Archive for May, 2008

A Silver Lesson

1 – Silver is the only commodity that is cheaper than what it is in 1980. ($54 then and $17 now)

2 – The silver-to-gold ratio has a long-term average of 15 and not 52 as it stands today, and that price gap should now close, along with the gold-to-oil ratio. With no further increase in oil or gold price the silver could be 5 times higher in value than it is today.

3- There is only a tiny fraction of the amount of physical silver in existence compared with physical gold. If you are thinking about scarcity it is silver that should be more highly priced than gold, not vice versa. Bullion dealers, coin ships, even Perth mint are all reporting shortage.

4 – Yet if the Hunt saga offers a single lesson it is to avoid margin trading in precious metals. For one thing price movements can be far too volatile to make this worthwhile, for another it leaves you vulnerable to your lenders.

5 – Stage two of the Credit Crunch upon us? The cost of insuring bonds from Lehman Brothers, Merrill Lynch and other brokerages against default has jumped in the past couple of weeks. There has been a steep rise in swap spreads over the past week. Another sell-off of United States equities and serious trouble for more major financial institutions?


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A Fly Back in Time

Today on

1. Gold went from an average price of $35.94 in 1970 to $120.17 in July 1973; an increase of 233%.

2. Then it fell from $120.17 to below $95 by Nov 1973 for a decline of over 20% in 4 months.

3. In March 1975, COMEX gold peaked at $187.50 for a rise of over 90% in 17 months.

4. In August 1976, COMEX gold bottomed at $101 for a 46% decline in 17 months, during this time gold had moved little for the previous 2 years and nine months. Then it began to move rapidly as US inflation began to be a problem in 1977, 1978 and 1979.

5. In October 1978, COMEX gold peaked at $249.40 for a rise of 147% in 26 months. By this time inflation in the developed world was high and rising much like inflation in the developing world is today.

6. In November 1978, COMEX gold bottomed at $191.20 for a decline of 24% in one month. Inflation continues to be a problem.

7. In January 1980 COMEX gold peaked at $873, an increase of over 350% in 14 months. After gold peaks, inflation begins to moderate. Paul Volcker has taken over at the Federal Reserve and administers some strong anti-inflationary interest rate increases which lead to a recession. He is a strong and steady force for moderation in money supply growth and reduces the public’s inflationary expectations.

We aren’t going to see $5000 Gold tomorrow, it takes time, but the important thing is, it is going there, unless we go back to Gold standard, or see America paying 15% interest rate on all Foreign debts (which will bankrupt the States, will it not?)

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CPI Since 18th Century

What caused the price to skyrocket?

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Peak Oil leads to Peak Food

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Oil Price, in US$, Euro, and Gold

Who says oil price has surged? Not if we’re still on Gold Standard:


And yes, it’s also true if we measure it in silver, gas price has actually became cheaper:

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Real Gold Price Since 1964

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Silver Coins rationed

Government rationed food during World War II, gasoline during oil crisis in the 1970s. Now, they’re imposing rations on Silver Eagle according to a latest WSJ report.

Here in Canada things aren’t any better either. On Wednesday I went to the local coin shop hoping to snap a dozen or two Silver Maple Leaf and were told that there isn’t any. I was told that they’ll have some on Thursday. On Thursday, I went to their HQ in downtown, and thanks God they do have some – a whole three of them. They’re the biggest bullion shop in Vancouver – which has 2.5 millions of people. Well a whole three of Silver Maple Leaf for 2.5 million people.

I’m not sure when it will happen, but Silver is going much, much higher. The mint were supposed to resume Silver Eagle / Maple Leaf delivery by the end of April, but today is already May 23rd as we stand. 1st Target $25, then $35, $50, $80 and Bang! (updated May.27th)

Update May 27th: They do have some Silver Maple Leaf for sale now. However a guy told me that they’re now short on Silver Bars…

Update June 26th: They’ve run out all 10oz and 100oz silver bars. Only Silver Maple leaf and 1oz round silver left. Next shipment date? Unknown.

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