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Rationally for silver

I am glad to see that silver bullion buyers are rational people. The latest statistics from the Silver Institute offer solid evidence.

Now I have always thought they were rational regardless of some of the purple prose employed by some of the so-called investment advisory writers.

How do I define rationality?

Well, that is straightforward as far as I am concerned.

Such a silver purchaser wants to buy at lower prices and sell at higher prices.


With that guidepost in mind, you can tune out claims of Weimar-style inflation, government seizures and credit collapses in China or elsewhere in the world.

I ran into an old friend, a longtime coin collector, at the Central States Numismatic Society convention in 2011 at the very peak of the silver market. He had hurried there to dump as much silver as he could at the then prevailing price around $48 an ounce.

Now I know one person is not necessarily representative of the entire group of bullion buyers, but I would like to think that such common sense is possessed by all or at least most of them.

The Silver Institute figures seem to show such common sense on parade.

The average price of silver bullion in 2015 was $15.68. This was down from an average price of $19.08 in 2014.

This decline of $3.40 is approximately 18 percent.

Silver got cheaper.

How did participants in the market respond?

The Silver Institute said demand for silver coins and bars rose from 236.1 million ounces to 292.3 million ounces, a gain of 24 percent.

Lower price. More silver buying. What could be more logical?

Then let’s look at the sell (supply) side of the equation.

The Silver Institute has a category called scrap. That encompasses recycled electronics to bullion bars made decades ago

Sales in this category dropped from 168.3 million ounces pin 2014 to 146.1 million in 2015, a decline of 13 percent.

The Silver Institute specifically wrote: “Behind the decline were fewer collectors active in the market and some holding back material awaiting higher prices.”

Such a statement cannot be clearer.

Lower prices prevailed. There were fewer sellers of silver. Totally rational.

Now the claims of calamity were out there in both 2011 and 2015. They are out there this at this very moment.

But be that as it may, however entertaining those claims might be to read, the actual participants in the bullion market are acting absolutely rationally.

The Silver Institute also noted that the decline in the amount of silver entering the market in its scrap category declined for four years in a row, 2012, 2013, 2014 and 2015. This precisely correlates with the decline in the price of silver from its 2011 high.

What does this mean?

All you need to know is the price of silver, which is $17.34 this morning according to the Kitco website.

The 475 words of this blog preceding the $17.34 price are completely unnecessary because market participants will do the rational thing knowing only that information.

Buzz blogger Dave Harper has twice won the Numismatic Literary Guild Award for Best Blog and is editor of the weekly newspaper "Numismatic News."

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