Does this mean the manipulation is over?

[stlouiscoin]

Just a question; If manipulation ends, why should silver and gold skyrocket?

Other than the end of manipulation, what reason does it have to rocket?

[68Camaro]

It doesn't necessarily go up just because manipulation ends, but there is a strong argument to be made that PMs are underpriced relative to cost of production and the manipulations hasn't allowed proper price discovery.

The topic of skyrocketing is a separate matter - that would be because of a major market or currency upset where there is a loss of confidence in fiat.

[InfleXion]

Just a question; If manipulation ends, why should silver and gold skyrocket?

Other than the end of manipulation, what reason does it have to rocket?

There are a few reasons. One of the foremost of which is supply and demand. The government stockpile of silver was 10 billion oz in the early 1900's. That ran out in the last couple decades. More recently gold and silver derivatives (GLD and SLV) have been created, I would argue out of necessity, to divert investment demand into proxies instead of the real thing, thus allowing leverage to take place on these financial instruments, and artificially increasing the supply available, which has a downward price effect on the rule of supply and demand. These things all point to far more demand than supply, for which price discovery is supposed to be the arbiter, yet is not currently being allowed to function freely due to these derivatives.

Additionally, the amount of silver mined each year is less than the amount demanded. The only reason that demand is met is because there are people willing to sell at these prices. A shift in market sentiment could easily exacerbate this scenario.

Also, the amount of silver available on the global marketplace is somewhere in the ballpark of $30 billion. It is too cheap for big players to invest in. They would suck it all up and then we'd be at a crunch. The richest of the rich literally cannot invest their entire net worth in silver without breaking the market. Yet, it is the 2nd most useful industrial commodity after crude oil. It doesn't add up.

During the planet's formation, silver was only deposited in the Earth's crust epithermally, which means at or near the surface. Where as gold was deposited both epithermally and mesothermally, throughout deep veins beneath the crust. I believe this is either due to their melting point or molecular density. As such, there is an argument that all the easy to mine silver has already been extracted, and will continue to have rising costs to maintain customary mining output levels. Considering that most silver is used up industrially, and it is not currently cost effective to recover it from landfills at today's prices, the supply/demand picture for silver is particularly bullish.

Historically money was conceived out of gold hoards, after seashells and cows I suppose. Gold never really goes away. It made sense for it to be money because it was readily available due to prior jewelry demand, and fulfilled the rules for a unit of account and a store of value which are:

> Divisibility - Ten 1/10ths are worth the same as Two 1/2ths are worth the same as One ounce, from a melt value perspective. Of course smaller coins have premiums because they are more desirable, but if you have a lump of metal you can divide it up with no loss of intrinsic value.

> Durability - Value will not be lost after eons at the bottom of the ocean or floating in space. Metals are elements. They are timeless. They are sturdy. If they catch fire, they may change states, but they won't disappear.

> Portability - You can take them with you anywhere you have capacity to carry them, unlike land or a home.

> Fungibility - Any like amount of the metal has the same intrinsic value as any other, from a melt perspective. An ounce is an ounce is an ounce. This is not the case with gems which require a keen eye to discern variations in value even for stones of the same size and weight.

For these reasons, gold (and silver, and copper) were money for thousands of years. As such, monetary systems eventually created representations of the gold and silver for practical purposes. The value of these proxies was derived directly from the amount of gold (and silver) backing the proxies in circulation.

The original definition of a dollar was simply a number of grains of gold or silver. The founding fathers had a competing bi-metal standard to keep things honest.

Since then we've put the cart before the horse. Dollars are no longer a represented by grains of gold and silver, rather gold and silver are represented by dollars and cents.

Here we now get to my point. The inception of money as we know it was derived by a backing of gold and silver. Yet there is no more backing. Assuming we have all the gold in Ft. Knox that we say we do, which is a pretty big assumption, the price of gold would still have to be over $10,000 per oz to back the amount of currency we now have in circulation.

The gold to silver ratio at about 65:1 as it is today is far higher than the historic ratio based on mining output of 15:1. Furthermore, the current mining output is more like 7:1.

So if gold would need to go to $10,000/oz to back our currency, silver would need to go to over $1,000/oz to return to historical norms.

I do not think this will ever happen because our currency would likely not survive if the true value of metals were to be exposed and once again take over as money, as they always have throughout historic monetary cycles. If it did happen it would be indicative of hyperinflation, and nobody would want to sell metals in that environment. It would be a vicious and short lived cycle.

The eventuality is that things will be priced in gold and silver once again someday, and that they will be priced in relation to each other and according to what they can buy, but not in dollars, at least not the kind of dollars we know. At such time as the manipulation ends it would also mean the end of the systems which the manipulation supports, which are dependent upon the ability to print currency out of thin air, and subsequently not having a gold or silver backing which would require money is only created in tandem with an increase in metal backing. Once all the leverage is unwound and the dust is settled, those holding metals will not be in a position to profit, rather they will be in a position of increased buying power.

[pennypicker]

I want to thank Inflexion for taking the time to share his thoughts and wisdom. Quite frankly this forum isn't nearly as interesting and thought provoking as it was when I joined four years ago so it is always refreshing when I can become further educated in PM knowledge as a result of such outstanding writing. My thanks once again.