Saturday, February 23, 2013
Gold to Hit $2000 This Year?
Kerry Hall at Mining.com offers this note:
Commodities expert and precious metals forecaster Eugen Weinberg from Germany's Commerzbank discusses how gold buying will pick up in the second half of the year and push prices towards $2,000, in an interview with Bloomberg TV.
While there is no compelling reason to own gold at the moment, since the Euro crisis is abating and inflation hasn't picked up yet, he thinks the investment interest will come back and continuous buying by the central banks will elevate the price.
"Going in like a bear, coming out like a bull" is how Weinberg characterizes the next 12 months for gold.
At the moment, gold havens aren't needed because other commodities have recovered since last year and are likely to do so further this year.
Overall, he believes sentiment is improving with investors' risk appetite coming back. As well, corporate clients are becoming more upbeat about the future.
Monday, November 7, 2011
Gold and Silver Prices Pop as Investors Seek Safety
Gold prices popped Monday despite a stronger U.S. dollar as stronger physical demand and safe haven buying kicked in.
Gold for December delivery jumped $35 to close at $1,791.10 an ounce at the Comex division of the New York Mercantile Exchange and were climbing higher in after-hours trading. The gold price has traded as high as $1,787.80 and as low as $1,754 an ounce.
Silver prices closed up 74 cents at $34.82 an ounce while the U.S. dollar index was slightly higher at $76.93.
In Europe, it's Greek redux, with 10-year Italian bond yields soaring over 6.6%, a euro-record high, Prime Minister Berlusconi losing three party members in a week and the lower house preparing to vote on 2012 budget issues on Tuesday, which, if defeated, could trigger another confidence vote for Berlusconi.
Now that Greece is shifting to an interim government, which should approve austerity measures and its next tranche of bailout money, investors are focusing on the drama unfolding in Italy. According to Kitco's gold index, gold demand was up more than $43 and the rally was shaking off a stronger U.S. dollar, leaving the overall price up $41.80 an ounce.
The latest commitment of traders report for the week ending November 1st,showed that speculative traders added 1,003 long contracts and reduced their short positions by 9,221 contracts, which means some of gold's 3% two-day rally last week was short covering and modest long exposure.
James Moore, research analyst at FastMarkets, says that current safe haven buying could push prices "towards the $1785-1800 area in the coming sessions." Gold was rising in all currencies with the strongest gains coming in the swiss franc -- gold was up 4.25% -- on weekend reports that the Swiss National Bank was ready to take further steps to devalue its currency. The bank has previously pegged the swiss franc to the euro at an exchange rate of 1.2 francs per euro, but could raise the rate if need be.
Barclays Capital also reiterated its bullish stance on gold "we expect near-term buying interest ... to underpin a move higher. A break above resistance at $1,775 would confirm our bullish view toward our target near $1,840" an ounce.
Rumors were also flying this weekend that Germany or other Eurozone central banks would be forced to sell gold in their reserves to help increase the firing power of the European Financial Stability Fund, or bailout fund. Germany is the second-largest holder of gold in the world, with 3,401 tons, and holds the third most gold as a percentage of its reserves, behind Greece and Portugal, according to the World Gold Council.
At current prices all of Germany's gold would net $193 billion, well short of the trillion plus dollars officials were hoping to expand the bailout fund to.
German officials reportedly said Monday that the gold will "remain off limits," but gold in the weaker EU nations could be used as collateral. "Gold's value as money and as a strategically important monetary asset is being slowly realized again," says Mark O'Byrne, CEO of GoldCorp, a bullion dealer.
Gold mining stocks were popping Monday with many like Randgold(GOLD) jumping to new 52-week highs . Kinross Gold(KGC) was adding 3.21% to $14.79 while Yamana Gold(AUY) was up 1.29% at $16.47. Other gold stocks, Agnico-Eagle(AEM) and Eldorado Gold(EGO) were trading higher at $46.95 and $19.33, respectively.
--Written by Alix Steel in New York.
Gold for December delivery jumped $35 to close at $1,791.10 an ounce at the Comex division of the New York Mercantile Exchange and were climbing higher in after-hours trading. The gold price has traded as high as $1,787.80 and as low as $1,754 an ounce.
Silver prices closed up 74 cents at $34.82 an ounce while the U.S. dollar index was slightly higher at $76.93.
In Europe, it's Greek redux, with 10-year Italian bond yields soaring over 6.6%, a euro-record high, Prime Minister Berlusconi losing three party members in a week and the lower house preparing to vote on 2012 budget issues on Tuesday, which, if defeated, could trigger another confidence vote for Berlusconi.
Now that Greece is shifting to an interim government, which should approve austerity measures and its next tranche of bailout money, investors are focusing on the drama unfolding in Italy. According to Kitco's gold index, gold demand was up more than $43 and the rally was shaking off a stronger U.S. dollar, leaving the overall price up $41.80 an ounce.
