silver = oil

smiley · Fission Joined: Apr 16, 2004 Posts: 2106 Location: Europe

To those who believe the supply/demand price graphs in their economy 101 books, it might be interesting to look at another commodity which is currently depleting, silver.

To give you the basic background. Silver production has been far below silver consumption for the past decades due to depletion of the silver mines (We've been mining it for a few thousand years now). The difference between silver and oil is that it is stored in large quantities at the central banks. So the sales of the central banks have so far filled the gap between production and demand, but we're nearing the end of our inventories.

One of the reasons the silver situation looks a lot rosier than it actually is is because silver is massively shorted. Shorting is the selling of silver without having actual silver to back it up. This can be done since most investors won't use the clause to actually acquire the silver. As a silver user (eg. Kodak) to do so can be beneficail since it lowers the price of your raw materials. There are a number of times more silver contracts around than actual silver giving the impression of a commodity in great supply.

This link is an early warning from Ted Butler (the Hubbert of silver)
http://www.gold-eagle.com/gold_digest_98/butler111498.html

These stories have long been discarted by the officials (the EIA and DOE's of silver) as pure nonsence. However last year the bomb burst. The bank of Canada ordered a substantial quantity of real silver and if I'm not mistaken they are still waiting for it (12 months!). Other investors who do order physical silver also noticed the ever lengthening delivery times.

The results: silver doubled in price in only a few months (from $4 to >$8 ).
http://www.kitco.com/ind/Hornig/apr012004.html

Three weeks ago their was a counteroffensive by the central banks (who don't like high prices because they spell inflation and draw money away from the stock market). They proclaimed that they we're preparing a massive silver sale from their vaults which caused the price to drop 30% overnigth. So far they haven sold anything yet and some doubt that they will and can, so the price is set for another leg upwards.

While the silver market is different from the oil market in a sense that you don't store oil and don't sell non-existing oil I think that the fundamentals and conflicting interests are the same. As supply meets demand you will get a powerstruggle between those who need higher prices (investors) and those who want lower prices (governements consumers).

You'll hear heartbreaking stories about shortages and conflicting tales about how well oiled the society is and that there are great oilfields just around the horizon. Since the price is set by speculation this will cause wild price fluctuations.

So if we get these sudden spikes and drops in the oil prices it will be a sign that demand matches supply and that we're entering dangerous territory. I'm afraid we're seeing the first signs of that. And I'm particularly afaid what happens if the oil price embarks on a similar rollercoaster ride as silver (Imagine $80 oil in two months). That could bring more harm than depletion itself.

Cool Hand Linc · Posted: Sun May 09, 2004 10:34 pm Post subject: yep

The idea that price can jump so much real fast is why I am doing what I can to prepare. Imagine the supply dropping somewhat. It would cause the price to begin climbing and continue to climb. Just a small percentage reduction over a prolonged period of time would still be bad news. Sad

MattSavinar · Elite Joined: May 09, 2004 Posts: 1990

I just listened to an archived interview on Coast to Coast AM. I don't remember the guy's name, but he was an ex Wall Street fellow and really seemed to know what he was talking about.

He spoke about Peak Oil, amongst other issues such as consumer debt, trade imbalance etc. . .

He said silver would make an excellent investment, better than even gold.

On a sidenote, the C2C show has had a lot of really interesting shows the last few months for those of the "PeakNic" persuasion. They had Heinberg and Ruppert on. They had a guy on about how civilizations end and then this Wall Street guy on. (I was on Feb 25th also)

I'm a subscriber and for 30 bucks for 6 months, you can't beat it . Much better investment than cable.

Back to silver for a moment: Once I have some projects up and running, I'm definitely looking into investing in it. It won't save your ass long term as we descend into the dark ages, but it may help you stay afloat during the dim ages.

Matt

Aaron · Posted: Wed May 12, 2004 8:55 am Post subject:

_________________
"When you understand why you dismiss all the other possible gods, you will understand why I dismiss yours." - Stephen F Roberts.

Praise HawkMan

The_Virginian · Light Sweet Crude Joined: Jun 19, 2004 Posts: 1429

One big difference between Oil and silver is that silver as a metal can be reused, while oil when combusted, can't.

Silver is bound to go up in price, and when it does the producers will open up mines, find new ones etc. etc. plus we have a lot of jewelry that could be used if the resale value was enough to tempt the poorer folk who could not afford Gold anayways.

There is 12 cents of silver in a keybord (1998 prices) if that went up 4X in price, you might pay a teeny bit more for that product. one day it might pay to recycle keboards and other minimal uses of silver. Right now we are still chewing our Cud.

This is an investment bonanza, not panic time. Rolling Eyes

Besides Peak Oil will make all these industrial uses of silver obsolete, right? Shocked

_________________
Eickhorn Daggers!
www.pistolanddagger.com

Chicagoan · Heavy Crude Joined: Jun 19, 2004 Posts: 315

Silver is used in the manufacture of solar panels, and these should be high in demand.

smiley · Fission Joined: Apr 16, 2004 Posts: 2106 Location: Europe

Aldert · Tar Sands Joined: May 18, 2004 Posts: 43 Location: europe

Great illustration Aaron... quit your avatar though.. extremely irritating. Confused

_________________
PEAK OIL CENTER
http://members.home.nl/peakoil/

pup55 · Expert Joined: May 26, 2004 Posts: 3586

http://www.roperld.com/minerals/metalsum.htm

Here is a link you might be interested in. An old-timer made a lot of predictions in 1976 about depletion rates of various metals/natural resources.

It would be interesting to revisit this for accuracy. He has an email address, might be interesting to wake him up and see if he has any thoughts on this issue.

smiley · Fission Joined: Apr 16, 2004 Posts: 2106 Location: Europe

Good find pup.

I think this guy deserves his own thread in the modeling part of the forum so I'll move it there.