Nobody Will Tell You This About SILVER! - David Morgan

Summary

In this discussion, the speaker explores the complexities of the silver and gold markets, addressing myths and market manipulation. Key topics include the growing demand for silver, its role as a store of value, and the historical deficit in the silver market. The speaker contrasts this with gold, noting similar challenges around supply and demand. They delve into how precious metals are increasingly seen as viable alternatives to fiat currency, especially as modern payment methods evolve. The conversation also touches on the psychology of investing in precious metals and the dynamics behind price fluctuations and market rallies.

Takeaways

• 😀 Silver has been in a market deficit for decades, but much of its supply is locked in landfills or investor hands rather than being available for industrial or commercial use.
• 😀 From 1990 to 2005, the above-ground stockpile of silver decreased significantly due to high demand, but since 2005, the stockpile has been increasing again.
• 😀 Despite the increase in the above-ground silver stockpile, the market is still considered in deficit because demand exceeds supply, with a notable portion held by investors.
• 😀 The gold-to-silver ratio in the ground is 7:1, which is significantly higher than the natural ratio of 12:1 in the 1300s, indicating that silver is being mined at a faster rate.
• 😀 Gold is considered a more reliable store of value than silver, as it doesn’t get consumed in the same way and remains largely in circulation.
• 😀 Markets move at the margin, and prices are influenced by the behavior of owners unwilling to sell, creating parabolic price movements when supply is constrained.
• 😀 Precious metals like gold and silver can act as a hedge against fiat currency, but in extreme market conditions, metals could be directly exchanged for goods and services.
• 😀 There has been a historical manipulation of gold and silver markets, but the evidence of suppression is debated; manipulation is acknowledged in some cases, but not every day.
• 😀 The price of gold, particularly its rise from $35 to $422 in the 1970s, is a result of policy changes and market interventions rather than a natural market trend.
• 😀 Silver’s value remains relatively stable when measured in terms of its purchasing power, as demonstrated by historical examples where silver dimes could buy a gallon of gas in 1968 and still maintain that purchasing power today.
• 😀 Newcomers to precious metals often ask how to liquidate their investments. Today, there are multiple ways to spend or exchange metals, such as using a silver-backed debit card, blockchain payments, or direct exchanges.

Q & A

Is the claim that the world is running out of silver true or false?

The claim is more nuanced than simply true or false. While there has been a historical deficit in the silver market, it is not because the world is running out of silver. Silver stockpiles above ground have been decreasing, but there has been a replenishment in recent years. The deficit is due to higher demand exceeding the supply of newly mined and recycled silver.

Why does Jeffrey Christian call the silver market deficit a myth?

Jeffrey Christian argues that the idea of a silver market deficit is a myth because the silver that has been mined historically is still present in landfills and may not be accessible for practical use. While the market has experienced deficits, silver has not disappeared entirely, and the increase in above-ground stockpiles in recent years complicates the issue.

What role do above-ground stockpiles play in the silver market?

Above-ground stockpiles are essential in balancing the silver market. When there is a demand deficit, the market relies on existing silver stockpiles to meet the demand. While the silver market has experienced deficits, these stockpiles have been used to fill in the gap, and the stockpiles have been increasing in recent years.

How do supply and demand dynamics affect silver prices?

The price of silver is influenced by supply and demand, and especially by the availability of silver for sale. If investors or owners of silver are unwilling to sell at certain price levels, the market has to bid the price up in order to encourage selling, which can lead to parabolic price movements.

What does the gold-to-silver ratio indicate about the silver market?

The gold-to-silver ratio reflects the relative amounts of these two metals in the ground. Currently, the ratio is around 7:1, meaning there is significantly more silver mined than gold. Historically, this ratio was around 12:1, indicating that silver is being mined at a faster rate, potentially depleting its available supply.

What is the argument for holding precious metals like silver and gold?

The primary argument for holding precious metals, like silver and gold, is that they act as a hedge against the devaluation of fiat currency. While their supply is finite, their value tends to hold up over time, making them attractive as a store of wealth, especially during times of economic uncertainty or inflation.

Why might someone want to sell their precious metals for fiat currency?

The desire to exchange precious metals for fiat currency often stems from the need for liquidity or to capitalize on a market high. However, the speaker argues that one should consider the long-term implications of selling precious metals for fiat, especially in the face of inflation and fiat currency devaluation.

What does the speaker suggest about selling precious metals during a market peak?

The speaker suggests that, although many people believe they should sell their precious metals at a market peak, this may not always be the best decision. Historical examples show that holding onto assets like gold and silver can yield substantial long-term gains, especially when paired with other assets like long-term treasuries.

What are the different ways to exchange precious metals for goods or services?

There are various methods to exchange precious metals for goods and services. These include using silver or gold-backed debit cards, utilizing blockchain technology to facilitate transactions, or directly trading metal for items through agreements between parties. Several states are now also legally recognizing gold and silver as acceptable forms of payment.

How does the concept of 'direct exchange' work with precious metals?

Direct exchange refers to using precious metals like silver or gold in trade without relying on fiat currency as an intermediary. This can involve personal agreements where goods or services are exchanged directly for metal. In some cases, silver and gold are used to pay for things like cars or property, if both parties agree to the transaction.