Silver's Smoking Guns, Part 2: Investment Paradox
Not immediately. Mining by its very nature requires a significant lag time to adjust to changes in market parameters. It generally takes a minimum of five years to find/explore/develop a new mineral deposit, and usually closer to a decade. As noted in Part 1, however, vast numbers of gold and silver miners were bankrupted through the price suppression of the 1980s and 1990s (in excess of 90% of the world's mines), so reopening these old mines is a somewhat quicker process.
This means we have had more than enough time for the gold and silver sectors to fully adjust to (supposed) bull market conditions. Clearly expansion in mine supply is still being severely constrained by metals prices. In terms of market psychology, all bull markets are characterized by exuberant behavior, and (if anything) excessive gains in prices. Indeed to talk about "constrained prices in a bull market" is an obvious non sequitur.
With gold itself being underproduced and silver being underproduced (vs. gold) by more than a factor of two, we now have the complete picture we need as investors. Silver has been (and is) serially underpriced, resulting in severe underproduction (still), despite strong and growing demand.
With price, supply, and demand parameters all optimal in the silver market, we see investors stampeding into this sector, right? Wrong. Typically, throughout history investors have held an average of between 5% and 10% of their wealth in precious metals -- with that ratio soaring in times of extreme uncertainty/crisis.Yet as we see Western economies
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV