all but the elite, will be ugly.
  2. Central banks abhor deflation. They will do whatever is necessary to avoid deflation.  They are likely to succeed, thanks to their “printing presses.”
  3. Governments want inflation and higher taxes. They hate deflation and lower taxes.  Governments exist to spend money  –  more and more money.  The US national debt has increased from $3 billion in 1913 to nearly $20,000 billion today.  Expect government deficit spending and dollar devaluation to continue, along with higher prices for what we need to live.
  4. The inevitable consequences of deficit spending, currency devaluations, central bank “printing,” and politicians being politicians is higher prices – exponentially higher prices. Look at the exponential trend line in silver prices that runs from about $3.50 in 1991 to about $30 in 2016.

CONCLUSIONS:

 

  • Silver prices hit an important low in December 2015. Expect a “great leap forward” in prices during the next five years.
  • Silver prices are “managed” by several powerful groups. Expect volatility.  In simple terms, the sequence is:  Run prices up, suck in investors near the top, increase margins, crash prices by selling heavily with paper contracts, disillusion the “amateurs,” Goldman announces “research” that indicates silver and gold will fall for several years, allow a small rally, force prices down again, big traders cover shorts, margins are reduced, more “bad” news is distributed on silver, and the large players begin buying while small investors are disgusted and beaten down by silver “management,” …  and the cycle repeats.
  • Central bankers will do what they do – devalue the currencies and “print” as much as possible to benefit themselves and the financial and political elite. This will increase silver prices. 
  • Politicians will do what they do – spend money and increase debt. This will increase silver prices.
  • Large traders will do what they do – push prices higher and then crash them lower. The low occurred in December 2015 – expect higher silver prices for several, probably many years.
  • Stackers will do what they do – buy, stack, and wait. They see the big picture.  Silver prices (kitco.com) during the past 100 years:

1913           $0.58                                 Fed Reserve created

1953           $0.85

1973           $3.14

1980                               $50.00           High

1983           $9.12

1993           $4.57

2003           $4.88

2011                               $48.50           High

2013           $23.79

2015           $13.82                               Low

Late April 2016              $17.00

  • Silver prices will move upward to $50 and eventually to $100. Depending upon the degree of dollar devaluation, how much “money printing” occurs, the loss of dollar reserve currency status, hyperinflation, importance of the Chinese physical exchanges, and much more … silver prices could race far higher than $100.  We shall see …

Read:  Nine Meals from Anarchy.

Read:  The Real Reason to Invest in Silver

Gary Christenson

The Deviant Investor

I discuss long term silver prices in my book, “Who Killed Doctor Silver Cartwheel.”  Amazon or gechristenson.com

 

9 thoughts on “Silver: The “Five Year Plan” and the Great Leap Forward

  1. I appreciate your analysis of the silver market. The only thing that I do not like is the long term view. I think any investment has to be scaled down to at least a 10 year view point. In 2008 silver was about where it is today. That’s not a great return for 8 years.. It is certainly difficult to predict where the price of anything will be 10 years from now. Who knows, maybe silver is 6 dollars an ounce. No one knows!!!


    • In 2008 silver hit a high over $20 and a low around $8.50, average perhaps $12 – $13. Silver is currently well below its long term exponential trend line. What happens next week is anyone’s guess, but the next few years should be up considerably. We’ll see.
      The Deviant Investor


  2. In 1912 the dollar value was 100%. In the 1950’s it was 43%. Now it’s only approximately 3%. Even as prices are manipulated, how can the manipulators prevent a tsunami of a price rise in, say silver, into the hundreds or thousands of dollars per ounce if the dollar has so little value? At some point in time, the manipulation process has got to come to a point of being accounted for.
    After all, the planet Earth only has so much Gold and Silver. As populations increase, so do demands for these metals and all other resources and the further we have to dig (at greater costs) to get them.



    • Silver is a valuable metal, but as a store of value extremely volatile. 100 years ago, silver was selling for roughly 67 cents per ounce.
      http://www.macrotrends.net/1470/historical-silver-prices-100-year-chart
      Inflation adjusted, this is roughly $12 per ounce in today’s Dollars. So the purchasing power of silver was roughly maintained over the past 100 years which speaks very much in favor of the fact that silver is a form of money. However, the volatility silver displayed over the past 100 years is breathtaking. In my opinion, silver is a great vehicle to speculate in, but not a great buy and hold investment. One of the reasons why I prefer gold is because storing $100,000 = 300 lbs silver is a nightmare . Storing $100,000 = 80 gold coins is easy. Those who do not like gold, should consider platinum group metals. These are not monetary metals, so will never face the risk of confiscation. Platinum, although rarer than gold, sells presently at a significant discount to gold.

      There is a lot of talk about price manipulation. However, price manipulation can succeed only if demand is weak. The reality is that despite heavy demand for precious metals in Asia, the overall demand for gold and silver is modest. There is to much metal being produced and not enough demand in the world in order to drive prices through the roof (to the moon). So prices are still very affordable.



    • Silver will correct – guaranteed. Probably soon but in a managed market, predictions are difficult. But in the long run, silver is going much higher. Look for a pull-back and load up.
      The Deviant Investor


  3. Silver, when Coined by the U.S. Mint is actual “Money”
    (ie “Lawful Money”)
    Ergo, that is why the U.S. Mint is required to publish each and every year, the “Statutory” Value of its working Stockpile of Silver, alongside of the Fiat Clownbux “Market” Value.

    Lawful Money.
    Got Any/ Got Enough?

    When the Defecation Hits The Oscillation, most will wish they had MORE!

    “Federal Reserve Notes are not dollars.” RUSSELL L.MUNK, former Assistant General Counsel, Department of the Treasury

    “Wall Street had been doing business with pieces of paper; and now someone asked for a dollar, and it was discovered that the dollar had been mislaid.” Upton Sinclair

    Stealing the world can be fun
    It doesn’t require a gun
    Just hire some guy
    To print to the sky
    Then buy all the assets and run!
    ~ @TheLimerickKing

    “We are all born ignorant, but one must work hard to remain stupid.” Benjamin Franklin

    Cheers,
    S. Rex


    • Stealing the world does require a gun. Maintaining trade deficits for close to 40 years and that every year can not be accomplished just by printing paper money. It requires a huge defense budget and a constant war against any foreign state attempting to escape from the clutches of the US Dollar. There is a very rational reason why the US defense budget is as large as the defense budgets of the rest of the world combined. Countries are forced (by bribes and threats) to hold Dollars in their savings (=reserves) account. Let’s not forget: US Dollars held abroad (in form of bonds and other financial assets) are promises by the US economy to produce and to deliver economic goods in exchange for these Dollars. It is unlikely that these promises will ever be fulfilled. If we really had the intention to honor these promises, we would slash the defense budget by 50% and invest the difference into the productive capacity of our economy in order to bring these Dollars back home. Do you think such a proposal could realistically be adopted by our congress ?


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