Why Silver Will Soon Become 'Unobtainium' - Mike Maloney

Here's a comprehensive summary of the YouTube video transcript:

Key Concepts

• Silver Supply Deficit: Demand for silver is outstripping new supply, leading to a dwindling available stockpile.
• Cup and Handle Pattern: A bullish technical analysis pattern indicating a potential significant price increase. Multiple cup and handle patterns (short-term, 2011, and 45-year) are discussed.
• CPI Adjustment: Silver's price adjusted for inflation (Consumer Price Index) shows a more significant breakout from historical resistance.
• Gold-Silver Ratio: The ratio of gold's price to silver's price. A falling ratio indicates silver is outperforming gold. Historical and current ratios are analyzed.
• Derivatives Market: The transcript suggests the silver market is fracturing the "paper game" of derivatives, potentially leading to the decline of the derivative business.
• Unobtainium/Unaffordium: A speculative stage where physical silver becomes extremely scarce and unaffordable due to extreme demand and limited supply.

Silver Supply and Demand Dynamics

The core argument presented is that silver is entering a period of significant price appreciation due to a fundamental supply deficit.

• Supply Lag: It takes 5 to 10 years to discover a silver deposit, develop it into a mine, extract the ore, and refine it into bars. This long lead time means that even with high prices, new supply cannot quickly enter the market.
• Projected Supply Shortage: The transcript indicates that a positive supply situation for silver is not expected until the 2030s. There will not be enough silver available at least until the end of the current decade.
• Market Balance: Data from the Silver Institute shows a shift from a small positive market balance (supply exceeding demand) for five consecutive years to a significant negative balance (demand exceeding supply) for the last five years.
• ETP Impact: When factoring in net investment in Exchange Traded Products (ETPs) like ETFs, the deficit becomes even more pronounced. For seven years in a row, demand (including ETPs) has outstripped supply.
• Cumulative Deficit: Over the last seven years, the cumulative effect of these deficits has resulted in a reduction of approximately 1.1 billion ounces from the available silver stockpile.
• "Running Out of Silver": The presenters emphasize that the available stockpile is dwindling, leading to a situation where demand is outstripping supply.

Technical Analysis and Price Targets

The video highlights several technical indicators and analyst predictions for silver's price.

• Cup and Handle Breakouts:
  • A recent short-term cup and handle pattern has been broken.
  • A larger cup and handle pattern dating back to 2011 has also been broken.
  • A significant 45-year cup and handle pattern, identified by one of the presenters, dating back to 1980, has also been broken on yearly, quarterly, and monthly charts.
• Price Target of $85: Analyst Rashad Hajiev's prediction of a potential breakout to $85 within 3 to 4 weeks is mentioned.
• "Fireworks" Ahead: The presenters believe that once silver exceeds the 2011 high and the larger cup and handle patterns fulfill, "real fireworks" will occur, suggesting the rally has just begun.
• Triple-Digit Silver: A comparison to the bull market of the 1970s suggests the potential for triple-digit silver prices, with a suggestion to "move the decimal point one place to the right" from current predictions.
• Viewer Predictions: Comments from viewers suggest targets of $100 and even $200, with the sentiment that "the game is up" for traditional markets.

CPI-Adjusted Silver Price

Adjusting silver's price for inflation reveals a more dramatic picture of its historical undervaluation and recent breakout.

• Breaking 45-Year Resistance: When adjusted for CPI, silver has broken above 45 years of resistance.
• Historical Peak Comparison: The 1980 peak, when adjusted for CPI, appears significantly higher than current prices, highlighting how inexpensive silver is in real terms.
• Inflation-Adjusted Cup and Handle: The 45-year cup and handle pattern is also discussed in the context of CPI-adjusted prices, reinforcing the bullish outlook.

Gold-Silver Ratio Analysis

The declining gold-silver ratio is presented as a strong indicator of silver's outperformance.