The latest commitment of traders report for the week ending November 1st,showed that speculative traders added 1,003 long contracts and reduced their short positions by 9,221 contracts, which means some of gold's 3% two-day rally last week was short covering and modest long exposure.
James Moore, research analyst at FastMarkets, says that current safe haven buying could push prices "towards the $1785-1800 area in the coming sessions." Gold was rising in all currencies with the strongest gains coming in the swiss franc -- gold was up 4.25% -- on weekend reports that the Swiss National Bank was ready to take further steps to devalue its currency. The bank has previously pegged the swiss franc to the euro at an exchange rate of 1.2 francs per euro, but could raise the rate if need be.
Barclays Capital also reiterated its bullish stance on gold "we expect near-term buying interest ... to underpin a move higher. A break above resistance at $1,775 would confirm our bullish view toward our target near $1,840" an ounce.
Rumors were also flying this weekend that Germany or other Eurozone central banks would be forced to sell gold in their reserves to help increase the firing power of the European Financial Stability Fund, or bailout fund. Germany is the second-largest holder of gold in the world, with 3,401 tons, and holds the third most gold as a percentage of its reserves, behind Greece and Portugal, according to the World Gold Council.
At current prices all of Germany's gold would net $193 billion, well short of the trillion plus dollars officials were hoping to expand the bailout fund to.
German officials reportedly said Monday that the gold will "remain off limits," but gold in the weaker EU nations could be used as collateral. "Gold's value as money and as a strategically important monetary asset is being slowly realized again," says Mark O'Byrne, CEO of GoldCorp, a bullion dealer.
Gold mining stocks were popping Monday with many like Randgold(GOLD) jumping to new 52-week highs . Kinross Gold(KGC) was adding 3.21% to $14.79 while Yamana Gold(AUY) was up 1.29% at $16.47. Other gold stocks, Agnico-Eagle(AEM) and Eldorado Gold(EGO) were trading higher at $46.95 and $19.33, respectively.
--Written by Alix Steel in New York.
Saturday, October 15, 2011
Gold Prices Could Move Higher as Europe Stabilizes
Prices could move higher next week
B G Shirsat / Mumbai October 16, 2011, 0:45 IST
Gold prices could rise next week on the back of stable cues from Europe and better-than-expected economic data from the US. The Kitco News Gold Survey suggested strong rally in gold next week with 21 participants expecting prices to go up, while three believe prices could fall and one says prices will remain sideways or unchanged. On the week, December gold futures prices on the Comex division of the New York Mercantile Exchange settled at $1,683 an ounce — up 2.9 per cent on the week.
The trading pattern on Friday in the most-active December gold contract on the Comex division of the New York Mercantile Exchange, suggested strong up move in gold futures around $1,704. The lower-end support for December futures is expected to come at $1,652, the market picture chart suggested. TPO counts above (35 per cent) the point of control (PoC-1,678) hinted at a strong support for gold below $1,675. The weekly volume weighted an average price of $1,674, mostly through buy-side indicating strong opening on Monday.
Trading in call and put options remained steady on account of range-bound trading last week. Selling was witnessed in the $1,700-strike December series call options at a premium of $46. The $1,650-1,700-strike put saw sell-side bias as traders expected gold to go substantially below $1,650 and then probably move up above $1,700.
Comex gold futures have seen choppy trading on a day-to-day basis recently. However, the long-term monthly continuation chart for nearby Comex gold futures showed the bulls are still in full technical command, says Jim Wyckoff, technical analyst of Kitco News. Prices have been treading higher for 10 years and there are no long-term technical clues the uptrend in prices will end any time soon.
Gold’s rally from a more than two-month low may be capped at about $1,730 an ounce, as trading turnover declines, leaving the metal range-bound, according to technical research by Barclays Capital. “Falling daily volumes in gold suggest that the up move is unsustainable,” said the report made available on Thursday. Bullion dropped 11 per cent in September, the most since October 2008, which spurred speculators to cut their net-long position to the lowest since February till October 4, according to data from the Commodity Futures Trading Commission.
B G Shirsat / Mumbai October 16, 2011, 0:45 IST
Gold prices could rise next week on the back of stable cues from Europe and better-than-expected economic data from the US. The Kitco News Gold Survey suggested strong rally in gold next week with 21 participants expecting prices to go up, while three believe prices could fall and one says prices will remain sideways or unchanged. On the week, December gold futures prices on the Comex division of the New York Mercantile Exchange settled at $1,683 an ounce — up 2.9 per cent on the week.
The trading pattern on Friday in the most-active December gold contract on the Comex division of the New York Mercantile Exchange, suggested strong up move in gold futures around $1,704. The lower-end support for December futures is expected to come at $1,652, the market picture chart suggested. TPO counts above (35 per cent) the point of control (PoC-1,678) hinted at a strong support for gold below $1,675. The weekly volume weighted an average price of $1,674, mostly through buy-side indicating strong opening on Monday.
