In this post I will summarise why I bought into silver and why there’s currently a golden opportunity for investors.
After the events of COVID-19 and the entire globe was pushed into lock down, it became clear that we were heading into not only a global pandemic, but a potential recession.
During a recession, as most of us already know, central banks print exuberant amounts of money and ultimately devalues their respective currency.
A common hedge against inflation is to purchase physical metals, however at the time I was looking for a hedge GOLD was also heavily overpriced, particularly against Silver.
This is what led me to conduct further research into Silver to understand WHY the price of silver had been so heavily suppressed since 2008 compared to GOLD which had so heavily rallied.
Why has Silvers price been suppressed since 2008?
Some people allude that silvers price has been suppressed because it is worthless. It is “the cheap mans GOLD”. However Silver has historically held a price ratio of 1oz of Gold buying 25-50 oz of Silver. When I bought Silver, the price ratio had blown to HISTORICAL HIGHS of 1:120!
From a technical analysis point of view this was enough for me to feel comfortable buying Silver now, then waiting for the ratio to come closer to its historical level of 1:50 or 1:80 even, at which point I would sell my Silver for Gold.
But the actual reason (based on my research) for the GOLD:SILVER ratio
Blowing out so heavily is due to JP Morgan Stock Piling And Shorting The Price Of Silver.
In the following video, there is a 15 minute run down of how JP Morgan has done this.
Since around 2011, JP Morgan have been stockpiling Silver
In 2018 it is said that JP Morgan have around 53% of the total 261 million ounces of Silver held in vaults
But JP Morgan have not only been stockpiling Silver
They have also been SHORTING IT
There is a limit on the number of contracts you are allowed to short for Silver
But because JP Morgan hold so much of it, they have an exemption on how many contracts they can actually short
This allows them to move the market price for Silver substantially more than anyone else, and hence conduct price manipulation
The price of Silver has been shorted by JP Morgan from $42 USD an ounce all the way down to $13 USD an ounce
What happens next?
The risk to short Silver when it is so close to 0 is too large
And also the potential gain to make on the huge stock piles of Silver is so high
So I suspect JP Morgan will now remove their short pressure from the market and allow Silvers price to run
Outside of JP Morgan
We are also currently heading into a global environment which is facing negative REAL INTEREST RATES
This is (interest rates – inflation)
The down side to holding commodities is you don’t get dividend payments
However people would prefer no dividend payments over losing money due to negative real interest rates
Hence commodities are a great speculative investment during crisis
Summary of GOLD:SILVER investment
I entered into Silver back at around $15 USD an ounce
It is currently up around 25%
The GOLD:SILVER RATIO was around 115 when I entered, it is now at 93
I am going to wait for GOLD:SILVER to reach around 80, I will then move some of my Silver into GOLD
However I do think Silver could get to $30+ an OZ and I think it is heavily under valued
As per this chart:
So I will hold some silver and look to sell it into GOLD closer to 1:50 ratio
This part of my portfolio is my long term hold
Disclaimer: The above content is for educational purposes only and is NOT investment advice. All investments involve risk and therefore we recommend you do your own research.
Written By William Wright Via www.miningstore.com.au