Hi Cockerel!

I often hear from people who make the connection that a rising market for precious metals must also imply the end of the world. I think Dennis Gartman is one in particular that often suggests he does not want to live in a world where gold is much higher. Now I would agree that a complete economic meltdown would indeed launch gold and silver, breaking them out of the enforced manipulative grip on their trading. But I think if the manipulation itself were removed, the metals would be much higher and the economy itself would be unchanged from where it is now.

Lets just talk about silver, and consider some important ratios. When silver last peaked at $50 in 1980, the ratio to oil was much lower. Interesting, many people suggested $50 oil itself would destroy the economy but in fact we sustained much higher prices and things held together. I think $200 a barrel oil is inevitable, btw, and how high should silver trade then, just on the basis of comparison?

How about the ratio of silver bullion to printed money. I do not have the actual numbers at hand, but I believe there were at least a couple billion ounces of physical silver in documented stockpiles in 1980. Since then, the bullion surplus is almost completely consumed, yet printed money has been growing parabollically. So it is safe to argue that there is far less silver in the world today per dollar of printed money. Should that not imply much higher silver prices now compared to 1980?

How about the simple ratio if metal per person on the planet. Lets assume that 2 billion ounces of silver existed in 1980, and 4 billion people were alive then worldwide. That works out to a ratio of one ounce of silver per 2 people. Now today I would imagine more than 6 billion people are walking the earth, and less than 1 billion ounces of silver exist in pure bulli on above ground. The assumed ratio above has thus declined to just one ounce of silver for every six people. Since the scarcity of the metal is so much more acute, should not the value rise several hundred percent as well? But we see silver today trading at a fraction of the 1980 level.

I pound the table that this divergence is due primarily to illegal manipulative pressure. To remove that criminal element would not automatically revert the planet into a crisis. If you interfere with a thermometre and show a temperature that is artificially created the air does not immediately cool off when that influence is removed. Instead, we would simply get to have an accurate indication of the real conditions before that false reading was imposed. So too by allowing the metals to trade freely.

cheers!

mike