Call Toll Free: 323.386.2323
View Shopping Bag
Like Us on Facebook!

Archive for the ‘Rising Price of Silver & Gold’ Category

Apr
20

As silver speeds towards $50 per ounce, I read and hear more and more about how it hasn’t been this high since the 1980’s. It’s true that silver once closed at almost $50 an ounce, but you can’t count that, and there’s a good reason why.

Here’s what happened: There were these two guys, Nelson and William Hunt. They were brothers from a rich oil family in Texas. Not just any rich oil family, the richest family in the whole country at the time. Their daddy had set them up in oil businesses of their own and they expanded into cattle, sugar, real estate and pizza parlors. In the early 70’s inflation was cutting into their oil profits and they started looking around for something to invest in to protect their wealth. Since it was illegal to own gold bullion at the time, they decided to invest in silver, which was then trading at about $1.50 per ounce.

The brothers hatched a plan and in 1974 bought up 55 million ounces of silver on contract, which equaled about 8% of the entire world supply at the time. The price of silver responded by rising to $6.00 per ounce. Their purchases left them strapped for cash, but hungry for more silver, so they started looking for partners. In 1978 they teamed up with a couple of Saudi Sheiks they knew from their oil ventures and created an investment company called International Metal Investment.

The company quickly bought up every ounce of silver and every contract they could get their hands on, and by late 1979 they had amassed over 130 million ounces of physical silver and 90 million ounces on contract for immediate delivery, which just about put them in control of the market. This caused a panic and silver prices soared.

The Federal Reserve got hip to what was happening and made changes to the trading rules which forced the group to liquidate their holdings. The Hunt Brothers were eventually forced to declare bankruptcy. In 1988 they were convicted of conspiring to manipulate the market and the IRS slapped them with a 90 million dollar tax bill. (Ouch!) Meanwhile silver fell back to normal levels and by 1990 was trading at a more realistic $3.50 per ounce.

So when you hear that silver once traded at almost $50 an ounce in the 1980′s, it’s true, but it did that for only a couple of days. And during those two trading days,  January 17 and January 18, 1980, the price of silver went over $50, but it never actually closed over $50.00. Those up and down prices during a trading day are called intra-day trading prices and are not recorded as the closing price. So technically, as of this date, silver has never closed at over $50.00 per ounce. But it certainly may do that very soon.

The steady rise in silver prices over the last 10 years is due to many factors, such as the increase in industrial use, the fact that more is being demanded than is available, the silver ETF’s and many other reasons. The good news is, at least this time, the rise in price is not because of couple of greedy cowboys trying to force the price up artificially. The bad news is, I believe high prices are here to stay. I believe we will continue to see the volatile up/down price in an upward pattern, always hitting new highs with bigger price swings.

The chart below shows the price of silver from 1900 through today. You can clearly see that over time the trend is upward, and you can also see what a huge (but temporary) impact the Hunt Brothers had on the market. (Click on the chart to bring up a full screen version).

The cold hard truth is that the price of silver products are directly related to the price of silver in the spot market. Manufacturers, distributors, and retailers of silver products are powerless to change that. The rising cost of silver has been a source of pain for all of us.

So how do we move forward?

  1. Accept it. Everything, including silver, is rising in price. These are inflationary times.
  2. Fall in love with bronze and copper clays. (All of the projects in our Learning Center can be completed in bronze or copper clays!) Bronze requires a kiln, but some copper can be torch fired. Some people are reluctant to purchase a kiln because of the price tag, but kilns are looking more affordable every day compared to silver clay. In my last article, Why Are Silver Clay Prices Going Up?, I mentioned that a kiln can be had for less than the cost of three – 100 gram packages of silver clay.
  3. Mix mediums. Maybe we begin to treat silver as we do gold; using it as an accent or a small portion of your overall creation to help reduce your costs. Incorporating beads, gems, metal stampings, new findings or other jewelry items can help you use silver metal clay to define your designs and use less silver.
  4. Watch the market. Prices fluctuate all the time. Purchase your silver clay when the price is affordable to you. Like gasoline, a small decrease in price, however brief, is still a small victory.
  5. Don’t be afraid of the price of silver! It’s still a bargain. If the price of silver were based on its abundance, it would be higher than gold.

Why $50 Silver In 1980 Does Not Count © 2011 Mardel Rein | www.cooltools.us

Feb
21

It’s no secret that the price of silver clay has been going through the roof in the last few years. Even jewelry artists new to metal clay have noticed the rapidly rising prices in the last several months and are asking, “What’s up with the price of silver clay?”

The answer is easy. Silver clay is getting more expensive because the price of silver is going up. Since fine silver is the main ingredient in all PMC and Art Clay silver products, any fluctuation in the silver market can make a big difference in the price of silver clay.

Mitsubishi Materials introduced silver clay in the United States in 1996. At that time silver was hovering around $5 an ounce. The price of silver clay was fixed in those days because silver prices were steady and had been for many years. The fixed price meant that no matter how the price of silver fluctuated in the market, silver clay prices were firm. You knew what you would pay and it did not change.

This silver honeymoon lasted all the way through 2003 while silver floated between $4 and $5 per ounce. But then, in 2004, the price of silver started to creep up. Every month a new high in price was set and by December, 2005, silver had closed as high as $9.23 per ounce, more than double what it was just a few months earlier.

The following April a new silver-backed ETF fund was introduced allowing investors to trade silver funds in the stock market, something that had never been done before, and rumors of the coming ETF had probably fueled the run-up in price that began the previous year.

In 2006, the year started out with silver at $8.79 per ounce. On the day the new Silver-backed ETF went on sale, it gained an astonishing 7%. Silver then closed out the year at $14.85 for an incredible one-year gain of almost 69%; an unheard of return on an investment of any kind.

