V Shape Recovery Up Next from Predicted Fall In Silver

We got a pullback in silver that I thought might be coming in my last post. I wrote Aug 20, 2024 the following:

If we do get a pullback in the price of gold and silver, it will be short lived. The Federal Reserve can’t win the battle on inflation unless they raise interest rates so look for an initial move down in rates over the next few Fed meetings and then it’s time for them to play catch up, especially if we get a September/October crash or post election crash in the stock markets. They will try to stimulate the economy and stock market and it will unleash the price of gold and silver to the “undreamed of” heights that Richard Russell used to speak of.

Save a little cash for any “flash crashes” that may occur like we had in March of 2020 when silver fell under $12 an ounce. If we did get any move south from this $29 range in silver, don’t fear any purchases at that point.

What has transpired since my last article is a drop in the market (not a crash mind you) and a drop in the price of silver as shown by the chart of SLV below. SLV is the Exchange Traded Fund that represents the paper trade in silver. It’s not the same as owning physical silver because it is run by JP Morgan and quite simply, there is no reason to trust a bank to manage your silver trade. I wrote about this in my book Buy Gold and Silver Safely about the potential issues with the silver ETF. It’s free online in pdf form if you haven’t read it.

You can see price has dropped in SLV to 25.38 which is around 27.89 for the spot price of silver. We should see some fluctuations from here and over the next 2 days a possible move lower which my recommendation is to buy as much as you can as we won’t see these prices maybe ever again. At the same time, we should bottom close to where we are now so don’t wait too long. More on that later.

Think about the statement I made, “these prices may never bee seen again.” These past few years silver has lagged gold in a big way. In 1980 silver hit its highs the same time gold did and in 2011 it did the same thing. But lately we have had gold hitting all time highs and silver is sitting down here in the 27 range. Why?

Silver use has surged with green technologies, solar panels and electronics but jewelry demand has fallen. This could be related to what’s really going on with our economy. US GDP was revised higher last quarter to a 3% annual rate. However, most of the GDP calculation relies on consumer spending which was up 2.9% last quarter. However, at the same time, credit card debt is at record levels up 5/8% over last year. So is this GDP growth from production or the fact consumers had more room on their credit cards and spend they did?

Silver is not a U.S. only phenomena. The premiums that individuals pay in China will shock you. For years the Chinese have been flying here to buy mostly gold at cheaper premiums than can be had in China. But overall the demand for silver has been increasing in China. China is going solar and with dwindling inventories, they are going abroad to buy silver directly. But this has slowed down of late. So why can’t silver get going?

Silver Is Money

This is the hardest part in predicting whether the falling economy would drag the price of silver down along with the stock market. We got a taste of that today. But let’s not forget one aspect to silver that trumps all others. Silver is money.

The purchasing power of silver has always kept up with real inflation. This is through good times and bad. Silver is your insurance against a government that is just like the consumer, spending out of control and at record levels. Nothing will change the consumer or the government except the consumer has a maximum they can go into debt and the government does not.

My Dad is 90 years old and we finally pulled out the red topped jar that he was putting silver coins into since I was a kid. He taught me to always be on the look out for silver coins and each time I found one he would put it in the jar. Each quarter today is worth $5.06 and each dime is worth $2.02. That’s with the drop in the price of silver the last few weeks. You’ll be asking yourself this question 5, 10 and 20 years from now, which is a better buy, the 1964 quarter with 90% silver or the 1965 and later quarter with no silver? If you know you can make that change today, trading fiat dollars for silver, and you know government spending will never cease, why are you holding onto fiat dollars?

Sky’s the Limit for Government Spending

I’ve written much on government spending and how there is nothing in place or not one single person outside of Elon Musk who can right this ship of an out of control Congress, both sides, who are set on making us all Serfs. But one person can make a difference and that is shown to be true in Argentina with the necessary cuts made by President Javier Milei and those cuts showing up with a declining inflation rate.

