$1,488, $42.98, new record prices for gold and silver
Posted on 16 April 2011 with 8 comments from readers
Gold and silver bounced back from their recent slight correction and ended the week with a new all-time high of $1,488 per ounce for gold and $42.98 an ounce for silver.
This best explanation that ArabianMoney has heard for this resilience is that those sat on the sidelines of global financial markets with cash piles are getting twitchy and tired of waiting to buy. But underpining this is the obvious matter of continued money printing around the globe.
Currency devaluation
The more fiat currency that enters circulation the higher the value of gold and silver will go. Those who have not yet got the precious metals’ conundrum simply do not understand that these metals are in essence a currency and not a commodity.
Buyers today are switching out of paper money and into a money that they can trust, or at least one that no politician can create out of thin air. Alchemists used to try but they just never managed to do it.
Instead gold and silver are laboriously mined from the earth and so the supply can only grow modestly each year, and in the case of silver more has been consumed than produced for many years, undermining the existing stocks to the extent that silver is actually rarer than gold.
Is that why buyers are purchasing as much silver as gold now? Probably not. It is more that gold has become so expensive that buyers begin to look for an alternative, and as they buy the price goes up and others begin to notice.
Next targets
Upside targets are clearly $1,500 an ounce for gold and $50 for silver, the all-time high of 1980. Round numbers often present battle grounds for those trading with computer models and so can take a time to cross decisively. Gold at $1,000 took three attempts and look where we have got to now.
The sky is still the limit for precious metals and the possibility of a parabolic ascent from these levels is rather high (click here), and perhaps higher than most forecasters would like to admit for fear of being wrong.
ArabianMoney is aware of the risks of a big correction in precious metals but equally convinced that the rebound would be even stronger than the one of the past couple of weeks. The risk of being out of the market during another big rise is greater than the risk getting caught out by another correction.
8 Comments posted by readers:
As an old mathematician I caution you on the use of “parabolic ascent”; this will cause unnecessary strain on the frontal lobes of our market “experts”.
Gold and silver are so cheap. Both are going way higher. With governments printing fiat money like there is no tomorrow, what else would you expect? A minimum target for gold is 8,000 an ounce. But would expect 12-15,000 an ounce as a reasonable price.
Silver could reach 1500 an ounce!
Let’s please remember that Gold and Silver is money!!!!!
So, the gold:silver ratio is coming down to 5:1 – 10:1. That’s way below 16:1 which is its historical ratio, I understand. Hope you’re right because some of us are going to be very rich indeed.
For some reason, I can’t get into this theme that gold and silver are money. I suppose I’ve never bought or sold anything with either metal. However, it seems to me that supply and demand dominate the concept of bullion being money as far as price rises are concerned.
So the importance of bullion being money being emphasised by a succession of exclamation marks leaves me puzzled with a sense of missing out on something very wonderful and very important.
Robert, how does “parabolic ascent” differ from “exponential rise”? Is it a less severe rise but between exponential and linear?
As an ol’ mathematician, I gotta agree with Robert in his post above. The extremely rapid increase in silver prices over the past 6-9 months has certainly been spectacular, but not parabolic; parabolic curves look very different than exponential curves.
In fairness to those who are not mathematicians, go here for info:
http://en.wikipedia.org/wiki/Exponential_growth
Gold and Silver are Cheaper Today, than in the Year 2000:
The purchasing power of the US Dollar has dropped dramatically over the past 11 years, but most people, especially Americans, don’t realize that fact.
Similarly, most people don’t realize that the “real” price of gold and silver is actually below what those prices were just 10 or 11 years ago, after factoring the purchasing power of the USD into the equation. Here’s what Marc Faber has to say about this topic:
http://www.cnbc.com/id/42478554
It might go to $1000 an but it will still cost $200 for a loaf or Bread !
The upswing of a parabolic curve does look as if it could be exponential but that it needn’t be. However, a parabolic curve seems to require a symmetrical down-swing before rising.
We haven’t seen this down-swing with silver prices, I suggest, and therefore, perhaps, we shouldn’t be talking about a parabolic ascent of prices now.
Instead, perhaps we could say that we have rapid linear growth of silver price which is now tending towards being exponential.
I found a number of parabolic curves on wikipedia:
http://www.google.co.uk/search?q=parabolic+curve&hl=en&rlz=1T4ACPW_enGB356GB357&prmd=ivnsfd&tbm=isch&tbo=u&source=univ&sa=X&ei=9uKrTYCyCoGw8gO30J24Ag&ved=0CDsQsAQ&biw=669&bih=343
mick, I don’t follow the logic that if silver gets to $1000 then bread will be $200. It might but I don’t see that it’s inevitable that bread prices, for example, rise just because silver price does.
If investment and pension fund managers decided one day to invest in silver, such as PIMCO doing this, then silver prices would soar on the basis of supply and demand, whilst a loaf bread could stay at roughly the same price since there is no change in supply and demand for bread.
Whilst gold and silver can be and, indeed, are used as currency, I don’t see that their price movements are chained to the value of the dollar so that they move up for no other reason than the value of the dollar.