Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Real International Price of Silver

Commodities / Analysis & Strategy Jan 29, 2007 - 10:11 AM GMT

By: Robert_Watson

Commodities What is the real price of an ounce of silver and just how widespread should a silver bull market be? We have watched over the last few years as the price of silver in US dollars has marched upwards from the lows of $4 to the recent highs of $15. However, the good luck of silver has been mainly laid at the door of the bad luck of US dollar. The US dollar depreciates and hence the price of silver in US dollars appreciates. Seems a simple enough equation, but surely a real bull market will stand on its own merits and not on the misfortunes of another? With that in mind, is silver worth investing in by lovers of silver from other countries across the globe?


To answer that question, I have come up with the Silver Analyst Composite Price or the SACP for short. The SACP attempts to ask the question of how much is silver really worth. As I said, silver is increasing in US dollar terms but the US dollar is also depreciating in the international currency markets. Based on this, we may fear that silver may not be faring so well in other major currencies such as the Yen or Euro. If the silver bull market is for real, we should expect to see an increase internationally and across the board.

To that end, the SACP is an equally weighted composite of the silver spot price in six major world currencies. These are the US dollar, the Euro, the Yen, the British pound, the Canadian dollar and the Australian dollar. The chart is then rebased to the start of the silver bull market in June 2003 where the SACP is set to one. In this way we can see exactly how the international silver bull market has progressed in the last three and a half years. As you examine the chart below, the international bull market hit a recent peak of 2.95 on the 12th May 2006. That tells you right away that silver as measured across a broad range of currencies has almost tripled in price since June 2003. In other words, it's an international bull market in silver after all!

SACP is an equally weighted composite of the silver spot price in six major world currencies

In fact, there is not too great a disparity between silver prices across the globe. If one looked at the US dollar price rebased to the bull market start, you would get a corresponding multiple of 3.31 indicating that though the US dollar-denominated bull market is the strongest of the six, silver is 12% weaker on a global basis. The table below gives the end of year values for each currency rebased to 1 from the start of the silver bull market:

Currency

US Dollar

Australian Dollar

Canadian Dollar

British Pound

Japanese Yen

Euro

SACP

Value

3.03

2.53

2.55

2.59

2.99

2.69

2.73

As you can see, silver as priced in Australian dollars has shown the poorest performance with a 2.55 increase in their silver price since the bull began – such is the nature of currencies linked to commodity rich countries. However, the Yen is not far behind the US dollar at 2.99. Needless to say, since we see the silver bull market as an inverse to the US dollar bear market, we expect the US dollar to stay ahead in this table of comparative currencies. There will be other currencies where silver is in an even more raging bull market, we think of the unfortunate holders of the rapidly inflating Zimbabwean Dollar for example.

We also add the 200-day moving average for this composite price that has generally proven to be a level of support during the bull market. At year-end it was at about 2.50 with the composite price at 2.73, so we could see some testing of this level before the bull resumes. Each month, we intend to update this chart for subscribers to give a definitive picture of just where the international bull market in silver is.

But to ask one final question, if the silver bull market is largely just reflecting a US dollar bear market, then why is it increasing globally against other currencies that are appreciating against the dollar?

The answer is quite simply relative supply. As holders of US dollars move into Euros or Pounds to hedge themselves against any drop in their dollar denominated assets, they naturally increase demand for these fiat products. As investors buy up treasuries, notes or derivatives in these currencies, the demand is met in the time honoured fiat fashion by creation ex nihilo. That is, the central and commercial banks of these countries create the money out of thin air to meet demand.

Now this can be a two edged sword for the governments issuing these currencies depending on how they want economic growth and interest rates to go. But for silver it is a different picture. As demand for silver increase from US dollar holders, no one can press a computer key and magic silver out of nothing to quietly balance supply and demand. Demand has to be met from mine supply or above ground stocks and since silver is an internationally traded commodity, this ripples out to all silver markets everywhere.

Central banks may curtail demand for Euros and Pounds by constricting the money supply but the silver supply is already constrained by geology and holders of silver who expect higher prices. That is why the silver bull market is an international bull market and will remain so until the fortunes of the US dollar revives again.

By Robert Watson

Further silver analysis can be obtained by going to our silver blog at http://silveranalyst.blogspot.com where readers can obtain the first issue of The Silver Analyst free and learn about subscription details. Comments and questions are also invited via email to silveranalysis@yahoo.co.uk .


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

vishal
24 Feb 08, 08:59
Silver price

internation price shows silver price as 18.01 and indian price shows Rs. 12000.

Kindly show me the calculation for my understanding.

Thanking You


Post Comment

Only logged in users are allowed to post comments. Register/ Log in