This is an excerpt from Ted Butler’s latest newsletter to his paid subscribers. We strongly encourage readers to subscribe to the newsletter on www.butlerresearch.com for in-depth analysis in the gold and silver markets.
The extreme price smash, while painful to existing holders, represents something else completely to new silver investors. The fact that there is no legitimate reason for the drop, away from price manipulation, not only does not undermine the opportunity in buying silver, it enhances it.
Silver prices have become so depressed and unreasonably cheap, that what has been created is the rarest of circumstances – a second chance at buying what has been the best investment asset at a bargain price. While I suppose it is natural to moan about the loss of value (I confess to doing that), that does not detract from this being the ideal time to buy silver. Rather than view it as the end of a magnificent run, I can’t help but think of it as the opportunity of a lifetime making a u-turn and giving everyone who chooses a second chance to get on board.
I can’t help but think that we are situated price-wise, adjusting for everything that has occurred since then, at the equivalent of $4 or $5 or $6 ten years ago. The biggest similarity is that the one thing that is most out of balance is the price itself. I’m not talking about any inflation adjustment; I’m talking about an adjustment for all the known facts over the past ten years. Sure, back then, silver had been depressed for years and decades; this time it’s been a relatively sudden down move. But the common denominator on both occasions is that the price has gotten stupid cheap.
What’s stupid cheap? It’s a price that can’t be sustained long term, for the impact of what it will do to the law of supply and demand. Simply put, the price of silver is at a level that can’t be sustained indefinitely for real world supply/demand considerations, including production costs and ultimate investment demand. Can it go lower in the very short term? Maybe. Must it go higher in the long term, whether it goes lower or not short term? I can’t see how that won’t happen.
I think the real key here is to buy silver with the same mindset that folks bought it at $5, namely, buying it with the intention of holding it for a long time in order to sell it at a stupid expensive high price down the road. Just like one would buy a piece of raw land with the intent of putting its daily value out of mind. That’s what the most successful holders did ten years ago and what astute holders and buyers of silver will do this time around. It took a crushing price decline to create the opportunity, but how else could that opportunity have been created?