Question for community discussion regarding precious metals investing

I have a question for the Pack’s precious metals gurus. I just checked JM Bullion’s website and a roll of American Eagles is $388.20. This is the lowest price I’ve seen in a long time. I understand that people invest in PMs when other investment options are tanking, and that usually drives up the cost of PMs. Perhaps I am wrong here but it appears that U.S. financial institutions are tanking and yet the price of silver is so very low. This doesn’t make sense to me–could someone please explain? I am baffled.

Bam Bam

Comments

  1. The conspiracy theorists will say there is market manipulation of the gold and silver markets. Economists will say it is lack of industrial demand that is suppressing silver prices. Silver’s biggest use is in industrial and manufacturing uses. Comparatively very little silver goes into jewelry compared to that of gold. Demand for silver is very high at the individual retail level. But the retail demand is small compared to the effect of industrial demand.

    In my area it is darn near impossible to find 90% silver coins as few want to sell at these prices. Silver dollars and bullion are available but premiums are high. But the premiums could come down but I would not let that be my deciding factor. Think of precious metals as insurance and don’t worry about the prices. Dollar cost average. If prices go down you can get more for the next dollars spent. If they go, oh well, still buy some more.

    Don’t freeze because you are thinking too much about why silver prices are low. Just buy some. Wait a bit and buy more.

    • I agree.
      The current prices of silver (and gold) I think tell you more about the $U.S.Dollar than anything else. Right now the U.S. looks the best of all the dirty shirts out there. China, which everyyone used to say was going to be the #1 economy of the world — has been exposed as having massive internal debt problems & utter incompetence at managing their yuan. Japan is a 2-decade-old disaster. Europe is in big trouble as Divider-In-Chief’s Syria policy is a catastrophe, and his Iran dealings are the same — so most of Europe looks very very shakey, and wars are ongoing in so many middle eastern areas / Ukraine / (already lost real estate in the nation of Georgia) Libya is a disater….. people are still continuing to flood into the Dollar, thinking WE have the best gig going….

      hence silver is cheap. I have already lost plenty on it, and far more on gold mining stocks, but I’m still buying silver and holding my gold mining stocks. Portfolio insurance….diversification. In 2008 crash, EVERYTHING went down. It could happen again. Holding cash plus precious metals plus stocks gives you lots of diversification. No one knows the future. Easier to re-balance AFTER things zoom up or down. Not in advance.

      • I knew I liked you, I too have lost money on my gold mining stock. But I figure when the price of gold goes back up so will the stock.

    • DJ,

      I’ve been investing in (hands on) silver for a few years now, mostly as a hedge against inflation and as part of my retirement savings. Your explanation of low industrial demand makes perfect sense. Thank you.

    • There are a number of reasons that PMs drop. Having worked in the brokerage business there are a lot of things that happen that are counter-intuitive. One of the little known processes that kick in when stocks tank is depending on the depth and width of the drop, brokerages have margins to cover….and often it happens when they are short on cash and facing a large margin call. What does happen is often when these kinds of deep drops are active is that a call is made to the “Margin Desk” and they tell the clerk to sell gold and silver to get the cash to cover a pending margin call. So, when a market is falling badly, you’d expect to see precious metals rising, when in actuality you see them falling and it is because the brokerage needs the cash to cover their bets. THIS IS A GREAT TIME TO BUY when you see this kind of double-dip, because once the “house” settles its debts and can catch its breath….. it will look to replace the metals sold. This should also be an important situation to watch closely because of a “house” gets wacked bad enough, it can expose serious underlying weaknesses.

      But, to be clear, this is just an added event that can be happening while adjustments are being made. Metals ARE insurance and should be part of anyone’s portfolio that you should hold. I have gold and silver that I have accumulated over the years some of which has increased in value 4x-6x….but I’ve had to just sit on it. Not a bad idea to use 1-3% of any new funds to buy physical metals….