Trading in call and put options remained steady on account of range-bound trading last week. Selling was witnessed in the $1,700-strike December series call options at a premium of $46. The $1,650-1,700-strike put saw sell-side bias as traders expected gold to go substantially below $1,650 and then probably move up above $1,700.
Comex gold futures have seen choppy trading on a day-to-day basis recently. However, the long-term monthly continuation chart for nearby Comex gold futures showed the bulls are still in full technical command, says Jim Wyckoff, technical analyst of Kitco News. Prices have been treading higher for 10 years and there are no long-term technical clues the uptrend in prices will end any time soon.
Gold’s rally from a more than two-month low may be capped at about $1,730 an ounce, as trading turnover declines, leaving the metal range-bound, according to technical research by Barclays Capital. “Falling daily volumes in gold suggest that the up move is unsustainable,” said the report made available on Thursday. Bullion dropped 11 per cent in September, the most since October 2008, which spurred speculators to cut their net-long position to the lowest since February till October 4, according to data from the Commodity Futures Trading Commission.
Wednesday, August 10, 2011
GOLD SOARS ABOVE $1800 PER OUNCE - NO END IN SIGHT!
Gold price soars above $US1800/oz
Niko Kloeten | Tuesday August 09, 2011 | 13 comments
Gold has hit another milestone, shattering the $US1800/oz barrier, rising more than $US60 in less than a day's trading.
The spot price of gold is trading at about $US1811/oz after being under $US1750/oz less than a day ago.
New Zealand Mint head bullion trader Mike O'Kane says the recent rise in the price of gold has caused a surge of interest from Kiwis, with a large increase in the number of new buyers.
The price of gold has hit a new record, shattering the $US1700/ounce milestone and showing no signs of slowing down as global investors look for a safe haven.
The spot price of gold reached $US1750/ounce this afternoon and for New Zealand investors the gain is being magnified by the fall in the New Zealand dollar.
Mohendra Moodley, a director of Australian fund manager Taurus Funds Management, says New Zealand gold buyers are benefiting twice, due to gold being denominated in US dollars.
This is because the gold price in US dollars is rising while the New Zealand dollar falls against the greenback, raising the value of gold holdings in New Zealand dollar terms.
Although gold price rises are sometimes “diluted” by rises in the dollar, he says during times when markets are “stressed”, such as in 2008, the New Zealand dollar tends to go down while gold goes up.
"Gold has gone up 11-13% per year in New Zealand and Australian dollar terms in the last 10 years, compared to 19% per year in the US, so returns have been diluted but not by much."
Mr Moodley says inflation and interest rates play key roles in the demand for gold, with American investors who get near-zero interest rates from banks finding it particularly attractive.
“The opportunity cost is always the level of interest rates in any country,” he says. “Gold trades inversely to real interest rates – the lower the real interest rates the better the gold price.
“In markets where interest rates [such as New Zealand and Australia] are higher the opportunity cost is higher.
“Having said that, it also depends on the level of inflation – for instance, Chinese investors have high interest rates but also high inflation, meaning the real interest rate is low.”
Even though New Zealanders get better interest rates on savings than in many other countries, Mr Moodley says gold is still an attractive prospect given its recent performance.
“If you’re getting 3-4%, the question is, would you rather be earning 15-20%? I’d take that.”
Mr Moodley says gold run of success has resulted in increased interest in Australia and New Zealand.
“There is some interest coming out of this neck of the woods but most of the global demand is being driven by Asia, particularly India and China, Europe and of course the US.”
Niko Kloeten | Tuesday August 09, 2011 | 13 comments
Gold has hit another milestone, shattering the $US1800/oz barrier, rising more than $US60 in less than a day's trading.
The spot price of gold is trading at about $US1811/oz after being under $US1750/oz less than a day ago.
New Zealand Mint head bullion trader Mike O'Kane says the recent rise in the price of gold has caused a surge of interest from Kiwis, with a large increase in the number of new buyers.
The price of gold has hit a new record, shattering the $US1700/ounce milestone and showing no signs of slowing down as global investors look for a safe haven.
The spot price of gold reached $US1750/ounce this afternoon and for New Zealand investors the gain is being magnified by the fall in the New Zealand dollar.
Mohendra Moodley, a director of Australian fund manager Taurus Funds Management, says New Zealand gold buyers are benefiting twice, due to gold being denominated in US dollars.
This is because the gold price in US dollars is rising while the New Zealand dollar falls against the greenback, raising the value of gold holdings in New Zealand dollar terms.
Although gold price rises are sometimes “diluted” by rises in the dollar, he says during times when markets are “stressed”, such as in 2008, the New Zealand dollar tends to go down while gold goes up.
"Gold has gone up 11-13% per year in New Zealand and Australian dollar terms in the last 10 years, compared to 19% per year in the US, so returns have been diluted but not by much."
Mr Moodley says inflation and interest rates play key roles in the demand for gold, with American investors who get near-zero interest rates from banks finding it particularly attractive.