I posed the question Will the U.S. Follow Argentina’s Disastrous Inflation? The Fed is set to lower rates soon causing interest rates to fall more so that money is cheaper to borrow. So the governments philosophy is to borrow more money cheaper and this will in turn spur the economy because they are under the Keynesian influence that government spending can get us out of dire situations. Once the government learns it can spend unlimited amounts of money without any consequence to the dollar, what’s to stop them from doing so? Remember the Fed goal of 2% inflation? We have come down to 2.9% from the 2022 highs of 8% but the Fed had no control of the inflation rate going up and it’s a pipe dream by the Fed to think they can fight future inflation once it rears its ugly head. But they sure can project well on what inflation will do can’t they? Does anyone believe the next chart from Statista projecting inflation to average about 2.1% until 2029?

The U.S. will follow in Argentina’s footsteps as Congress doesn’t know hot to cut back. 

Will the Dollar Crash? 

For years there has been a call by many who write about gold that the dollar is going to crash. I have documented these calls over and over explaining how they have missed the boat on what the dollar priced in other currencies actually means. I wrote an article Dec 22, 2016 Why Dollar Crash Gold Bugs Have Been Wrong. The dollar simply has not crashed. I wrote a 400 page book on that as well called Illusions of Wealth.

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While I speak of the U.S. dollar and the potential of it crashing, by default and definition, if the dollar crashed, it means all the currencies that make up the dollar skyrocket. That means those countries like all of Europe, the UK, Japan, and Canada’s currencies are just fine compared to ours, right? Hardly so. They all have debt to GDP ratios that are also out of control like here in the United States.

Yet here we are Sept. 3, 2024 and the dollar is up the last week.

And silver is down the last week while the dollar has popped up again.

What Will Get Silver Going?

While the dollar may not necessarily crash, it will take more Dollars, Yen, Pounds, Euros and Canadian dollars to purchase gold and silver moving forward.

Gold Priced in Various Currencies Just 5 years Ago Versus Today

US Dollar: January 5, 2019 $1,246.94 and Sept 3rd $2,491.08 an ounce, a 99.78% increase.

Euro: January 5, 2019 $1,127.81 an ounce vs September 3rd $2,253.14 an ounce, a 99.78% increase.

Yen: January 5, 2019 182,180.35 an ounce vs September 3rd $363,977.51 an ounce, a 99.78% increase.

Pound: and January 5, 2019 $949.90 an ounce vs September 3rd $1897.62 an ounce, a 99.77% increase.

I could do this for any currency that makes up the Dollar Index but you get the point. Gold is rising in every currency. In fact, gold has doubled in price for the currencies above and yet the dollar has stayed somewhat steady the last 5 years. Can I rest my case on my statement: “it will take more Dollars, Yen, Pounds, Euros and Canadian dollars to purchase gold and silver moving forward.” It’s the same case I made in my Illusions of Wealth book in 2016.

Gold Silver Ratio 

The gold silver ratio is sitting at 88.96 today and the chart below shows the support and resistance levels. We are well above the norm for now which tells us that a move back down below 80 is imminent. Somewhere in the 40’s is my ideal target for this ratio as silver will act like the hare in the tortoise and the hare fable and jump out ahead of gold for the time being.

Over the next few weeks look for a bounce in silver and possibly one more fake out test of the lows into the Fed and once the Fed solidifies rate cuts, silver will be off to the races. Buying today you still have premiums at decent levels. When silver goes, premiums will shoot up as well. I will also say, even if you are hesitant in buying silver, anything under $30 is a good price to buy. Sit back and watch the fireworks, especially after the election. And especially when you see what I mention in the next paragraph.

Notice how I didn’t mention one thing about the banks and a major reason to own gold and silver? There will be another banking crisis of some sort. They bring it upon themselves. I watched the Big Short again and all I could do is credit those who saw what was going on by doing a little homework with some big time admiration as this has been what I have been trying to do since I wrote my first book in 2010. My next book I have put this same effort into and it will be out September 15th. You can sign up for the release of How To Profit In Up and Down Markets by going to this link:

profitinupanddownmarkets.com