What will happen when the silver price is $100

[GoldNugget]

Here is an excellent article about what will happen when the silver price is $100.

The moral of the story is to buy physical silver, particularly silver coins such as American Silver Eagle coins.

"What Happens At $100 Silver"
By: Theodore Butler
Posted at: http://silverseek.com

We broke it down to three broad forms of silver investment – paper (including leveraged silver), mining company stocks, and real silver (including professionally stored silver). We agreed that, at $100 silver, there would be many problems with paper forms of silver. This would include leveraged contracts, including contracts with private companies and possibly futures and options contracts traded on recognized exchanges. This form would certainly include all pool accounts and accounts that held unallocated silver (no individual serial numbers and specific weights on 1000 oz bars), and bank certificates also with unallocated silver.

Many of these paper arrangements would fail in some way along the journey to $100 silver. Most pool and private leveraged accounts are dependent on the financial solvency of the company issuing such accounts. Such companies rarely hold any or the entire full amount of real silver to back the accounts, in essence, creating a short position. This places these companies and accounts in grave danger in the event of a very sharp rise in the price of silver, if not by outright bankruptcy and default, then by arbitrary rule changes and sudden new terms designed to part one from one’s silver participation.

In the case of futures and options contracts, extreme volatility, in addition to rule changes involving margin and delivery terms, may shake many from a silver position prematurely. This has already occurred in the sharp sell-offs we’ve had so far. But if you think we have seen volatility in the price of silver to date, just wait until the price moves higher. Holding a leverage contract will be like riding a Brahma bull. As always, delivery default looms large at extremely high prices and in shortage conditions. While both Izzy and I would deal in futures and options compared to pool or private leveraged or unallocated silver accounts, it would be with both eyes open to what could happen at $100 silver. Speculation is OK; if you know you are speculating and are not kidding yourself into thinking you are investing.

If we get to $100 silver, or more, that will not be something the US Government will care to encourage, for a variety of reasons. Unlike the actions they have taken in the past, namely to sell or threaten to sell their vast stockpiles of silver whenever silver went up in price, that cannot occur again because the US Government no longer owns any silver. But they won’t look to feed a silver bull market at $100, so we fully expect them to suspend the minting of Silver Eagles (probably long before we get to $100) and the U.S. Mint would no longer buy silver on the open market. Both Izzy and I expect a premium to develop in all previously issued Silver Eagles if the US stops minting these coins (Above and beyond the premiums already existing in a certain number of series already). At $100 (if we get there), a box of 500 Silver Eagles will have a silver content intrinsic value of $50,000, plus any premium that may develop.