“The opportunity cost is always the level of interest rates in any country,” he says. “Gold trades inversely to real interest rates – the lower the real interest rates the better the gold price.
“In markets where interest rates [such as New Zealand and Australia] are higher the opportunity cost is higher.
“Having said that, it also depends on the level of inflation – for instance, Chinese investors have high interest rates but also high inflation, meaning the real interest rate is low.”
Even though New Zealanders get better interest rates on savings than in many other countries, Mr Moodley says gold is still an attractive prospect given its recent performance.
“If you’re getting 3-4%, the question is, would you rather be earning 15-20%? I’d take that.”
Mr Moodley says gold run of success has resulted in increased interest in Australia and New Zealand.
“There is some interest coming out of this neck of the woods but most of the global demand is being driven by Asia, particularly India and China, Europe and of course the US.”
Tuesday, April 26, 2011
It's Time to Buy Silver!
Sell Gold, Buy Silver
by Robert Kiyosaki
Friday, January 14, 2011
tweet0EmailPrint.provided by
You may have noticed that gold is hovering around $1,360 an ounce (sliding recently after a big run-up) and silver is around $30 an ounce. That means in November of 2010 alone, gold increased in price by 2 percent and silver by 14 percent. Investing in gold and silver beats saving money in a bank earning less than 0.1 percent per month. Once again, this is further evidence that savers are losers as central banks of the world print trillions of dollars.
With paper money declining in value, millions of people are finally climbing on the gold wagon. Everywhere I go, I see signs that say, "We Buy Gold," calling out to people desperate for cash to trade in their gold jewelry.
For years now, I've said that silver is a better investment than gold.
To quickly summarize, here are a few reasons:
• Silver is consumed and gold is hoarded.
• Silver is a precious metal and is also an industrial metal that is used in electronics, medicine, water purification, and jewelry
• Today stockpiles of gold are increasing while stockpiles of silver are decreasing. (This means there's an abundance of gold and a shortage of silver).
• The gold/silver ratio is historically 14:1. This means that if gold were $14 an ounce then silver would $1 an ounce. Today, the ratio is approximately 50:1. Silver is extremely underpriced. If silver held to the historic 14:1 ratio, with gold at $1,400 an ounce then silver should be $100 an ounce -- not the $30 an ounce it is today.
In my opinion, when you combine the fact that there's a shortage of silver and that it's underpriced, silver is the safest and best investment today…but not for long.
A logical question is, "Why is the price of silver suppressed? Why is silver so much lower than gold?"
There are two primary reasons for silver's low price.
Number one, central banks buy gold, not silver. To bankers, gold is money and silver isn't. Today central banks are buying tons of gold, with India being one of the biggest buyers. This elevates the price of gold, leaving silver the bridesmaid but not the bride.
The price of silver is manipulated. The price of silver is intentionally kept low. While this is criminal, it's not illegal. Yet for decades, COMEX, the commodities exchange, has been in cahoots with the biggest silver investors at the expense of the little silver investor. This is about to end, thanks to some regulatory changes that may offer the biggest opportunity for silver investors between January and March of 2011.
What has changed?
Rumors are flying that more than 25 lawsuits have been filed against commercial investors such as JP Morgan and HSBC, accusing them of price manipulation to keep the price of silver artificially low.
The Commodities Futures Trading Commission (CFTC), which is to the COMEX what the SEC is to the New York Stock Exchange, has passed a new law which will force COMEX to play fair, forbidding such massive short positions on silver.. The actions of the CFTC are one more reason for last November's 14 percent price rise in silver. The price manipulation of silver is about to end.
How was the price of silver kept low?
Big investors short-selling silver have kept the price low. For decades, the biggest players in the silver market, commercial investors such as JP Morgan and HSBC, have taken massive short positions on silver.
What does short selling mean?
Short selling (shorting) means you sell something you don't own. Simply put, you borrow something to sell with the promise you will return what you borrowed.
It's not much different than going to your neighbor to borrow 5 pounds of flour and promising to return 5 pounds of flour in a month.
Shorting is done in all markets: commodities, stocks, bonds, and real estate.
The commercial banks, generally large banks such as JPMorgan and HSBC, sell borrowed silver from the COMEX and pocket the money. The banks use that money to invest in other higher-returning investments such as stocks or bonds.
Meanwhile, COMEX has earned billions of dollars from the interest on the borrowed silver. The commercial banks and the COMEX both profit from this large short position of silver, the larger the better.
Now, with the new CFTC law, the commercial banks will need to buy back silver and return it to the exchange. The problem is not a money problem. The problem is a shortage of silver.
When the commercial banks start buying rather than selling silver, this will cause the price of silver to rise, increasing the costs to replace the silver. It's simple supply and demand.
This massive big short has left the banks with a large margin-call when a broker asks an investor to bring an account up to a minimum position. How big is the margin call in silver? It is estimated that the total net short position on the COMEX is 550 million ounces of silver. And that's just on the COMEX. Worldwide, it's estimated that the short position is 2 billion to 3 billion ounces of silver.
