Remember back in the 1970’s, when there were long lines at gas stations? There was no gas, and people often ran out while waiting in line. America, literally almost ground to a halt. Why wasn’t there any gas? Because idiotic government decided, in all of its normal wisdom, that gas and oil were just too high, so they instituted price controls. There was plenty of oil and gas, but no one would sell it at a loss. Gee, I wonder why! (There is no shortage of oil now. Gas and diesel prices are high because of declining dollar value only. It’s been estimated that Iraq, with all its future costs will total as much as $5 trillion printing press dollars.)
Even General Washington at Valley Forge, suffered from idiotic government. His soldiers were freezing, rags wrapped around their frostbitten feet, ragged uniforms, and no protection from a humid, cold, Philadelphia winter. Fifteen miles away, no one was freezing. Government had decided what it would pay for uniforms, shoes, and things soldiers needed, and no one would sell to them at prices under manufacturing costs. The Brits were fine, with their ships constantly bringing in food, warm clothing, and shoes for the Redcoats. Washington almost lost what became the United States of America. He was a genius though, and when he crossed the Delaware and surprised the Brits, in spite of the government gang, he was on his way to an eventual win.
Is there a shortage of water in the desert? Not if you are willing to pay for it, and there are no price controls. Is there a shortage of Model T Fords? Not if you are willing to pay for them. Suppose government, in all of its absurdity, decided that silver was to be capped at $19 an ounce. No silver could be sold at more than $19 an ounce. There would be a shortage of silver, and the same if price controls were placed on gold at maybe $950. Prices on any item, are a reflection of its supply and demand. I really do believe, that in the light of the increased worldwide demand for gold and silver, the demand will be more than mines can produce, and prices will go skyward much further than inflation, as they already are. Diesel fuel is higher than gasoline, and especially in winter, because diesel and #2 fuel oil are the same, and the entire Northeast U.S. seems to have oil burners, which use #2 fuel, making it ’scarce,’ and therefore expensive. As prices go up, fewer trucks may be driven, or hauled on economical trains, and the Northeast people will turn their thermostats down. Supply and demand, once again. If the DC Gang put price controls on fuel oil, I’ll guarantee you a shortage.
Naturally, as prices of metals go up, dormant mines may reopen, which could produce at elevated prices, and will help to counteract short supplies, slowing price increases. As prices go up, more will foolishly take their profits, thinking that the ’top’ has been reached, and put metals on the market, slowing price increases. Sellers into any market, be it metals, stocks, or anything else, will place those goods on the market, thereby leveling or even lowering prices. If the IMF foolishly decides to sell thousands of ounces of gold, it may go down because there would be a surplus on the market. When prices go down, or there is a ’dip,’ more people buy the bargain price, and prices go up!
It’s all supply and demand as far as prices of anything go, except when there are government mandated price controls, which assure that there will be a shortage. As far as supply and demand in gold and silver are concerned, the entire world is realizing that all currencies, regardless of which ones in use, are being printed with no backing or limits on their amounts. The whole world is beginning to see the fallacy of saving in paper money, and huge numbers are getting out of fiat money, into real money, and rightfully so. Is there a possible ’top’ in gold and silver prices? Theoretically no, since there is no theoretical bottom of currency values. The dollar is being printed far faster than the euro, so it may fade faster, but no paper money is safe, so for goodness sakes, stop saving in it! Protect yourself and have a great weekend.