What will the US Debt Downgrade do to PM prices?
I'm curious what you all think will happen to PM prices on Monday, Rest of Week, End of Month and End of Year?
My predictions for Silver:
Monday I expect some volatility for sure but think it will stay in the $40 range.
Rest of Week I expect to be up about $3-$4.
End of Month I'm looking for $40 to $48 and perhaps slightly above $50.
End of Year I think we'll see $80-$85. Perhaps more if QE III is announced/proven.
It's certainly going to get very interesting. Debt Downgrade and now Germany is balking at the idea of bailing Italy out now.
Bill
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Replies to This Discussion
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Permalink Reply by Larry on -
Hi, Indentured!,
In the same vein (no pun intended for PMs), I was just giving a quick glance at theclosing prices from Friday and raise an interesting question by doing so, only silver, one of my biggest holdings, doesn't figure in it. I'm looking at gold, which is still holding up remarkably well, and its ratio to platinum. There is only now about a $50.00 per ounce difference between the two, or roughly, one silver eagle! Back in '08, platinum briefly dipped below gold for a day or so, before breaking slightly back up. Now, I know that platinum is tightly dependent on industrial automobile and electrical use, so it is affected more by an overall bad economy; no cars sold, no cataclytic converters needed, less platinum used and bought, for example. A fifty dollar swing for platinum is no big deal anymore, nor is a twenty dollar change forgold so I'm going to look and see what transpires here and if platinum is giving us a bleaker outlook on the overall economy than gold is evidencing people's fears. I'd bet that you never thought you'd see $2-$3 swings in a day of silver prices not that long ago, when it was selling for only twice those amounts! A lot of learning going on today for amateurs but not many signs of what to do, if anything, and when. I am totally unsure of the future price for silver but I'm with you all the way in hoping your call comes through at or anywhere near $80 - $85!!!! Let me know if you ever looked at the platinum vs. gold equation from '08 and its aftermath, and what you think. All the best, Larry
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Permalink Reply by Buffalo on -
I think the credit downgrade was expected by many. S&P had been pretty clear about what they wanted to see from the debt ceiling/deficit reduction agreement. That didn't happen, so either the S&P downgraded or lost credibility by backing down. There were also fairly credible stories flying around about the downgrade at least a few hours before the US markets closed on Friday, enough time to react. So my thought is much of the effect of the actual downgrade is already priced in. I do think the dollar will be under pressure and lose more this week versus the so-called "safe haven" currencies. The situation is the euro zone is spinning out of control and that will pressure the euro as well, more "flight to safety" investments including gold. I think gold is getting much more benefit than silver, platinum, etc as far as a safety investment/alternative currency and I think that will continue.
I'm thinking silver will be negatively impacted more by economic concerns, relatively flat short term, maybe $38-42 this week, $45 by the end of the month. Between now and the end of the year there are so many unknowns that its hard to say anything about what it might do. $80-85 could happen but it just doesn't seem to me that silver is getting the same benefits gold is from many of the factors we see right now. That plus what appears to me to be deterioration in the overall economic situation might keep silver down to not much more than $50 by the end of the year, again thinking that silver is acting like an industrial metal more than like gold..
For gold. I think $1700 will fall this week. I think we will see a lot of volatility and that will only get worse going forward, but if gold doesn't break $1850 this year I'll be amazed.
Personally I don't care how many denials the Fed and others come out with, I think it is virtually certain QE3 will happen no later than Q1 2012, and probably before the end of this year. The economy is tanking, there is no political will for huge government stimulus programs, the Fed will step in again and fire up the electronic "printing presses."
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Permalink Reply by Indentured Servant on -
I have not considered platinum at all since it briefly dipped below the price of gold in '08. I seriously considered buying some at that time but two things stopped me. I had already been educating myself with respect to the economy since '06-'07. It was Chris Martenson's site that convinced me that once recovery begins, the future will be quite different including less reliance on oil based energy (save for natural gas) due to decreasing supply and increasing price. The other thing was something that was reported about the same time platinum price dipped below that of gold, cheaper and better methods to clean exhaust gases that rely less on platinum. In my mind that meant that by the time a serious recovery takes hold, new technology will have minimized the need for platinum.
I really only focus on silver, gold and opportunities in raw land for food/wood and residential rental property. My plan is to monitor but ignore gold until the Au/Ag ratio tightens and then swap one for the other. I will always maintain a position in silver because compared to gold, silvers technology and industrial uses are many times bigger than gold. Who knows I may end up switching back to silver from gold at some point. My timeline is the rest of my life which, with good health, should be about 30-40 years. A lot can happen in that time so my plan is subject to change. For now I buy silver as cheaply and as quickly as I can. My average cost is about half of current spot so I even use silver as my short/long term savings. If I need cash to spend in less than two weeks I keep cash. If the need is more than two weeks out I buy silver. I have never sold a single ounce of silver but I have sold about ten ounces of numismatic gold to convert to less expensive bullion gold.
Bill
Larry said:
Hi, Indentured!,
Let me know if you ever looked at the platinum vs. gold equation from '08 and its aftermath, and what you think. All the best, Larry
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Permalink Reply by Indentured Servant on
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Buffalo,
I largely agree with your analysis. I think the severe, engineered beatdown that silver sustained in May has people skittish. Five or more margin increases on silver in such a short time span knocked it from nearly $49 to $33! When it was all finished I asked myself if ANY of the fundamentals changed at all. The answer was no so in the end, we only kicked the can a bit further down the road. The engineered dollar collapse has to proceed slowly enough to prevent anarchy when "entitlements" are trimmed or eliminated. We need to adapt the the "new normal" if you will. Without the May silver beatdown I was looking for $100 silver by 12/31/11.
