Silver has always had a reputation as a younger sister of our Favorite metal Gold. Silver has had its own history and has time to time shown its shine.
Going back in history in the 1980’s, Silver had made the world go crazy. It was another Speculation story that had got all the investors by their nerves. Will Brothers, as they were called, sons of Father with history of making money in gambling and having zero or hero attitude, went to conquer almost more than 1/3rd of the world’s silver reserves to create a humongous speculation in the commodity markets ,that the world still remembers as the ‘Silver Thursday’.
Will brothers had a view that the government is going to collapse and so will the US Dollar. Also the rising Inflation levels were continuously depreciating their assets. Thus to get a shield against this Inflation and to safeguard their asset they decided to accumulate some Physical Assets. Accumulating large reserves of gold was prohibited, so they instead went for Silver. They started buying heavy quantities of Silver from the market and entered into Futures Contract to buy millions of tonnes of Silver and they took actual Delivery of it. They drove the Silver prices like a maniac from near $6 per troy ounce to nearly $50/ troy ounce giving more than 750% jump in its price. There came a time that they had accumulated almost 1/3rd of existing silver reserves of the world most of it on Margin Money. But when they got busted, Silver crashed more than 50% in just 4 trading days to around mere $11 in few days and got many traders and investors bankrupted.
Similar craze was again witnessed after the year 2009, when Fear from terrorist groups like al-qaeda had shaken the world and silver also being a safe haven asset, had again showed a pumping rally that drove the silver prices to a new all-time high in 2011 of Approx. $50/ Troy ounce, the previous reached levels of 1980 which, converted in Indian rupees was more than Rs 75000/kg.
After the killing of Osama Bin Laden by US government, people felt peace and Silver price came back down crashing even worst to $20/troy ounce in 2 years or around Rs 30000 in rupee terms .
History is repeated and same emotional fools keep going extreme optimistic in good times and extreme pessimistic in Bad time driving the security prices maniac.
Another beginning of a rally is witnessed as Silver reaches Rs 50000 as on date 4/09/2019.
Will it be different or the same story again !!!
With continuously depreciating Rupee, if we assume that rupee will stabilize at Rs 75/$, same levels of Rs 75000 can be achieved even when the Silver rate reaches $31/troy ounce. $31*32.1507(Troy Ounces/Kg)*Rs 75/$=Rs 74750/Kg.
The current rate is $19.29. Thus, a rally of just $11 can make silver touch lifetime high.
Will it happen this time??
Please do comment and let me know your views.
Signing off,
Have a profitable day!
Saurabh Jain
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Glossary
1 Troy ounce- 31.103 grams
1 kilogram- 32.15 Troy ounce
Futures contract- Agreement to buy security in future at rate agreed upon today
Margin money- In simpler terms, borrowed money.
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