SILVER MAKES A MOVE

 

$38.37 

The paper silver price has moved up to $23 an ounce, while real US silver eagles are selling for about $38.  That's a premium of about 60 percent.  

What's going on?

What's going on is that precious metals are just beginning to catch on to the investing public for the first time in over a decade.  As gold flirts with $2000 and real gold selling for about $2200 (about a 10 percent premium) silver is finally starting to outperform on a precentage and premium basis.

Silver is an impossible market to analyze.  It has an industrial component but that really works against the broad sentiment that supports silver as an alternative safety investment.

Silver has no monetary value.  Unlike gold, it is not hoarded by the Central Banks of theWorld.  In fact no central bank holds any silver as a reserve asset.

But silver does have the same 5000 year history that gold has as serving as real money.  

5000 years is a long time.  You can collect silver coins minted in about 545 BC.  That's 2700 years ago.  But silver and gold's recorded usage goes back another 2000 years before that.

                                              the first silver coin from 545 BC

The important thing to understand about silver is that it is a gauge of confidence.  In fact the entire global banking system is based on Confidence.  And as people lose confidence in the banking system - which is beginning to feel very shaky - they look first to gold, and as gold becomes too expensive for most people to use as a hedge, they look to silver which sells for about a tenth the price.  So it is a much more affordable hedge.  

And it share two important features with gold.  A) it has a 5000 year track record of holding its store of value.  And B) IT HAS NO COUNTERPARTY RISK.

Gold and silver are the only safe assets besides perhaps precious jewels, that have no counterparty risk - and can be used as money.  Bitcoin has a massive counterparty risk in the form of bitcoin exchanges.  Every form of national currency has massive counterparty risk in the form of debt.  Every Bank has massive counterparty risk in the form of debt. Real Estate that is owned free and clear doesn't have counterparty risk as such, but it is not portable - or constant.  Most other Hard Assets have no counterparty risk but many are not portable - or divisible - which makes them a good store of value but useless as currency.

It's funny but Artistotle figured out about 2500 years ago the necessary atributes of real money: durable, divisible, constant, portable and it must have Intrinsic Value.

Gold is money.  But silver also admirably exhibits these attributes even if the central banks have abandoned it.  And when silver starts to outperform, that bodes well for the long term for gold and all hard assets.