1. The U.S. dollar has lost 20% of its purchasing power just since 2000 and 30% since 1990. 70% of that decline has been since 1978 when the mandate for the Fed was changed to a dual mandate of both price stability and full employment. Since the Federal Reserve was created in 1913, the U.S. dollar has lost 95% of its purchasing power. When you compare the appreciation in precious metals to the dollar in those same time frames, those facts alone should convince you that you need significant exposure to the sector protect your wealth.
2. Central banks for decades have been selling off their reserves of silver to meet excess demand which has kept prices artificially low. That has made mining unprofitable for so long there is a deficit of annually mined silver at today’s prices.
3. Since 1980 the above ground available gold stores have increased 600% while above ground available silver stores have been reduced 90% during the same time frame.
4. The Silver Exchange Traded Funds have democratized precious metals investing to the average investor who know doesn’t have to worry about delivery and storage. This increase in demand from new investors is removing almost 25% of current production annually. That is a positive as long as investors continue adding to their holdings. Surprisingly Silver investors even during the panic of 2008 amidst a 50% decline in the price of silver actually added to their positions.
5. A significant silver mine needs multi millions of dollars (in some cases hundreds of millions) to get started, could take three to five years before any production has begun.
6. In a precious metals bull market, silver consistently over the long-term outperforms gold. Since October 2001, silver has increased in price from approximately $4 to a recent high of $31 which is an approximate 775% gain. During that same approximate time period, Gold went from $265 to a recent high of $1430 for an approximate gain of 540%. So Silver outperformed Gold by 235% in the same time period.
7. This time participation by investors will be global! In 1980 only investors from North America, Europe and the Middle East were involved in big precious metals bull market. Now there are hundreds of millions of new potential investors in the same countries but most importantly in China, India and the former Soviet Union. This Bull market will be global in nature which will make it that much more explosive to the upside.
8. Silver is the more attractive to average investors when gold prices are more than $1000 per ounce.
9. China which is a significant producer of silver and used to export a significant percentage of their production. They have now significantly limited exports by 40%.
10. It is believed that China is purchasing and storing large quantities of both gold and silver. China’s objective is to make their currency the new reserve country for the world, so they can diversify out of the consistently declining U.S. dollar.
11.China’s Premier just called the U.S. dollar as a world reserve currency “a product of the past” so their goal is pretty clear to anyone listening.
12. To make the Chinese currency different from all other fiat currencies it will be backed by a reserve of gold and silver.
13. Deregulation in financial markets and the eternal ethic of greed by Wall Street and major money center banks are destroying the fabric and the functioning of the United States economy, its workers, savers and the country itself.
14. When economies of major societies use fiat money that is backed by nothing precious metals approximately every forty years do an accounting and rise in price to equal all the paper money every created and the debts incurred.
15.Precious metals will be the fifth and final asset bubble in the next three to five years. First were the internet and technology stock market bubble, then real estate, then an overall world wide credit bubble, then the U.S. Treasury market. Finally a lack of confidence in the currency and solvency will lead to the most spectacular transfer of wealth yet with an explosive bubble in precious metals prices.
Disclosure: I am long SIVR, EXK, CDE, USSIF.PK.
Additional disclosure: Interesting after a 15% correction in Silver since the new year.