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Wednesday, July 2, 2014

As Oil Prices Go, So Does Silver - Prepare for Economic Collapse

An article posted on Deviant Investor makes the case that silver is related to crude oil prices. The original title of the article is: "What Crude Oil Says About Silver" - If you want to know where silver prices are going, ask crude oil! Prices are volatile, spiked high and low in 2008, and have, on average, risen steadily for the past 14 years.

Crude Oil Prices:

December 1998 Crude Oil price was under $11 (silver roughly $4.85)

January 2000: Crude Oil price was about $24 (silver roughly $5.25)

July 2008: Crude Oil price topped about $147 (silver roughly $18.40)

December 2008: Crude Oil prices crashed to about $35 (silver roughly $10.50)

June 20, 2014: Current price is about $106 (silver roughly $19.80)

Summary:

Politics: The situation in Iraq, a major oil producer, seems to deteriorate every day. The chaos and violence could easily spread and that chaos and violence will reduce supply and kick crude oil prices higher. Adding to the chaos, central banks will “print” more euros, yen, and dollars and governments will add to their mountains of debt. Price inflation will accelerate and the dollar will weaken further.

Demand: More cars in Asia need gasoline. Even if the world economies contract, demand for crude oil should continue to rise.

Crude Oil Outlook: Crude oil prices have many reasons to explode higher and few to drop lower. The trend has been up for more than a decade. Central banks will print, politicians will instigate more wars and invasions, and each euro, yen, and dollar will purchase even less crude oil and gasoline. It is business as usual, but with an extra dollop of chaos, war, and price inflation tossed into the mix….

Conclusion: Higher oil prices, more military spending, more debt, more chaos, higher consumer prices.

1) Higher oil prices, more military spending, more debt, more chaos, higher consumer prices.

2) Crude and silver have been trending upward for 12+ years. Politics and war will accelerate the price increases.

3) The 52 week moving average of crude is about $100 – below the linear trend. Market price is a bit higher with plenty of room to spike much higher as Middle-East and Ukrainian warfare escalates.

4) The 52 week moving average of silver and the current market price are both about $20 – well below the linear trend. Silver could more than double in price and not violate the 12+ year upward trend.

5) Crude oil prices are moving higher and silver prices will follow.

6) Rig for stormy weather – coming in from Iraq, Syria, Ukraine, Russia, South China Sea, “amateur hour” in foreign policy, more wars and invasions, and much of Asia reducing their dependence upon the dollar and Treasury bonds.

7) Statistical correlation between crude and silver for 12+ years of weekly smoothed prices is about 0.84 while correlation between unsmoothed weekly prices is about 0.79. Crude and silver prices are closely aligned in the long term.

7) Preparation is essential.

8) Silver purchases are good preparation.

UrbanMan's Comments: I manipulated the Defiant Investors article only in re- arranging how the facts and opinions were presented, and added the Silver Price to the month and year crude oil price listing, but the facts remain the same. We will have an increase in oil prices. It will drive prices on all other commodities higher - it only remains undetermined whether or not the increase will be fast or slow and if the prices will cause a food crisis and therefore an economic then societal collapse as the Government cannot handle another 20 to 50 million on food stamps, nor would food stamps pay for much food stuffs with the increased prices. Imagine the now 50 million people on food stamps, living day to day, and another 20 to 50 million added to that population. That's close to 1/3 of the population starving and maybe more importantly, being extremely pissed off at government who they see as the entity that should be saving them.

Silver (and gold) is a safe bet as a survival prep. It's the same as having medical kit and supplies as if you need it, you really need it. It may be the only thing that is worth bartering with. As the Defiant Investor articles explains if gasoline goes to $5.00 a gallon, today's Silver at under $21.00 an ounce will in al probability be worth $50 an ounce. Imagine if gasoline is higher in price and availability is greatly reduced. What will silver be worth then? I put my money where my mouth is, I bought another 42 ounces a few weeks ago when it was around $19.50 an ounce.  

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