Gold & Silver question

A downturn in the housing industry coupled with steel manufacturing and the auto industry.
 
I buy 10 oz stackers from Scottsdale Silver as they have a great reputation.
 
boring said:
thanks for the response. any idea what caused that?
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Aty least for silver, what cause the crash in 1980 was the speculation and market manipulation that drove the prices up to ridiculpous heights. Silver prices had been generally rising throught the 70s, but really caught fiire in 1980, thanks in a large part to the Hunt brothers (Nelson, William and Lamar's) attempt to corner the market. Silver had risen from about $5 per ounce in the mid 70s to $15 in '79, and then it just took off, peaking at about $50 an ounce, before dropping back to $11 per ounce a couple months later. It generally declined through the 80s, and bottomed at under $4 per ounce in the eatly 90s, before stabilizing at around $5-6 per ounce. It started climbing again in the early 00s, and briefly got over $45 in 2011, after which it dropped sharply, recovered a bit, and began it's downward trend the about &16 per ounce, which is where it is today.

So basically, the silver market crashed in 1980 because the price had been driven up to unrealistic and unsustainable levels through speculation and manipulation. It was on a general downward trend through the 80s and 90s because industrial demand wasn't sufficient to sustain the previous high prices, and with other investments payoing real returns, precious metals just didn't seem like particularly good investments.

Silver (and gold) began to turn around after the September 11 attacks. I'd put that down in part to unease about the country's (and the world's) economic prospects, but also to a lot of other things. For one, the Fed lowered interest rates to very low levels, while government spending rose and deficits increased dramatically. In a rational world, that should eventually lead to some pretty serious inflation, and precious metals are seen as a hedge against that sort of thing. (But if recent events tell us anything, it's that we're not living in a rational world. At least not in the short term.)

Prices dropped a bit when the housing bubble popped (along with prices for pretty much everything else), but then recovered strongly as people saw preciuous metals as a hedge against the "financial crisis," and as prices rose, so did the usual speculation and irrational exuberance, culminating in a $45 peak in 2011, which was followed by a steep decline for the next with steep declines through 2015.

So now silver at about $16 per ounce. Cheap, compared to the highs of $45 in 2011 and $50 in 1980, but not at all cheap compared to the roughly $5-6 average price from about 1985 to 2002 (not to mention the $4.20 price in early September and late October of 2001). I still can't convoince myself that silver's cheap at $16, but I'm also not convinced that it's goint to go much lower. Adjusted for inflation, those mid-90s prices would translate to about $10 per ounce today, which would mean silver's still overpriced by about 60%. But that assumes an awful lot. Maybe silver was just an amazing bargain in the 70s. Maybe it's a great bargain today. Or maybe it's still inflated bacause artifically low interest rates have made the cost of holding precious metals relatively low comparred to other assets. If you could get 6% on T-Bills, a lot more people would think twice about keeping their money tied up in metals. On the other hand, if the world suddenly decides that Uncle Sam has borrowed more than he can ever pay back and quit buying his paper (leaving inflation as the only viable alternative to dispose of the debt), a Canadian Maple Leaf might start to look a whole lot better than a wheelbarrow full of worthless dollars.

That's my take on oit anyway, and you can take it for whatever it's worth.

All that said, and despite my misgivings, if I had an extra $10K lying around, I'd buy a Silver Maple Leaf Monster Box from Kitco.
 
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