By Michael Lebowitz, Managing Director, Absolute Investment Management
- Gold and silver are similar in their time honored role as de facto currencies and a store of value. They have been shunned when fiat currencies were trustworthy and desirable when confidence was lacking in the currency du jour. There are some differences however. Silver is significantly cheaper and aptly called the poor man’s gold. Additionally, 50% of demand for silver is for industrial purposes, while gold has precious few uses outside of jewelry.
- The ratio of the gold price to the silver price has decreased from 70 to 32 since last September as shown in the second graph below. Over that period gold is up about 25%. Had gold risen in line with silver it would be over $3,000 an ounce!
- We are also aware of longstanding rumors and conspiracy theories that believe JPMorgan and HSBC are short and manipulating the price of silver lower. We have no way of knowing if this is true, but if true, it could account for the massive buying if they are covering their shorts.
- We see no reason why the price of silver can not rise further but we think it is more likely it will drop significantly. We think its time to sit on the sidelines and let it play out.
PDF copy below.