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Author Topic: Why This Leading Indicator Predicts a Big Rise in Silver  (Read 1215 times)
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tamo42
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« on: 2010 Dec 17, 08:24:49 pm »



As you might have heard once or twice, silver is a very important metal.  It is rare enough to be in the "precious" category.  It is ductile enough and conductive enough to be used heavily in industry.  It is antibacterial enough to be used in medicine.  And, perhaps most importantly, it is reliable enough to serve as money.

It is this money function that has really come to the forefront over the last couple of years.

As an astute investor, I keep an eye on the silver markets.  I say markets because there are many ways and places that silver is traded.  Lately, one of these has been telegraphing a big rise in silver prices.

OK, enough suspense.  The market I am referring to is recycled sterling silverware.  Remember grandma's silverware that had to be polished every year?  That stuff is made out of 92.5% silver.  That's why it's called silverware!  If you shopped around for this stuff on eBay last year, you could get your hands on plenty of pieces of old silverware for approximately 80% of the piece's metallic value.

Now we are seeing auctions like this:






Let's do a little math here.  If you click on the auction, you will see that the seller says this fork is 26 grams.  That translates to 0.836 troy ounces.  But wait, sterling is only 92.5% pure.  So we only have .773 troy ounces of pure silver.  The winning bid plus shipping, $46.79, divided by the .773 troy ounces give us a net price of $60.50 per troy ounce.





Here's a live auction going for several pieces, totaling 339 grams.  The current spot value of this lot would be $294.  With a day remaining, let's see what happens.

There are a few reasons I can think of for this happening:

1 - Random sterling silver is really popular right now for some reason (unlikely)
2 - People continually over pay because they can't do the math (possible)
3 - The people buying this silver are doing so for the *long* haul.  The fact that they might be overpaying a bit now doesn't matter in their view (likely)

Basically, in my opinion, these people are super-bulls.  These are the people that see silver going to $100/ounce or $500/ounce or infinity as the US Dollar collapses.

These people can be contrasted with the bullion buyers who generally pay just a bit over spot value for their ebay auctions.







Maybe soon I will write a post on how you might score some slightly under spot value silver on eBay.
« Last Edit: 2011 Jan 07, 08:19:58 am by tamo42 » Logged

Neal McSpadden
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« Reply #1 on: 2010 Dec 17, 09:13:03 pm »

This is one of the most insightful and informative articles you have ever written tamo42. They keep getting better, each time. That's amazing that you've pulled some big-picture information out of such a small market segment. I think you're right, there are many super-bulls out there, and they don't just want bland bullion anymore, they want luxury items that they intend to put on the table at fancy dinner parties.

I remember when people couldn't give that sterling silver stuff away, not even to me! I was an eager buyer of silver, and I always turned away the sterling, like many others did. People would contact me frequently to see if I would change my mind about buying. The fact that sterling seems to be THE hot silver commodity - above bars and generic coins - tells me that the silver market has taken on a life of its own.

It's not just about what the silver commodity market is doing, it's not about what the forex currency market is doing, it's about luxury. Anybody who wants to impress, simply must put real silverware on the table for their dinner party guests. You know the silver bull has left the barn when people can't buy enough of it, even at inflated prices. This isn't what we would expect to see in a bubble - this is what we'd expect to see in permanent change.

Silver isn't the poor-man's gold anymore, it's the rich man's luxury household items. Wow.
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« Reply #2 on: 2010 Dec 17, 09:25:53 pm »

The luxury/useful element is a good point.  If you buy silver that is useful in every day life, you get a monetary investment that is more than just numbers on a page, and you can impress your friends.
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« Reply #3 on: 2010 Dec 17, 09:31:03 pm »

Somebody needs to paste a link to this article over at Kitco or some other big bullion forum. People need to see this.
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If families are a problem for the system, then we must reject the system, not the families.
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« Reply #4 on: 2010 Dec 18, 07:21:23 am »

d
Somebody needs to paste a link to this article over at Kitco or some other big bullion forum. People need to see this.

definitely
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« Reply #5 on: 2010 Dec 18, 12:21:58 pm »

Did you do it?
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If families are a problem for the system, then we must reject the system, not the families.
Founder of the Coin Compendium (forum, blogs, calendar, images, donate, contribute).
LBC makes you rich, with a free ebay gift certificate awarded every month!
The Coin Compendium and the china-mint.info forum, censure, disclosure.
Do not PM questions. Answers should be publicly available.
Backup is not enough. Protect your data with MultiPar.
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Badon effect: type 1 to 8, type 9.
I type faster on a TypeMatrix.
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« Reply #6 on: 2011 Jun 29, 11:33:30 pm »

Is it too early to say I was totally right?

It looks like the eBay widgets have gone wonky, but they had auctions involving sterling silver serving forks and such that were selling for far above the melt value of the pieces.
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