Silver Prices Appreciated A Whopping 8.9% This Previous Week ! Will it Carry on Its Assent, Or Is I

If any of my followers aren't aware of the present silver prices, you might want to go and have a quick look. The spot valuation on silver went up by 8.9 percent in the past week . Those who have read my work is aware that I'm at present a really big fan of the use of gold and silver as a type of insurance against the widespread inflation that's going to be the probable result of the trillions of ongoing US dollars being created by our own federal government in an effort to stop the existing crisis and its downward spiral. I continue to stand behind that belief, and i believe the recent pricing movements are suggestive of things to come. Silver is really fascinating for a number of reasons:



1. Its historical cost ratio to gold. Silver is taken from the ground at a ratio of approximately 12-15 ounces for each and every once of gold discovered. But its value above ground differs highly in comparison to gold. It typically hovers well under its scarcity ratio, and usually trades at around 1/60th that of gold. However during times of financial crisis or inflation, silver can catch-up quite rapidly. The latest price movement has moved it to 1/50.7th that of gold and rising. When this sort of move happens, silver moves up much quicker than gold on a percentage basis. At a present price of $1408 per oz, silver could be valued at $78 per oz if it hit a value of 1/18th that of gold. It's already closed a substantial portion of that ratio difference within the last week, and exhibits no real indications of halting.



2. As predicted in my report, we've now gotten nearly conclusive evidence of gold and silver market manipulation by key participants in the market. JP Morgan and HSBC have been indited on racketeering (RICO) charges for conspiring to keep the spot price of silver low. Even though this does not yet guarantee a conviction, I think it could have a deeper impact on the silver market. If they were manipulating the market by selling short into price rallies, like the indictment suggests, they will have undoubtedly stopped for now. What this means is that silver might actually have a chance of discovering its true market valuation, and the multi-day rally that it's been going through appears to be an indicator of that.



3. Far above the pricing ratio of silver to gold, or even the independence of the marketplace, is the ability of precious metals to hedge from increases in inflation being caused by the recent rash of harmful monetary policy. With the combination of our federal government spending trillions of dollars in stimulus, bailouts, and quantitative easing, added to our foreign trading partners desperately firing up their printing presses to counter the supply of greenbacks originating from us, I think a little insurance is actually a very good thing.



4. The supply versus demand conditions in the silver marketplace are extremely advantageous to a price increase at present. Basically, we haven't been mining sliver as fast as we've needed it for commercial and consumer electronics uses, and there isn't a substantial above ground reserve of it as you can find with gold. Which means that producers of consumer electronics, jewelry, and specific medical applications will be increasingly bidding with investors for the available pool of ready silver as its price goes up, which may lead to some explosive results. This will be however, a mid-term effect, because a significant rise in the cost of silver will both depress commercial demand and increase mining, and will ultimately counter this trend.



My greatest worry tends to be that raises in inflation will affect commodities like oil and precious metals before they hit everything else, and that the cost of precious metals could rapidly go up past the average person's budget before he realizes what's going on. Mix that with the increasing number of people living paycheck to paycheck, and you have an extremely big problem. I can make no guarantees regarding the value of silver or gold for the week, month, or year, but I personally believe that we're on the cusp of a gold and silver repricing, as opposed to just a mere price adjustment, and so I think that we've just witnessed the beginnings of a significant move upwards in the price of silver.



I personally invite you to come over to my blog, The Rogue Economist, or check out my online E-Book, The $300 Trillion Dollar Crisis.