If this is true, that means 2 billion to 3 billion ounces of silver have been borrowed and need to be purchased and replaced.
Again, the problem is not a money problem. The problem is that there's not enough silver to cover the margin-call.
When will this margin-call occur?
The laws passed by the CFTC and Congress take effect by March 2011.
If the laws aren't repealed, the big commercial banks will be forced to buy silver to replace the silver they've been borrowing. When they buy, the price will go up.
And if the price of silver goes up during this buying period, their losses will grow like an atomic mushroom cloud. This means that the big banks and COMEX will be doing everything possible to keep the price of silver low so that they can buy silver to cover their exposed positions. In the next two to three months, you will probably see huge swings, up and down, in the price of silver.
I've been buying silver for years, starting at under $4 an ounce. One year ago, silver was about $17 an ounce. Today it's about $30 an ounce. I believe $50 to $60 an ounce is possible for 2011.
I believe it's possible to see the price of silver gain more in one year than it has gained in the past twenty years.
As I close this column, I advise you to read this great interview of Ted Butler, the person who has for years single-handedly been demanding Congress to force the COMEX and big commercial banks to play fair.
As Ted Butler states, "It is time to sell gold and buy silver."
From Yahoo! Finance
by Robert Kiyosaki
Friday, January 14, 2011
tweet0EmailPrint.provided by
You may have noticed that gold is hovering around $1,360 an ounce (sliding recently after a big run-up) and silver is around $30 an ounce. That means in November of 2010 alone, gold increased in price by 2 percent and silver by 14 percent. Investing in gold and silver beats saving money in a bank earning less than 0.1 percent per month. Once again, this is further evidence that savers are losers as central banks of the world print trillions of dollars.
With paper money declining in value, millions of people are finally climbing on the gold wagon. Everywhere I go, I see signs that say, "We Buy Gold," calling out to people desperate for cash to trade in their gold jewelry.
For years now, I've said that silver is a better investment than gold.
To quickly summarize, here are a few reasons:
• Silver is consumed and gold is hoarded.
• Silver is a precious metal and is also an industrial metal that is used in electronics, medicine, water purification, and jewelry
• Today stockpiles of gold are increasing while stockpiles of silver are decreasing. (This means there's an abundance of gold and a shortage of silver).
• The gold/silver ratio is historically 14:1. This means that if gold were $14 an ounce then silver would $1 an ounce. Today, the ratio is approximately 50:1. Silver is extremely underpriced. If silver held to the historic 14:1 ratio, with gold at $1,400 an ounce then silver should be $100 an ounce -- not the $30 an ounce it is today.
In my opinion, when you combine the fact that there's a shortage of silver and that it's underpriced, silver is the safest and best investment today…but not for long.
A logical question is, "Why is the price of silver suppressed? Why is silver so much lower than gold?"
There are two primary reasons for silver's low price.
Number one, central banks buy gold, not silver. To bankers, gold is money and silver isn't. Today central banks are buying tons of gold, with India being one of the biggest buyers. This elevates the price of gold, leaving silver the bridesmaid but not the bride.
The price of silver is manipulated. The price of silver is intentionally kept low. While this is criminal, it's not illegal. Yet for decades, COMEX, the commodities exchange, has been in cahoots with the biggest silver investors at the expense of the little silver investor. This is about to end, thanks to some regulatory changes that may offer the biggest opportunity for silver investors between January and March of 2011.
What has changed?
Rumors are flying that more than 25 lawsuits have been filed against commercial investors such as JP Morgan and HSBC, accusing them of price manipulation to keep the price of silver artificially low.
The Commodities Futures Trading Commission (CFTC), which is to the COMEX what the SEC is to the New York Stock Exchange, has passed a new law which will force COMEX to play fair, forbidding such massive short positions on silver.. The actions of the CFTC are one more reason for last November's 14 percent price rise in silver. The price manipulation of silver is about to end.
How was the price of silver kept low?
Big investors short-selling silver have kept the price low. For decades, the biggest players in the silver market, commercial investors such as JP Morgan and HSBC, have taken massive short positions on silver.
What does short selling mean?
Short selling (shorting) means you sell something you don't own. Simply put, you borrow something to sell with the promise you will return what you borrowed.
It's not much different than going to your neighbor to borrow 5 pounds of flour and promising to return 5 pounds of flour in a month.
Shorting is done in all markets: commodities, stocks, bonds, and real estate.
The commercial banks, generally large banks such as JPMorgan and HSBC, sell borrowed silver from the COMEX and pocket the money. The banks use that money to invest in other higher-returning investments such as stocks or bonds.
Meanwhile, COMEX has earned billions of dollars from the interest on the borrowed silver. The commercial banks and the COMEX both profit from this large short position of silver, the larger the better.
Now, with the new CFTC law, the commercial banks will need to buy back silver and return it to the exchange. The problem is not a money problem. The problem is a shortage of silver.
