Could silver double in price because of... Apple?

Could silver double in price because of... Apple?

Summary: Resource specialist and editor of Real Asset Returns thinks that Apple's demand for industrial silver in China could push the price of silver to over $40 in 12 months.

TOPICS: Apple, Hardware
A one-year chart of silver, which is down down almost 40% in a year - Jason O'Grady

Monday Morning's Peter Krauth thinks that the price of silver could double over the next 12 months, in part, because of Apple. I took particular interest in Krauth's article because its the intersection of two topics that I've been following for decades: Apple and precious metals. 

In addition to my (possibly unhealthy) obsession with Apple, I've been a coin collector/Numismatist for even longer. I got my first set of proof coins at age seven and have loved coins ever since. In 1999 the U.S. 50 State Quarters Program in rekindled my love of the hobby and with it a fascination with precious metals, specifically gold and silver. I digress.

Above is a one-year chart of the price (per ounce) of silver. As you can see, silver's down almost 40 percent in a year and way off its peak of $47.84 in April 2011. 

Back to Krauth's take on silver vis-a-vis Apple. In his article, Krauth says that "Apple is giving us some surprising indications that the demand for silver is much higher than its current price would have us believe." He connected some dots and linked January's 10 week delay of the new 27-inch iMac to a possible shortage of industrial silver in China. A theory supported by silver commodities analyst Ted Butler. 

Krauth thinks that Apple is just one indicator that silver could double over the next 12 months. Among his other reasons are huge silver premiums and record silver sales by the U.S. Mint (in the first three months of 2013, the U.S. Mint sold more than 15 million American Silver Eagle bullion coins.)

If you're a silver bug you can read the rest of Krauth's analysis at Monday Morning (free email subscription required).

Topics: Apple, Hardware

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  • The speculators have found a new love

  • This is part of the problem with precious metal monetary standards

    The prices are not necessarily stable in relation to other items. Fiat currencies certainly have their problems too, but nothing is free.

    Bimetallism could work, but how to get there without disrupting the world economy is a trick for people much smarter than I am. A pure international gold standard failed in the Great Depression after enduring for less than a century and I don't think a revival would work any better. Private digital currencies like Bitcoin are likely to suffer from the problems that have plagued computers and networks for decades and they disappear if the power goes out; and we've already seen problems with disappearing exchanges. So we limp along with the state-backed fiat system we already have.

    As one of my old engineering professors used to say in a thick Chinese accent: There ain't no such thing as a free lunch.
    John L. Ries
    • The Problem with a Gold Standard

      or any physical item being used as currency is the finite amount. The way our global economic system works relies heavily on growth, which gold, nor silver could account for. While I also agree that Fiat currencies have their own faults, it is much easier to allow for growth, Federal Monetary Policy and Fiscal Policy to keep pumping an economy. Once gold or silver is all owned, the money supply would dry up, causing numerous problems throughout the world. The flip side to the coin, is that if we found more gold or silver (whether it be on earth, or in the future from mining asteroids, etc) the inflation would be that akin to Hyperinflation that can be caused by excess monetary or fiscal policy.

      I think the only thing that gold or silver is good for is investments, or to use in products, such as Apple is currently doing. The price will obviously fluctuate based on the perceived market value, and to be honest, I would not be surprised either if the prices doubled for silver. Although you have to wonder if these "shortages" are anything like "oil shortages" used for speculation and price adjustment purposes only.
      • Specu;ation isn't such a good thing

        Says me, "investing" in a commodity you only intend to resell when the price is right really isn't investment at all. There's a major difference between that and investing in a business which takes your money, uses it to provide goods and services people want to buy and then pays you a return; or investing in students who are expected take their educations to make themselves better and more productive citizens (or employees).

        What speculation mostly does is disturb financial stability and engender a "get rich quick" mentality (much like other forms of gambling). I find it interesting that every financial panic in US history was prompted by the bursting of a speculative bubble.
        John L. Ries
        • OK, maybe not all

          There were the Arab Oil Embargo and the Iranian Hostage Crisis in the 1970s.

          But certainly the vast majority of US financial panics have been due to the bursting of speculative bubbles, as I said.
          John L. Ries
      • No problem

        Actually, gold or silver would suffice, because they're infinitely divisible. You could have one ounce of gold divided by 1000 and place that quantity in a base metal coin worth $1.
        But also, the debt based monetary system is what needs constant growth, to pay back all the interest. Plus, constant growth in a finite environment is not only impossible, but also highly undesirable!
        Joe PW
        • The problem with a monometal standard...

 that it is highly sensitive to changes in supply of or demand for the basis metal (my initial point); a bimetal standard is much less so. The advantage of a bimetal standard is that if for some reason one metal becomes hideously expensive, people can trade with the cheaper metal and save the expensive one, thus avoiding massive deflation (which is what usually happens in a financial panic). There's still a potential problem with inflation (as occurred in the 19th century) if one metal suddenly becomes much more plentiful than expected, but these effects tend not to last (eventually, the boom comes to an end).
          John L. Ries
        • Wrong!