The current calamity resulting from yet more engineering will create the "Oh God, we need to pass this legislation before it gets worse" moment that will allow Bernanke and Turbo Timmy to ride in on their shining steeds to save the day with (insert incomprehensible gobbledygook here) which will really be QEIII and save the day. Medium to long term I see silver outperforming gold quite a bit. Silver should do well. It has tremendous manufacturing demand and below ground ore bodies are increasingly expensive and difficult to access. Above ground supplies are used in minute quantities industrially making it uneconomical to recover so once used, it is essentially gone forever.
Also, as the markets continue to decline all those inflated dollars will begin to seek safe havens and silver should benefit nicely. Until then there will be nice dips signifying sale prices.
Bill
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Permalink Reply by Buffalo on
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Bill,
I was also convinced silver would be in the $85-100 range by the end of this year. And I agree fully with you that physical supply shortages will ultimately drive it much higher than that. If you need silver for manufacturing or whatever you need physical metal, not pieces of paper that say you own silver. From everything I've looked at, 25% or more of current demand has to be met from recycling in one form or another, and that shortage in new supply will only get worse in my opinion. I think the smackdown via the margin increases have delayed those prices, but I do agree we will see them, just not as soon as I had expected. What happened due to the margin increases is part of why I changed my outloook, but part of it is I think we are facing an economic downturn that will reduce prices and demand from what they would have been, all of that together maybe pushing the $85-100 price levels back as much as a year. I think gold benefits more in a straightforward way from the "flight to safety" aspect where with silver that appeal is a little lower, offset somewhat by the negative economic factors, and the sheer size of the market in dollars is less. But bottom line is I think we will silver well above $100 eventually.
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Permalink Reply by Buffalo on
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A little follow up to what I'm trying to say. With silver, I think the price will eventually mainly be driven by increasing rarity- there won't enough physical silver to go around. With gold, increasing rarity won't be the main issue, instead prices will be driven higher by economic, fiscal, and geopolitical issues. So as times goes by, I think the factors driving gold price will increasingly diverge from the factors driving silver price, and eventually they might have very little in common.
All of that is assuming we don't have some kind of major economic collapse, hyperinflation, or some other SHTF scenario first. It still worries me when Bernanke and Geithner say those things can't happen, especially since Geithner testified to Congress a little over a year ago that the US credit rating would never be downgraded.
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Permalink Reply by Buffalo on
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I ran across this interview video this morning, recorded on April 19, 2011. Amazing how mistaken Geithner was even this close to when the credit rating was downgraded, it is almost unbelievable that he can really be so naive and dismissive of the risks we face :
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Permalink Reply by Buffalo on
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I have to say I might have underestimated the effects of the downgrade that remain to be seen when the major markets reopen. Overseas markets that did open today have seen equities drop and gold up by 6-7%. If that continues tonight and Monday it could be a very wild ride after all. The Tel Aviv market saw equities fall by more than 5% in pre-open trade, temporarily halting trade by a "circuit-breaker" that hasn't been used since late 2008. I also saw this today at the Apmex site, it was supposedly put up yesterday (Sat).
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Permalink Reply by Indentured Servant on
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Alan Greenspan on Meet The Press - Aug. 7, 2011
Q - "Are U.S. treasury bonds still safe to invest in?"
Alan Greenspan - "Very much so. This is not an issue of credit rating, the United States can pay any debt it has because we can always print money to do that. So, there is zero probability of default."
President Obama in his speech today August 8, 2011
"Markets will rise and fall, but this is the United States of America. No matter what some agency may say, we have always been and always will be a triple-A country"
Are you F%&@ING KIDDING ME? Is it just me or do either of these IDIOTS have even the slightest clue how the system works? It could be said that Obama was just trying to reassure the country but that comment is akin to what you tell your little league team when they just just lost their tenth game of the season. Greenspan on the other hand is either a die hard, in the tank central banker and actually believes the BULLSHIT he peddles or his cheese has slid off his cracker!!! Either way these two are second string at best. And Kerry? The MINORITY Tea Party really has so much F%&@ING influence that it would cause the FIRST credit downgrade in US history? Really? REALLY?!!! The absolute vacuum of leadership in DC still astounds me every time. Are Americans really so dumb that they actually believe the Lithium and antidepressant induced drivel that pours out of these people?Bill
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Permalink Reply by Indentured Servant on
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And now......that I've calmed down a bit.
It looks like my call for silver today was pretty good. We'll see what the week brings. Gold impressed me today. Hopefully prices hold.
I expect to see Dow 8000 soon so that should help silver reach my end of month target.
Bill
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Permalink Reply by Steve on -
I was hoping to see silver do better than it has thus far...as I write this gold is up to $1729 and silver is down to $38.82....so silver is only up 40 cents, or 1 % from Friday's close.
I think silver could break out anytime, but right now I don't see it going above $42...at best, by months end...I hope I'm wrong.
Indentured Servant said:And now......that I've calmed down a bit.
It looks like my call for silver today was pretty good. We'll see what the week brings. Gold impressed me today. Hopefully prices hold.
I expect to see Dow 8000 soon so that should help silver reach my end of month target.
Bill
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Permalink Reply by Indentured Servant on
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I'm just going on memory but it seems like silver is moving in close conjunction with the dollar. When the dollar is up, or moving sideways, silver just sort of languishes. As the dollar tanks silver goes up. Luckily, the gains seem to largely hold until the next dollar leg up. Keep in mind that silver is up 20% since the May beatdown. It is also up about 29.7% on the year. Not bad at all in a market that is being actively manipulated to the downside. If we make $50 /oz by New Year that will be a 73% increase. Gold so far is up 15.5% on the year and Platinum is up 0.9%. I'm still favoring silver as my primary purchase due to bigger upside gains.
Bill
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