Silver…The Investment Of A Lifetime

December 13, 2013

Even though its price has declined over 30% this year alone, silver remains the people’s metal. Silver remains a store of value when central planners try to inflate their way out of debt. Silver remains an asset for anyone who senses that there is a need to hedge either against the corruption or the incompetence of system apparatchiks who did not see the 2008 crisis coming. Silver is a portable, cheap real asset that has also been money to more people than has gold throughout world history. While the price of paper silver has been hit hard these past two years, this has not stopped people from buying real silver coins and real silver bars. As we round out 2013, it looks as though physical demand will be in record territory. And even some forms of paper silver, like the SLV, did not see the kinds of outflows of metal seen by the GLD this year.  So don’t let the silver price fool you—beneath the surface some very determined buyers are voting with their feet, diversifying away from cash, bonds, stock, or real estate-- and into silver.

Silver is an investment for a more realistic public, a public that has learned tough lessons from an economy that has posted its weakest “recovery”—if it can even be called that—since the Great Depression. For a determined minority, silver stands as a vote of no confidence in an economic system that- for whatever reason- is simply not working for large swaths of western society. The change in social mood is palpable- and much evidence remains that the parabolic increase in silver investment since roughly 2006 speaks to this fundamental change. To me, this shows that silver investors are the dire-hards, they are the ones who will hang on no matter what to this metal as monetary insurance. Since all of the silver for investment is only worth at most 40 billion dollars, you simply can't have that many people so committed to silver without the price rising substantially. And so, as I like to say, silver is not so much the poor man's gold, as it is the wise man's gold, because in addition to providing insurance as a real asset, silver could potentially make a moon shot in terms of price.

Silver is also one of the most versatile industrial metals out there. The industrial applications for silver far exceed gold, which ironically is part of the reason why silver is so undervalued and rare: government and banks dumped all the silver they could dump so as to satisfy industrial demand which gave markets the impression of limitless supply for the white metal. Some wonder whether or not a true industrial shortage in silver is possible in the coming years.

One has to wonder if the near doubling of many solar stocks over the past year is any indication of the future of solar demand, which is simply one of many new industrial uses for the white metal that could send its price soaring. The bull market in silver over the past years arose simply from investment demand, by the way, and so any increase in industrial demand represents just one more reason for the price of the people's metal to move higher.

There are other reasons, as well, for silver to dramatically outperform all other assets in the years ahead. Here are four to watch for in 2014:

  • Near record speculator short interest.  Usually the speculators in the paper markets play the role of dumb money. In 2013 these speculators increased their bets against higher silver prices to levels not seen in years-- or decades- depending on how you dissect the data. When everyone is on one side of a trade, there is a greater than even chance that they are wrong.
  • The possibility of Indian gold investors diversifying into silver.  2013 is shaping up to be a record year for silver imports into India. The reason for this should be clear to even the most casual observer of the precious metals markets: with the Indian government trying to kill the gold market, at least some Indians are seeking an alternative monetary metal. The only problem is that the size of the silver market is nearly 100 times smaller than that of gold. Billions of dollars of investor interest in gold hardly moves the price of the yellow metal-- in the case of silver, however, billions of dollars can potentially double or triple the white metal's price.
  • Continued interest in alternative currencies.  You may have also heard (or are lucky enough to be one) of the new "bitcoin millionaires." I find it interesting that at a time when the propagandists will tell you that the world economy is recovering, that the dollar is king, and that critics of the current political or social system are traitors, that somehow you have interest in alternative currencies like bitcoin. It seems that a determined minority wants something else besides fiat currency. We have seen the trend toward greater interest in alternative currency for a while with precious metals like silver. For example, Utah recently made it easier to transact in precious metal and we have had repeated efforts in Mexico to bring back silver as a form of savings, due to the efforts of Hugo Salinas Price. I don’t think the silver shorts take seriously the desire for alternative currencies-- a game changing reality that will take years to unfold globally.
  • Supply Shock?  While I believe that the mining stocks will someday get their day in the sun, recent events in the mining industry demonstrate how hard it is to get precious metal out of the ground economically (please note the word economically.) If I didn't know any better, I would say that mine supply for metals like gold and silver may be nearer to decline than many realize, given the disastrous cost overruns and other headwinds facing the mining industry. Moreover, the widespread belief that mine supply will just go up up and away forever flies in the face of historical reality. For whatever reason-- declining ore grades, energy costs, wars, or political or regulatory issues-- mine supply has gone down for decades before. Why should we expect our era to be any different? Silver supply has steadily increased for decades without any meaningful decline. Might we finally see the beginning of peak silver (at least for a few decades)? Is anyone out there factoring that into their analysis of where silver prices might go?

To sum up 2013, it looks as though silver investors have endured a painful cyclical top within a secular BULL market. You should compare the recent, two year decline in silver to the stock market in 1987. In that year, the stock market crashed, and many felt the bull market in stocks had ended. Many sold their positions grateful that they had not lost more even money. And for a while, it looked like that was the correct position. The stock market moved sideways for several years-- but it then began an even more dramatic move higher-- starting slowly-- around 1993. We all know how high the market eventually went. And I think you should understand that the amount of money needed to take silver up 5, 10, or 15 times from here is simply a fraction of what is needed to goose the stock market ever higher.

Of course silver is monetary insurance -- insurance that too few people own. But if I am reading the tea leaves correctly, silver could also just be the investment of a lifetime. Only time will tell.

Read more of Ryan Jordan's analysis at  where you can also learn  about his book, Silver--The People's Metal.


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Ryan Jordan currently teaches U.S history at the University of San Diego. He has previously taught at UC San Diego, Lafayette College, and Princeton University, where he received a Ph.D in 2004. His book, "Silver- The People's Metal," published in 2012, recounts the past, present, and future of the silver market.  Visit Ryan's blog:

Man has had the ability to separate silver from lead for as far back as 4000 B.C.