Volatility of silver - some thoughts......

[Catfish4u]

In everyday conversations I hear people say silver (gold too) could never be considered money as it is too volatile and should be considered a 'risky, speculative investment'. In my opinion gold and silver should be considered 'real money' while fiat is phony, manipulated money. But...... I am thinking - why is silver 'so volatile'?

My thoughts...... Silver supply is pretty stable and easy to estimate. I think most of the volatility is due to the 'expected demand for silver' and its rarity. Basic economic theory states that a price is discovered as supply and demand comes together. Silver supply is relatively stable. Current demand is very easy to calculate or estimate. With futures markets the demand is impossible to estimate as future demand changes depending on world events, economic events and consumer sentiments. The instability of world events (wars, conflicts, embargo's, austerity measures, etc) and fiat monies (worldwide QE/money printing) make it much harder to estimate the future demand for silver. What would happen if 'the masses lost faith/rejected fiat and moved into silver/gold? What if just one large country/economy lost faith (Europe, U.S., Japan, India, China, etc.)?

More about the supply side of silver: It appears there are about 800 million ounces of silver mined per year worldwide. There are around 7 billion people in the world. Thus, if every person in the world decided to purchase just 1/10 of one ounce of silver PER YEAR there would not be enough mined to handle this demand. 1/10 of one ounce of silver per person per year would cause a shortage!

Based on the above I understand the volatility of silver. A small change in expected future individual investor demand could cause massive supply shortages. I do not understand the low price though. I surmise it is because the general population and 'average Joe' still places a lot of trust in the 'worldwide fiat system'. Just imagine if there was a 'flock away from fiat and into silver'! Where would that place the price of one ounce of silver?

[InfleXion]

The Coinage Act of 1792 defines what a dollar is in grains of gold and silver. Gold and silver had been money for millenia, and it was the reversal of these roles that led us to where we are today. Dollars should be defined in grains of metal, not metal being defined in dollars. While the relationship is the same, the source of valuation has been switched, the peg removed, and now we have something that used to be as good as gold now only as good as the govermnent's ability to service its debt. The volatility we are currently experiencing is due to electronic markets allowing for faux supply and demand in large quantities. In the absence of that then any volatility would be due to a volatile currency, not metals (more so gold, but silver too) which simply reflect the inverse correlation when supply and demand relating to monetary expansion is allowed to work properly.

Because gold and silver were money first, and have stronger intrinsic properties of money than fiat currency (fungibility, durability, portability, divisibility) they are competition for the dollar and thus those who benefit from the perks of money printing have a vested interest in not wanting metals to reflect the nature of dollar devaluation or it could undermine confidence. Volatility makes people more likely to throw their hands up in frustration.

[Rosco]

How much you are Underwater on your current purchases strongly influences your desire to purchase more

[wheeler_dealer]

Underwater (LOL) It would require a submarine to rescue me I'm so underwater. However using the princles promoted here if you hold it and own it, it's nobody's liability. Besides silver shouldn't be bought with funds you can't lose or conduct day to day life without.
I had six ounces at $42.00 and I still have the same six at $22.00.
I lost the rest when the raft sprung a hole and sunk.