When the commercial banks start buying rather than selling silver, this will cause the price of silver to rise, increasing the costs to replace the silver. It's simple supply and demand.
This massive big short has left the banks with a large margin-call when a broker asks an investor to bring an account up to a minimum position. How big is the margin call in silver? It is estimated that the total net short position on the COMEX is 550 million ounces of silver. And that's just on the COMEX. Worldwide, it's estimated that the short position is 2 billion to 3 billion ounces of silver.
If this is true, that means 2 billion to 3 billion ounces of silver have been borrowed and need to be purchased and replaced.
Again, the problem is not a money problem. The problem is that there's not enough silver to cover the margin-call.
When will this margin-call occur?
The laws passed by the CFTC and Congress take effect by March 2011.
If the laws aren't repealed, the big commercial banks will be forced to buy silver to replace the silver they've been borrowing. When they buy, the price will go up.
And if the price of silver goes up during this buying period, their losses will grow like an atomic mushroom cloud. This means that the big banks and COMEX will be doing everything possible to keep the price of silver low so that they can buy silver to cover their exposed positions. In the next two to three months, you will probably see huge swings, up and down, in the price of silver.
I've been buying silver for years, starting at under $4 an ounce. One year ago, silver was about $17 an ounce. Today it's about $30 an ounce. I believe $50 to $60 an ounce is possible for 2011.
I believe it's possible to see the price of silver gain more in one year than it has gained in the past twenty years.
As I close this column, I advise you to read this great interview of Ted Butler, the person who has for years single-handedly been demanding Congress to force the COMEX and big commercial banks to play fair.
As Ted Butler states, "It is time to sell gold and buy silver."
From Yahoo! Finance
Wednesday, April 20, 2011
Silver Has More Room to Fly Relative to Gold Prices!
You know silver’s doing well when the commentators start giving it the "gold" treatment. Silver’s recent rise has been so spectacular that it’s caught many investors off guard. It’s natural to be skeptical when you don’t know the fundamentals driving strong performance, and many pundits and commentators have been quick to downplay it as a result — much like they do towards gold when it enjoys a run. Silver is also an awkward metal for them to categorize. Is it a commodity, a monetary metal, or both? And which side is driving demand? If it’s industrial demand, that’s ok, because that’s bullish. But if it’s investment demand for silver as money, well then that’s sort of bearish, isn’t it? The fact remains that most commentators have failed to grasp the monetary shifts that silver is signaling today, and in doing so they’ve failed to appreciate just how high it could actually go.
The financial media’s failure to grasp the benefits of precious metals ownership continues to perplex us, and it’s not just the commentators who are prone to perpetual disbelief. The sell side analysts are equally as irresolute. According to Bloomberg, the consensus silver price forecast by so-called experts for 2011 is $29.50, representing a 31% discount from the current spot price. This same group of analysts also predicts prices will decline another 25% in 2012 and a further 9% in 2013 to $20 an ounce. When you consider that the silver price has appreciated by over 21% annually over the past 10 years, these forecasts suggest a very dramatic change in the long-term trend. Will this reversal come true? Probably not. These were the same analysts who predicted that spot silver prices would average $18.65 this year — meaning they’ve missed the mark by over 100% thus far.
We don’t mean to bash the silver analyst community, and there are several whom we highly respect, but it is important for silver investors to appreciate that these price forecasts are being plugged into financial models that dictate equity valuations. These models are used by traders, bankers, analysts, and portfolio managers to derive valuations for silver stocks and create asset allocations for portfolios. To anyone questioning current silver equity valuations, we would ask: What price assumptions are you using? Of course we as allocators of capital are thankful for this phenomenon, as it allows us to buy our favorite silver stocks on the cheap, knowing full well that the herd will be following behind in due course as those backward-looking forecasts get ratcheted higher.
How can we be so confident that the price of silver will continue on its upward trajectory? Our thesis is premised on the most rudimentary of economic principles — supply and demand.
One of the key indicators that we’ve been monitoring is the gold/silver ratio. Much has been written about the ratio of late, and we won’t go into great detail on the subject, other than to note that the last time money was synonymous with defined amounts of gold and silver, the ratio was set at 16-to-1. In fact, for most of the past millennium, 1 ounce of gold would have been convertible to somewhere between 10 and 16 ounces of silver — an amount roughly in line with the relative occurrence of each mineral within the earth’s crust. For the better part of the past century, due to the world’s abandonment of bimetallism and then the gold standard, the gold/silver ratio has fluctuated widely, twice reaching lows near the 15-to-one mark and a high of 100-to-one back in the early 1990’s. The most recent high reached in the latter part of 2009 was nearly 80-to-1. Since then, the ratio has been tumbling to where it stands now at 35-to-1 — which reflects the incredible outperformance of silver over that time period. In our opinion, this ratio will continue to move lower, driven by nothing more than basic supply/demand fundamentals.
