The Price Of Silver: Confidence Is Appropriate
Anyone who’s looked at a silver price chart in the past ten years can quickly spot two important facts:
- Silver offers yield-seeking investors enormous odds.
- The evolution of silver is characterized by sometimes drastic setbacks in the share price.
How do you explain this overall development in the price of silver? Which factors are the most decisive for the price of silver
? What kinds of speculations and manipulations take place?
Fiat Money And Precious Metals - Fiction vs. Reality
The rising price of silver
in Euros and U.S. Dollars is primarily due to a simple and well-established fact: the money supply in the U.S. and the Euro zone is expanding. Europeans - unlike Americans - at least know the Geldmengenzwachs exactly. From January 2000 to January 2012, the total amount of money the European Central Bank (M3) increased from 4,715 billion to 9,759 billion Euros: an increase of 106%. However in the United States the announcement of the money supply in 2006 was adjusted so there are no longer official figures. When the money supply cannot keep up with economic growth, the value of that currency inevitably decreases.Question:
How can you accurately measure the reserve currency, the U.S. dollar and other major currencies such as the euro, yen and British pound when they all suffer from the same development?Answer:
Gold and silver are two precious metals that have been used for thousands of years to reflect the value of goods.
Unlike so-called fiat money (that can be multiplied at will, and whose value can be represented today officially only in other fiat money), the amount is limited to precious metals available at any time to a specific maximum. The price of gold and silver
is therefore largely nothing more than currency devaluation viewed from a reasonable base.
Industrial uses of silver
The question remains as to why the development of the price of silver
is so erratic. One factor is the importance of silver as an industrially valuable precious metal. In the wake of the 2007/2008 financial crisis, all major economies (excluding China) slipped into a recession that affected the silver price significantly because the economic demand was lacking. However, the slump in the silver price (from about $20 to below $10 in 2008) cannot be explained solely by lack of industrial demand. Silver
was and is an important object of speculation and manipulation in which profits can be generated either by rising or falling prices.