  2. Other things that are surprisingly cheap right now (due to the strength of the dollar…..I didn’t predict this, I thought we would have been in the toilet by now….) are semi-auto pistols, AR15’s AR-10s, and ammunition. In a lot of ways, food is reasonably cheap now, and of course FUEL is dirt cheap right now. It would be a good time to invest in propane in an underground tank.

    • i just filled mine up for less than half the cost of last year. yay!

    • and yes, ar’s cheaper than i have ever seen them. i put one together for 350 bucks last week. i look at that as a metals investment as well.

    • PrepperDoc:
      I agree with the food and fuel statement. We are having a case lot sale here this week/weekend. I looked at what we saved and at my interest rate on our Money Market account. I would need to leave $100,000 in that account for a year to equal the saving from last night.

      • Wow, those are GREAT testimonies to how much people can take advantage of the low prices our strong dollar buys us right now (and a lot of oil exploraton). It of course won’t last forever….

      • I know what you mean. 49 cents interest on my $57,000.00 “savings” account last month. Actually I now refer to it as my parking account. Just a place to park it that is less likely to burn down than my house.

  3. Bam Bam:

    I too would be interested if anyone can explain the pricing of PM’s. It used to be that bonds and PM’s went up when the market went down. Now it is just crazy.

    Personally, I refuse to spend much brain time on it. If I have the money, I buy. I’m still replacing what I sold for $1840 and $38 for gold and silver 4 years ago. I look to get ahead of where I was when I needed to generate some cash.

  4. I to have been purchasing silver as I know that it is most likely more valuable than our paper money. I am however wondering that when the whatever comes down the pike how am I to determin the value of , let’s say , an ounce of silver. Right now you can go on the net and find out on a daily basis it’s value. Or find out what an individual coin’s value is. Maybe it would be best to just pile it away and when things get better ( if ever ) use it as a savings account . Anyone with thoughts on this ?

    • Vince, I pretty much concur. Large denomination gold coins seem to pricey to be of much use as currency when (if) paper becomes worthless. Silver seems like a much better deal for use as day to day currency. I look at what I have as a savings account also. Perhaps I’ll never make any real interest on it but I kind of expect that it will probably make more than the money I have in my savings account at to big to fail. Actually I think of that one as more of a “parking” account. A place to keep it that is somewhat more secure than under my mattress.
      If the economy fails and I pray that it doesn’t silver will be worth whatever somebody is willing to trade for it. I’d personally ask for a minimum of 10 times face value and possibly go as high as 20 times face. I guess that there is something to be said for the power of prayer as I’ve been praying for over 40 years now that the economy doesn’t fail!
      (Doesn’t seem to have helped much with inflation though) If I’m lucky I get another 15 or 20 years on this side of the dirt and them my kids can divide up the coins.

  5. countrygirl says:

    There are a couple of things causing this. Other countries are feeling their own economic stress. Check the value of the Euro vs the dollar or the Canadian dollar vs the U.S. dollar. This is NOT because we are doing so great it is mostly because the U.S. is on a publicly admitted effort to keep interest rates down and to pump money into the stock market. So investors look around for the safest and most profitable place to put their money and it is our stock market. This depress the value of PMs around the world so while you and I and many other preppers in the U.S. still highly value gold and silver the majority in the world prefer the U.S. stock market. This could change in a heartbeat but it could last for months or years too.
    I have a lot of PM’s and I make nothing on them in interest AND the value in the last five years has been cut in half. My wife’s IRA is fully invested in the stock market and she has doubled it’s value in the last 5 years. Time will tell.

    • PrepperDoc says:

      That is a really good assessment, countrygirl!! China has put themselves in the same basket, literally buying their own market….but they won’t let you SELL, so who would want to invest there? At least one other central bank is outright buying their nation’s stocks….and probably ours is, covertly. That sort of makes me question if it is a “free” market anymore….

      Thanks for your concise explanation.

  6. George in Minnesota says:

    I look at PMs from a slightly different angle than most. DW & I used Canadian 1/4 oz maple leafs on a neck chain as jewelry during our world dive travels. We took a hint from the Flyer’s Survival kits during the run up to WWII. Those kits included British Sovereigns used to get a downed flyer out of a tight spot. We actually had to use one in Malaysia to save our lives and get out of an ugly situation.
    PMs we have now are many of the things others hold them for but to us they are the means to buy a tank of gas, bribe an “official”, pay a Doctor to stich up a wound, buy antibiotics and in general grease the wheels in a “Terminal Chaos” situation. The fluctuating value of the PMs means very little to us as they are in out kit similar to a portable water filter or a hand gun, simply a tool to use when the nasty stuff hits the fan.

    • PrepperDoc says:

      Wow — I hope I don’t get in as tough a situation as you found yourself in even BEFORE the big one….

    • Hi George, I like your jewelry approach. We bought British sovereign and French 20 franc coins in Europe this summer and just had them attached to a gold chain bracelet from Costco. Will add 1/4 0z gold Eagles and possibly a jewelry grade $5 gold piece. They make a nice charm bracelet, nice souvenirs, and might come in very handy some day.

  7. Remember that buying PMs comes only after one covers the basics of water, food, & security/firearms. Yes, the low price is tempting, but get all the basics first.

    • TPSnodgrass says:

      Agreed on all points above! We only have a few ounce gold coins, everything else in the portfolio which we physically control are fractional coins. We strongly believe those are FAR more useful in a “grid down situation than anything else. We each also carry on our persons, fractional coins as survival tools IF or when they might be needed. I’ve also been known to carry where legal in my BOB, ,22lr ammo, sealed in Food Saver bags as “barter”, and some other calibers as well. Will I use those? well before the fractional more valuable coins in a heartbeat. Hard to use a .22LR firearm with no ammo, and we stockpiled, .22LR YEARS ago, and people mocked us for it too. Well, we don’t worry nor concern ourselves with the .22LR or .22 Magnum “ammo drought” at present at all. Don’t have to. Same principle applies I believe in storing “wealth protection” fractional coins, either Au or Silver. We like both. However, first and foremost are food, water, shelter and defense. After those, THEN we started in on the “wealth protection” storage as we felt we needed. Will we have more time than we need? Probably not, but at least we are moving forward. Heck, even when you fall flat on your face, you ARE moving forward, it’s just the abrupt stop, that smarts! No fear! Good points, and I always am rejuvenated when reading your posts here ! Thank you all !!

  8. Ok, there is little doubt that there is price manipulation if you read charts and volume action on the COMEX at the open of the various exchanges but it’s complicated and burdensome to detail here. This is no conspiracy. I’ve been a trader for so many years but traded commodities only a few years. Suffice it to say that controlling the Au/Ag market by shorting the paper market brought to you by JPM, et al is simply acting as a surrogate for the FED and is based on dollar balance and the petrodollar. Also, as they jam the commodity down shorting the paper they are accumulating the physical at a price below the actual cost of mining the metal. I forgot how much JPM accumulated in the physical silver market recently but it was huge. It’s not just retail and it’s not the that silver is simply a commodity. Gold is not a commoadity and they tend to move congruently.

    USAwatchdog’s latest interview with the silver expert, Morgan, would be worth a perusal. Also, I view pm’s as a wealth preservation measure vice an earned income measure. Research Jim Rickards, whom I follow on twitter, and you’ll find a genius. Read his books.

    BTW, a 45 caliber ammo box holds exactly 18 tubes of 20 Silver Eagles quite perfectly. Rickards believes in at least 10% of investable income in pm’s. All relative on what your investable income is and whether you have food, ammo, et al. Some have more ability to lose due to more fiat wasting away.

    Due your own due diligence.

    • Great points and you are far more astute at “trading” than I!!!