At this point the price structure of silver clay was changed and silver clay began to float with the “spot” price of silver. That meant that when the spot price of silver went up, silver clay went right along with it, and it’s been that way ever since.

For example, a 50-gram package of PMC 3 clay nets a total of 50 grams of fine silver. 50 grams of fine silver equals 1.608 troy ounces*. At a spot price of 30.00, the silver value is $48.24. To give you some perspective, that same lump of silver clay had an average silver value of $8.04 from 1996 through 2003.

So what is the “spot” price? The silver “spot” is the daily price of silver. Because silver is a market commodity, the price changes each day. In London a group of 5 bankers sets or “fixes” the spot price for fine silver bullion and coins each morning.  The price set in London is called the “London Fix” price. In the US, a company called Handy & Harmon sets its own spot price called the “New York Spot”. In the US most dealers follow the New York spot.

Note: When looking at current prices or historical charts, be sure to notice whether the prices are London or New York. This information is usually noted in the title or footer. The two spot prices vary.

Since 2004 silver has continued its aggressive upward march in price and according to most pundits, it’s heading higher. Although I personally believe that silver-backed ETFs have played a large roll in the volatility of the spot market, it’s certainly not solely responsible.

Here are just a few reasons that have been argued as contributing to the rise in silver prices, and why silver is expected to continue moving upward:

  1. Silver supply is short of what it is contracted for. In other words, more people have notes that say they own silver than there is actually silver to cover those notes.
  2. Silver is being used in more products and industries than ever before, and the demand is forecast to continue increasing at a very fast clip.
  3. Silver is consumed in industry. Most of it is used in such small amounts that it is not recoverable. Consider that every electronic thing you own or use or have thrown out contains silver that will never be recovered.
  4. Silver is undervalued based on the historic gold/silver ratio.
  5. Silver has gained attention with its huge gains prompting many new buyers, setting the scene for a bubble.
  6. Depleted world stockpiles = less available physical silver.
  7. 75% of silver mined is a byproduct of base metal as base metal production declines, therefore less silver is being produced.
  8. Mining for silver is presently too costly to make a profit. More mines are closing than opening. (But this will soon change)
  9. Worldwide economy has driven investors to hold silver (and gold) as a store of wealth.
  10. Price manipulation. Bart Chilton, Commissioner of the Commodity Futures Trading Commission (CFTC) said, “I believe that there have been repeated attempts to influence prices in the silver markets.” Many others agree with him, so it warrants mentioning. Don’t believe it? On Jan 18, 1980 the price of silver hit an all time high of nearly $50 per ounce due to the attempt by Nelson and William Hunt to corner the market. (More on this in a later article.)

Lots of people have an opinion on where the price of silver will go in 2011. I’ve seen predictions as high as $65 per ounce and as low as $21, but most seem to think $35 is the number that we’ll settle at. There are some who argue that silver will be upwards of $100 per ounce. It sounds outlandish, but then so did $30 when silver was trading at $5. My personal prediction is that it will continue to move upwards in its currently volatile pattern. I would not be surprised to see it over $40 by the end of the year.

Even with a rising price, silver is still a great bargain as a jewelry making material. Whether you are working with silver in clay form or by traditional means, a rising silver price means more value to every piece of jewelry you make in silver (and everything in your current stock as well). And as the price goes higher, silver becomes more precious in the mind of the consumer. So a higher price means that more thought and care will go into the use of silver and silver clays.

Here are some ways of keeping the cost of silver down:

  1. Design your projects before opening your clay. Have a plan of action when the clay is open so you make just the components you need without allowing the clay to be exposed to the air.
  2. Incorporate sheet and wire into your projects. Everything doesn’t have to be made of silver clay. Fine silver sheet and wire is much less expensive and can be fused to the silver clay.
  3. Use thinner slabs. If you normally make slabs 6 cards thick for a pendant, make it 4 cards thick. The clay will go much further.
  4. Try making your item from the new PMC PRO alloy clay. This version is much stronger than fine silver clay. You can make shanks as thin as 2 cards thick and still maintain the strength needed.
  5. Try adding other metals to your creations. Use brass, copper, aluminum, titanium and other metals in sheet, wire, stampings and castings.
  6. Learn to saw, solder or form metal wire and sheet so you can incorporate more money saving techniques in your work.

For those who are feeling squeezed by the price of silver and are looking for less costly ways to work in silver clay, PMC PRO offers a very strong product that is 90% silver and can be used in much smaller quantities due to it’s strength. There is also a new and more reliable version of bronze clay called FASTfire BRONZclay that is very affordable. Copper clays are also much lower in price than silver, and copper clay can even be fired with a torch. And since base metal clays are ideally fired in a kiln, consider that a kiln can be had for less than the cost of 300 grams of silver clay.

Learn more about base metal clays in the Cool Tools Learning Center at www.cooltools.us

*Did you know? A troy ounce is not the same as ounces used for weighing food and other commodities. A troy ounce is a unit of measure reserved mainly for precious metals and gemstones. A “regular” ounce is what is used for dry measurements and is called an “avoirdupois” ounce. Isn’t that a beautiful word? Avoirdupois. It’s pronounced “av-wah-dew-pwah

Avoirdupois vs. Troy Ounces                          Avoirdupois vs. Troy Pounds

1 avoirdupois ounce = 28.35 grams                            1 troy pound = 12 troy ounces

1 troy ounce = 31.1 grams                                         1 avoirdupois pound = 16 avoirdupois ounces

Be sure you always weigh your metal clay with a scale that weighs in troy ounces for an accurate measurement of the silver weight.

Why Are Silver Clay Prices Going Up? © 2011 Mardel Rein / www.cooltools.us