• Current Ratio: The gold-silver ratio is currently around 73.
• Historical Lows: The ratio reached 30 in 2011 and 14 in 1980.
• Undervaluation: At a ratio of 70, silver is considered an extreme bargain.
• Projected Ratio Decline: The presenters believe the ratio could fall significantly below 14, especially considering the historical context of large US strategic silver stockpiles (now depleted) and the absence of extensive derivatives trading in 1980.
• Outperformance Potential: If the ratio moves from 73 to 10, it implies a 7.3 times return on silver compared to gold. Combined with gold's potential to double, this suggests a potential 10.4 times return for silver.
• Inverted Chart: A chart was presented inverted so that an increasing ratio signifies silver outperforming gold, making it easier to visualize the trend.

The "Paper Game" and Derivatives

Alistair McLeod's perspective on the fracturing of the "paper game" through silver and gold is discussed.

• Decline of Derivatives: McLeod suggests that these events mark the beginning of the decline in the entire derivative business.
• "Pretending You Have Something You Don't": The derivative business is characterized as creating more claims than actual underlying assets, akin to "musical chairs."
• Market Break and Price Explosion: When the market breaks, the price of physical silver is expected to explode.

The Five (and Six) Stages of Silver

The presenters outline a progression for silver's market status:

1. Undermined: Historically undervalued.
2. Undervalued: Still trading below its true worth.
3. Unchained: Breaking free from historical constraints.
4. Unstoppable: Gaining significant momentum.
5. Unobtainium: Becoming extremely scarce and difficult to acquire.
6. Unaffordium: The stage after unobtainium, where it becomes too expensive for most to buy.

Actionable Insights and Conclusion

• Don't Sell: The overwhelming sentiment is that it is not time to sell silver. Selling now would be a regretful decision, especially as the rally is just beginning.
• Buying Opportunity: The current environment is seen as a prime time to be buying silver.
• Spectacular Things Ahead: Silver is poised to do "spectacular things in a very short period of time."
• Fracturing the Rigged Market: The current price action is viewed as the destruction of a rigged market in real-time.
• Future Outlook: The expectation is for "super high prices" due to the supply deficit, with the potential for silver to become "unobtainium" and then "unaffordium."

Notable Quotes

• "We're probably not going to get back into a positive situation with uh silver supplies until the 2030s."
• "The cure for high prices is high prices because it'll bring more to market except to find a discovery to turn it into a mine and to to get that ore above ground and and refined into bars takes 5 to 10 years."
• "There just isn't enough. There's not going to be enough for at at least until the end of this decade and that means super high prices."
• "Once this exceeds the 2011 high and this cup and handle fulfills, uh then we've got some real fireworks again. So, the fireworks haven't even started yet. We've only lit the fuse."
• "The breakout in silver that happened a few days ago could potentially take silver to his $85 price target in a matter of three to four weeks."
• "$85 is too low. Try 100 and then towards 200. The game is up and the bullion banks are going to be irrelevant. Real price discovery awaits."
• "We are witnessing the destruction of a rigged market in real time. What a time to be alive and to be a silver stacker as well."
• "Silver finally breaking out above 45 years of resistance when adjusted for the CPI. Kaboom."
• "I think the paper game is being fractured through silver and then gold. We'll look back on these events and say they marked the beginning of the decline in the entire derivative business."
• "The derivative business is pretending you have something you don't and then betting on it."
• "The gold to silver ratio continues to drop like a stone. Silver's time has come."
• "It is still ex an extreme bargain. It is dirt cheap."
• "So now that trend is reversing. So now the trend is going negative where basically demand is outstripping supply."
• "So basically, we're running out of silver. The dark gray market balance is supply versus versus minus demand."
• "So the available stockpile is dwindling. We're basically running out of silver year after year for seven years."
• "So you don't have to be an economist to know that when you have shrinking supply and increasing demand, the thing that has to move is price and it goes up."
• "Eventually you're going to run out of silver and you won't be able to get it. That's why we call it unoptanium."
• "After it becomes un unoptanium, it becomes unaffordium because nobody will be able to buy it."

Live Q&A Announcement

Mike will be hosting a live Q&A on Zoom on Tuesday, December 9th, from 12:00 to 1:00 p.m. Eastern. Registration is available at goldsilver.com/askalen.