          " constant growth in a finite environment is not only impossible, but also highly undesirable!" --Joe PW

          Joe, You greatly underestimate the wealth-creation power of a free economy in any environment, finite or not, as long as there is freedom of the individual to pursue great dreams.

          You are the Thomas Malthus of economics. You fail to comprehend the ability of economic growth to meet human needs.
          roger that
      • Economic growth and a limited money supply

        work perfectly fine together. It simply means the value of the money increases. Pumping an economy is impossible. Value of money is a RESULT of economic activity, not it's source. Printing more dollars or changing bank ledgers doesn't increase economic activity, it produces inflation. Or it creates a bubble that, when it bursts, is far worse than the initial problem you were trying to avoid.
        • In other words...

          ...deflation, which is only a good thing if there is little or no debt (not our current situation).
          John L. Ries
    • Um, the gold standard didn't fail in the Great Depression

      in fact, it did it's intended purpose, limit the money supply. Roosevelt didn't like a set money supply. He was a fan of Keynesian economics which argues for inflation during recessions. So, Roosevelt made owning gold illegal, confiscated the supply, then dis-connected the dollar from it so he could print as much money as he wanted in what he thought was the best way to end the depression quickly (deficit spending). It failed, of course, because Roosevelt and Keynes think money is created by the government, when, in reality, money is nothing more than a universal barter used to value dissimilar items, and its worth is tied, not to how much you print, but to what your economic activity is.
      • Yes it did. . . .

        Keynes doesn't argue for inflation during recessions, he urges counter-cyclical spending to keep people employed and consuming goods and services. In the current economy inflation has been low - too low - despite a rough tripling of the money supply.

        The Great Depression ended in an orgy of deficit spending called WWII and massive government debt. During the 30s Roosevelt was too timid - as soon as the economy started improving he cut spending and it went back into recession - but WWII spending put America on a growth path for 30 years. We should be investing like that now.
        R Harris
      • Interesting quote from Wikipedia

        "The British Gold Standard Act 1925 both introduced the gold bullion standard and simultaneously repealed the gold specie standard. The new standard ended the circulation of gold specie coins. Instead, the law compelled the authorities to sell gold bullion on demand at a fixed price, but only in the form of bars containing approximately four hundred troy ounces of fine gold.[19]

        This standard lasted until September 19, 1931, when speculative attacks on the pound forced Britain entirely off the gold standard. Loans from American and French Central Banks of £50,000,000 were insufficient and exhausted in a matter of weeks, due to large gold outflows across the Atlantic.[20][21][22] The British benefited from this departure. They could now use monetary policy to stimulate the economy. Australia and New Zealand had already left the standard and Canada quickly followed suit."

        This was when Herbert Hoover was President of the United States, not FDR. And Keynes didn't have all that much influence over British economic policy in 1931, as the Government was committed to the very austerity measures he opposed. It wasn't until 1933 (when things were much worse) that Keynes' ideas started to be taken seriously by either the British or US government.
        John L. Ries
        • Forgot to mention

          No less of a conservative economist than Milton Friedman blamed the Federal Reserve's tight credit policies for the length and severity of the Great Depression. His analysis of the incident was the basis of his theory of monetarism.
          John L. Ries
  • To much "paper" gold was sold

    It was manipulated like a stock. People were selling gold they didn't have and now the market is collapsing.
    • Bummer

      If speculation didn't have an associated risk, speculators would be even less responsible than they are now.
      John L. Ries
  • You're basing this on news form ONE company?

    I know that Apple is large, but geez.... You really think that ONE COMPANY's operations are enough to cause silver to DOUBLE? I think you're giving them too much credit.
    • We have a booster

      But if silver prices are likely to be stable, then why promote it?
      John L. Ries
  • Silly ZDNET

    You guys must be smoking something. The cited article actually states that Apple is warning of a silver shortage due to their experiencing potential resource issues in China. It doesn't say that APPLE's production itself will cause a shortage that leads to price doubling, which is what your fanciful headline conveys.
  • Enjoy your coin collection, Jason

    It's a great hobby. And thanks for sparking some interesting comments. One thing that bugs me about all the interest in silver is so many greedy people out to get sterling silver items at way below the price of silver just so they can melt them down. I inherited some Art Deco sterling silver cutlery bearing the hallmark of an extremely good English silversmith and had to do a lot of homework when selling it (I didn't see the point in keeping something I would never use) so it didn't land up as scrap. And of course that meant it took a long time to sell.
    Laraine Anne Barker