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With the news about the short squeeze of silver currently under way, I have read articles/watched videos where people are talking about how precious metals, silver and gold specifically, are priced much lower than they should be compared to the dollar.

I have very limited knowledge with regards to markets and finance, but the squeeze on stocks and silver caught my interest since it has been all over the news. But I have been wondering. How can a precious metal cost less than it is worth? What evidence is there, if any, of these claims?

EDIT: As requested here are some links that people have shared with me talking about my question:

https://www.youtube.com/watch?v=_6fQ8KXw2X4

https://goldsilver.com/blog/amazing-silver-chart-shows-how-undervalued-it-is/

https://investingnews.com/daily/resource-investing/precious-metals-investing/silver-investing/silver-price-is-it-undervalued/

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    Please cite those articles, so we can read them and judge whether they are valid, or fear-mongering "gold bug" nonsense. – RonJohn Feb 1 at 14:23
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    @RonJohn it's somebody trying to cash in on more WSB rumors since GME made the mainstream news cycle. – Aaron D. Marasco Feb 1 at 14:34
  • @RonJohn As requested I shared some links, as I mentioned my understanding is limited so I could be misinterpreting the info presented – Mr. Spock Feb 1 at 14:45
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    How can a precious metal cost less than it is worth? What evidence is there, if any, of these claims? In general the claim is that, looking at historical data, it does not match the current situation and it will "correct" itself sooner than later. And as you mention GME, buyer beware: it is nothing but a variation of the "pump-and-dump" schema, and as in any of those late to the party will have considerable losses. A reddit initiative to buy silver can easily be the same. – SJuan76 Feb 1 at 15:21
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    the articles are totally nonsensical – Fattie Feb 1 at 15:27
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  1. The investingnews article is two years old, and thus not relevant to now.
  2. The GS blog starts with "Amazing", so I know it's self-serving hype.
  3. Ditto a YT video titled "HUGE SILVER SHORTAGE!"
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  • So I can safely say that the short squeeze has nothing to do with undervalued silver because there is no evidence that silver itself is undervalued? – Mr. Spock Feb 1 at 14:55
  • Do you have any answer for the first part of my question? Is it possible for a precious metal to cost less than it is worth? – Mr. Spock Feb 1 at 14:57
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    This is the best way to respond to questions like this - the reason it raises the hair on the back of your neck to have some ask it like that, is that there is an undercurrent of self-serving propaganda on the part of whoever spreads the news [not the OP necessarily, rather the articles shared]. An analysis of whether gold or silver is or isn't "overvalued" at the moment might seem preferable, but the direct response to something scam-ish is just to point out that it shares characteristics with a scam. – Grade 'Eh' Bacon Feb 1 at 14:57
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    @J-Rome I believe that your question is sincere, not scammish. To be quite honest, though, I care more about diseased rat anuses (no, I'm not a biologist, veterinarian or anyone else with a professional or hobby interest in rat diseases) than I do about whether PMs are under- or over-valued. – RonJohn Feb 1 at 15:35
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    @J-Rome Apologies for implying I think you are spreading misinformation, that wasn't my intention. Rather, the internet has been rife the last few days and weeks about the upcoming 'silver surge' [precious metals pricing speculation is a common topic for quasi-legitimate "advisors" to lure in the less informed]. It is the articles you posted, which themselves are part of the trash-speculation internet "eco-sphere" that I take issue with. Your question is well-formed and it is valuable to have questions exactly as you'ved asked them. – Grade 'Eh' Bacon Feb 1 at 18:35
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The fundamental problem with your question is how to determine what a precious metal, or indeed any other good, is worth. The only way to do that is to find out what a willing buyer will pay a willing seller. By that definition, silver is not over-valued.

Now it's possible that if the WSB people buy up a lot of silver and hold it, then there will be a price increase due to the artificial restriction of supply, as people/companies that use silver have to compete for the now more limited supply. That new price of silver will be what the silver is worth at that time, because it's what the buyers need to pay sellers to get the silver they want.

If that happens, silver users could perhaps find alternatives to the now-too-expensive silver, meaning the price will drop because nobody but the WSB hoarders want it. Then the silver they bought at $29/oz today might be selling for $15/oz next month, and that will be what silver is worth then.

Really, this is just basic market economics. Supply and demant, you know?

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  • "it's possible that if the WSB people buy up a lot of silver and hold it" reminds me of the Hunt Brothers... en.wikipedia.org/wiki/Silver_Thursday – RonJohn Feb 1 at 18:18
  • With gold, silver etc. there is also the problem that finding it and getting it out of the ground costs money. So if the price drops, people stop digging for it, and if the price goes up, more people will dig for it, and they will go to places where it was too costly to dig. – gnasher729 Feb 1 at 19:30
  • @gnasher729: Exactly. Dont have examples for silver, but there are working (and apparently profitable) gold mines not far from here that mine ore with about 0.2-0.25 ounces of gold per ton. (For you metric folks, that's 1 part gold to 128,000 - 160,000 part other stuff.) en.wikipedia.org/wiki/Carlin%E2%80%93type_gold_deposit#Mining – jamesqf Feb 1 at 20:49

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