The U.S. Mint, which is the world’s largest silver and gold coin manufacturer, recently reported that it had sold 13 million ounces of silver coins and 370 thousand ounces of gold coins on a year-to-date basis. This means that the U.S. Mint is now selling roughly equal amounts of silver and gold in dollars so far this year. Furthermore, bullion dealers like Sprott Money and GoldMoney have confirmed with us that they are now selling more silver than gold in dollar terms. For additional confirmation of this investment trend, just look at the flows for the two largest gold and silver ETFs. Investors have withdrawn approximately $3 billion from the GLD so far this year while the SLV has seen net inflows of $370 million over the same period. Dollar for dollar, investors are allocating as much if not more money to silver than to gold. And why shouldn’t they? Silver is much more of a "precious" metal than the current ratio of 35-to-1 would suggest.
To explain, we must first address mine supply. In 2010, the world mined approximately 736 million ounces of silver and 85 million ounces of gold. The world also produced an additional 215 million ounces of silver and 53 million ounces of gold from recycled scrap. Adding both together brings us 951 million ounces of silver and 139 million ounces of gold supply, for a ratio of 9 ounces of silver to 1 ounce of gold.
Interestingly, this 9-to-1 ratio is very similar to the ratio of available in-situ silver and gold reserves. The U.S. Geological Survey estimates that there are current in-situ reserves of approximately 16.4 billion ounces of silver versus 1.6 billion ounces for gold, or about a 10-to-1 ratio.
The case for silver is even more compelling when one considers the ramifications of its dual role as both an investment and industrial metal. Last year, non-investment demand for silver (which includes industrial, photographic and silverware demand) totaled approximately 610 million ounces. This represents approximately 64% of primary supply, leaving approximately 341 million ounces to satisfy investment demand.
On the gold side, industrial usage totaled 13 million ounces, or about 10% of primary supply, leaving approximately 125 million ounces left over for investment demand. So, after netting out the industrial usage, the primary supply left over for investment demand is about 2.7 times that for gold. However, if we convert those ounces to dollars at current prices, we’re left with $15 billion worth of silver available for investment versus $186 billion worth of gold, or a 1-to-13 ratio of silver to gold! This means that in terms of primary supply, silver only has 8% of the capacity for investment that gold does despite having equal if not more dollars flowing into it.
Now, it’s true that another potential source of supply is the very silver that investors already own — and at the right silver price these inventories of silver and gold bullion may be sold into the market to supplement any supply shortfalls. As we’ve noted previously, however, due to decades of underinvestment, the amount of silver bullion inventories are actually extremely small, even compared to those of gold. Recent estimates suggest that reported silver bullion inventories stand at roughly 1.2 billion ounces versus 2.2 billion ounces of gold bullion, or roughly a 0.5-to-1 ratio. To put that amount in perspective, consider that at present there is only $52 billion worth of silver bullion/coins and over $3.3 trillion worth of gold in inventory which could potentially be recirculated into the market. Converting this to a ratio, you get a one-to-63 ratio of silver to gold inventories. So how is silver still priced at 35-to-1?!
All indications lead us to believe that there is now roughly an equal amount of investment flowing into silver and gold on a dollar-for-dollar basis. And although the price ratio of silver to gold has fallen substantially since the highs of 2009, our analysis strongly suggests that this ratio must move lower to restore a fundamental balance between supply and demand. Only time will tell how much lower it will go, but we would not be surprised to see it hit single digits before settling into a more sustainable equilibrium.
What the so-called silver‘experts neglect to account for in their models and projections is that the fiat money experiment has failed. And in this context, we believe the market has assigned world reserve currency status to gold — not USD, not EUR, and not JPY. In our opinion, gold’s continued appreciation vis-à-vis every currency is assured because the great flight from fiat has only just begun. Like gold, silver also has a long monetary history, and as such, investors are now also buying silver as protection from the ravages of fiat currency debasement. Yet, when compared to gold, it is silver that offers the most attractive value proposition by virtue of the gross mispricing of its scarcity, which, we might add, has existed for many years. Thus, in our opinion, as this new bimetallic standard takes root, silver investors will continue to be justly rewarded with marked outperformance. We truly believe that this is the investment opportunity of a lifetime, and increasingly so, others are taking heed. What is clear to us is that with equal investment dollars now flowing into silver and gold, the current 35-to-1 ratio is unsustainable and has only one direction to go: lower.
Article by Eric Sprott
The financial media’s failure to grasp the benefits of precious metals ownership continues to perplex us, and it’s not just the commentators who are prone to perpetual disbelief. The sell side analysts are equally as irresolute. According to Bloomberg, the consensus silver price forecast by so-called experts for 2011 is $29.50, representing a 31% discount from the current spot price. This same group of analysts also predicts prices will decline another 25% in 2012 and a further 9% in 2013 to $20 an ounce. When you consider that the silver price has appreciated by over 21% annually over the past 10 years, these forecasts suggest a very dramatic change in the long-term trend. Will this reversal come true? Probably not. These were the same analysts who predicted that spot silver prices would average $18.65 this year — meaning they’ve missed the mark by over 100% thus far.
