Carlos Lam

Silver Prices Are About to Fall

"Sovereign demand can potentially support gold against both artificial price suppression, and its inverse relationship to the dollar. There is no sovereign demand for silver."

Let us assume you are correct. Currently, the silver-gold ratio is at 62-1. The most recent peak was about 80-1 in Feb-03. If gold remains at about $1100 and the ratio revisits 80-1, that calls for a $13.75/oz. silver price. An $11/oz. price (with gold at $1100) would mean a 100-1 ratio; not impossible, but highly unlikely.

Now, if gold were to retrace some gains, obviously silver could fall as well. However, with the Indian and Chinese "puts" on gold now extant, any correction in the gold price would seem to be short-lived.

Silver Prices Are About to Fall

On Nov 05 02:31 PM Russell Upsomgrubb wrote:

> Warren Buffett is perhaps the most successful investor of all time
> and just bough Burlington Northern, making a huge bet going forward
> on the growth of the American economy over the next 5-10 years.

The BN purchase can just as easily be viewed as a bet that commodities (i.e. coal, grain) will be transported by rail to our west coast ports en route to China and India. Moreover, it can be viewed as shorting the U.S dollar inasmuch as BH will be using cash (and borrowing some as well) to purchase a hard asset (the railroad).

> Mark Faber, a doomsayer, claims the value of the
> dollar will eventually fall to zero. Gee, I'll bet he owns a lot
> of gold.

Dr. Faber is correct: all fiat currencies eventually fall to zero. Gold, on the other hand, is money and has been so for 5,000 years. I disagree with Dr. Faber that we will experience hyperinflation in the next few years, but I do believe that we will experience high inflation here in America given the Fed's relentless money printing.

Gold and Silver 'Bubble' Has Long Way to Go

Here's when I know that the "bubble" has arrived:

1. I see jewelers take down the "Cash 4 Gold" signs and start putting up "Gold 4 Cash" signs

2. My 19 y/o sister-in-law begins trading gold online as a "job"

3. Time, Newsweek, and U.S. News have covers with a man hugging a gold bar on their covers

Four Major Developments Gold Investors Should Watch

On Sep 15 08:32 AM Jordan Lindsey wrote:

> As a trader my primary concern is risk. You seem to only be concerned
> with the possible reward side. What happens if your magical $1,000
> price level does not hold? What is your exit strategy?

Those of us who hold gold as "insurance" against calamity don't need an exit strategy. Gold is the ultimate "exit" strategy in itself.

For trading purposes, I go by the old standard Dow/gold ratio. I strongly believe that it'll get down to 3 or 2.5. There's just too much money printing going on and not enough real (i.e. non-sugar-high) economic growth going on.

Four Major Developments Gold Investors Should Watch

On Sep 15 09:15 AM axelrod608 wrote:

> I've often heard that the time to buy anything was when there were
> no buyers left and the time to sell anything was when everyone was
> buying. These days every cabbie, every shoeshine boy and every waitress
> is giving unsolicited advice to "buy gold". That may not constitute
> fundamental research, but it has been on my mind.

There are still too many signs at jewelry shops that say "CASH FOR GOLD" and a plethora of newspaper ads shouting the same thing. This means the insiders are still buying. When I start to see "GOLD FOR CASH" and read stories of teenagers trading gold online, then I'll get worried.

Barrick Gold to Sell Silver Stake

The elimination of gold hedges by Barrick is a bullish signal for gold. As far as gold goes, Barrick is the ultimate "insider" inasmuch as it has to accurately forecast a price for its product. Since Barrick is paying out money to remove the hedges, then the folks at Barrick must believe that gold is going to move substantially higher in the future.

Plunge Protection Team Attacks BofA: This Ends Now

On Apr 30 12:25 PM wobatus wrote:

> It has a 5,000 year track record, but why? People accept it, but
> why? It isn't oil. It isn't wheat (perishable, but valuable). It
> isn't coal. Or a forest. Or copper. Or water.
>
> Monotheism has also been around for thousands of years. And, not
> to put down believers, that doesn't mean there is a God, necessarily.

Gold accept gold because it's rare, portable, durable, and shiny. My argument isn't that it's useful like oil or lumber, merely that it's been accepted for trade for millennia. If you would rather have your wealth in agricultural land or forest, by all means do so! They both are much more useful than gold, but they do not have the portability that gold does. As you mentioned, wheat (and other crops) are perishable.

Plunge Protection Team Attacks BofA: This Ends Now

On Apr 30 09:46 AM biodummy wrote:

> If one begins with the lie (like the author does here claiming the
> dilution of the gold standard had been taking place in the late 1920s)
> it is sort of hard to believe in everything else he says. If anything,
> major recessions/depressions were happening more frequently and with
> greater severity before the fractional reserve banking had been put
> in place - essentially, about half of the time between the Civil
> War and WW1 the economy had been in recession. Gold standard (while
> being a dream of goldbugs - if it is instituted, the price of gold
> should be jacked up to ~$10K/oz to match the existing global gold
> reserves and the amount of money needed for the economy to run) is
> quite dead and is not coming back.

I don't know what America you are studying! The period between the Civil War and WWI was one of excellent economic growth and growth and growth in the ranks of the middle class. Sure, there were bubbles and depressions in certain places, but they did not last as long as did the Great Depression or the current depression.

Your last statement is quite laughable. History has shown that NO fiat currency has survived as long as gold, which has a 5000-year track record. Gold is accepted many places overseas as a means of exchange even if it is not widely accepted here in America (though I would note that outfits like GoldMoney and e-Gold do exist and transact here). Meanwhile, the Chinese are upping their gold reserves, so they certainly see something valuable in holding the commodity.

The very existence of fiat currency goes back to the idea of regime uncertainty popularized by Robert Higgs. With a fiat currency, there is no "sure thing" as to what the currency will be worth in the future, so entrepreneurs can't plan as well for the future. You and I may not live to see gold being used widely as a medium of exchange, but I'll wager that our grandchildren or great-grandchildren will.