      I looked at that JPM silver buy and compared to their overall holdings, it was just a “diversification” — one that most of us would heartily approve of. Perhaps you are right that they are activeily driving down the price (I don’t know) — but if so, it is to OUR as well as THEIR benefit. I did a breakdown and I think I have 2-3% of my TOTAL in precious metals, but then I have a huge chunk of LAND, and I have cash, firearms, ammo, productive equipment, radios, you name it. All over the board. I’m not any smarter than Solomon, and so I just follow his advice. If silver stays cheap, i may buy considerably more. I also bought FUEL. Diesel cars are awesome! Tractors also!

      • P-doc, I have an undergrad in bus. mngt with extraneous classes in macro- microeecon. I don’t portend what’s coming as I usually could, e.g. I left Northern Va after flipping homes preceding the housing crash two years before the crash, ergo, not stuck on a crashing elevator if you will. Left a couple years on the table. That is good enough.

        Au/Ag is operating in a realm not seen before. Price discovery is a farce here. Supply not meeting demand and the price is depressed leads me to one conclusion even disregarding the ubiquitous conspiracies propagated by the “theorists” on sites such as this. I’m not generally these folks. I’m wealthy but grew up dirt poor. I’m wealthy because I’m the ,
        Millionairre Next Door.
        Something tells me you know what that means.

        But, these folks have reason to be concearned and I’m all in.

      • Should have said I’m wealthy enough above. Gah. I was getting my imbibe on at the time. Sorry. I low carb, grain brain most days but then other days I get my life on.

    • gthomas,

      I just got a copy “The Death of Money” and will start reading it. Thanks for the tip.

      • NOT the easist read in the world. The guy has been a serious insider though and brilliant IMO. Most don’t know the story of long-term capital management, a hedge fund that collapsed in the late 90’s and how it nearly brought down the whole banking system. We only know of the 2008/9 near collapse. Rickards was brought in to save the day. Other than grain brain, the mystery of the shemitah, the Bible, this is the other book on my coffee table. Oh, and a book about native birds and stuff but I digress.

  9. Thomas The Tinker says:

    Hummm… JMHO! PMs are ‘priced’ in dollars and cents… that figure is determined by the ‘Market’ price of.. the ‘digital’ price of… the vapor price… the ETF… the ‘Hedge’… the greater fool price… these are all speculative… second.. third… re-hypothecated (sp?) forth or fifth.. re-hypothecated … This ‘Price’ is disconnected in so many ways. It is the price traders use in the give and take of ‘paper.. digital’ buying and selling.

    It is kept low in order to maintain wiggle room in the Long and Short crowd’s bubble… It is kept low in order to maintain the inflation bubble where it is.. give or take a buck.

    Stackers don’t control the price…. they (we) do control a small part of the physical supply. The price is ‘Rigged’. Right now it is rigged low and I rather like that.

    JMO…. Prepper Doc may explain things better…….. I’ve said it before.. I wanna see parity with Gold… give me parity with Gold and I’ll buy Southern Ohio…..

  10. Chuck Findlay says:

    I don’t invest in silver, I buy it to preserve my labor for future use.

    Difference being an investor is in a flip it for more then I paid for it mindset. My way is to preserve my labor (all money is is labor) for future use. I’m not so much worried about the fact that one silver coin cost me $25.00 and another coat me $16.00.

    As far as why it’s so low right now, I don’t know. But I don’t think it will stay that way and I am taking advantage of it by buying it at the low price. But then if it goes to $30.00 an ounce I will still buy it.

    Right now I think silver is 70 to 1 against gold. It has been historically 16 to 20 to 1. Who knows 70 may be the new normal, but I don’t think so.

  11. A while back I read about saving your nickels as they would be the next “PM”. At the time the melt value was 5.2 cents. The USA nickel is an alloy of copper and nickel. For those not familiar with the various metal alloys another important alloy is monel which is also made with copper and nickel. Yesterday I checked on coinflation for the current melt value of a nickel and it is down to 3 cents. So my $500.00 in rolled nickels lost about 40% of their melt value but they’re still worth $500.00.
    My question is, is my $500.00 still worth $500.00 or due to inflation and or market demand is it now worth $300.00? I will readily admit to not knowing jack about economics.

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