We don’t mean to bash the silver analyst community, and there are several whom we highly respect, but it is important for silver investors to appreciate that these price forecasts are being plugged into financial models that dictate equity valuations. These models are used by traders, bankers, analysts, and portfolio managers to derive valuations for silver stocks and create asset allocations for portfolios. To anyone questioning current silver equity valuations, we would ask: What price assumptions are you using? Of course we as allocators of capital are thankful for this phenomenon, as it allows us to buy our favorite silver stocks on the cheap, knowing full well that the herd will be following behind in due course as those backward-looking forecasts get ratcheted higher.
How can we be so confident that the price of silver will continue on its upward trajectory? Our thesis is premised on the most rudimentary of economic principles — supply and demand.
One of the key indicators that we’ve been monitoring is the gold/silver ratio. Much has been written about the ratio of late, and we won’t go into great detail on the subject, other than to note that the last time money was synonymous with defined amounts of gold and silver, the ratio was set at 16-to-1. In fact, for most of the past millennium, 1 ounce of gold would have been convertible to somewhere between 10 and 16 ounces of silver — an amount roughly in line with the relative occurrence of each mineral within the earth’s crust. For the better part of the past century, due to the world’s abandonment of bimetallism and then the gold standard, the gold/silver ratio has fluctuated widely, twice reaching lows near the 15-to-one mark and a high of 100-to-one back in the early 1990’s. The most recent high reached in the latter part of 2009 was nearly 80-to-1. Since then, the ratio has been tumbling to where it stands now at 35-to-1 — which reflects the incredible outperformance of silver over that time period. In our opinion, this ratio will continue to move lower, driven by nothing more than basic supply/demand fundamentals.
The U.S. Mint, which is the world’s largest silver and gold coin manufacturer, recently reported that it had sold 13 million ounces of silver coins and 370 thousand ounces of gold coins on a year-to-date basis. This means that the U.S. Mint is now selling roughly equal amounts of silver and gold in dollars so far this year. Furthermore, bullion dealers like Sprott Money and GoldMoney have confirmed with us that they are now selling more silver than gold in dollar terms. For additional confirmation of this investment trend, just look at the flows for the two largest gold and silver ETFs. Investors have withdrawn approximately $3 billion from the GLD so far this year while the SLV has seen net inflows of $370 million over the same period. Dollar for dollar, investors are allocating as much if not more money to silver than to gold. And why shouldn’t they? Silver is much more of a "precious" metal than the current ratio of 35-to-1 would suggest.
To explain, we must first address mine supply. In 2010, the world mined approximately 736 million ounces of silver and 85 million ounces of gold. The world also produced an additional 215 million ounces of silver and 53 million ounces of gold from recycled scrap. Adding both together brings us 951 million ounces of silver and 139 million ounces of gold supply, for a ratio of 9 ounces of silver to 1 ounce of gold.
Interestingly, this 9-to-1 ratio is very similar to the ratio of available in-situ silver and gold reserves. The U.S. Geological Survey estimates that there are current in-situ reserves of approximately 16.4 billion ounces of silver versus 1.6 billion ounces for gold, or about a 10-to-1 ratio.
The case for silver is even more compelling when one considers the ramifications of its dual role as both an investment and industrial metal. Last year, non-investment demand for silver (which includes industrial, photographic and silverware demand) totaled approximately 610 million ounces. This represents approximately 64% of primary supply, leaving approximately 341 million ounces to satisfy investment demand.
On the gold side, industrial usage totaled 13 million ounces, or about 10% of primary supply, leaving approximately 125 million ounces left over for investment demand. So, after netting out the industrial usage, the primary supply left over for investment demand is about 2.7 times that for gold. However, if we convert those ounces to dollars at current prices, we’re left with $15 billion worth of silver available for investment versus $186 billion worth of gold, or a 1-to-13 ratio of silver to gold! This means that in terms of primary supply, silver only has 8% of the capacity for investment that gold does despite having equal if not more dollars flowing into it.
Now, it’s true that another potential source of supply is the very silver that investors already own — and at the right silver price these inventories of silver and gold bullion may be sold into the market to supplement any supply shortfalls. As we’ve noted previously, however, due to decades of underinvestment, the amount of silver bullion inventories are actually extremely small, even compared to those of gold. Recent estimates suggest that reported silver bullion inventories stand at roughly 1.2 billion ounces versus 2.2 billion ounces of gold bullion, or roughly a 0.5-to-1 ratio. To put that amount in perspective, consider that at present there is only $52 billion worth of silver bullion/coins and over $3.3 trillion worth of gold in inventory which could potentially be recirculated into the market. Converting this to a ratio, you get a one-to-63 ratio of silver to gold inventories. So how is silver still priced at 35-to-1?!
All indications lead us to believe that there is now roughly an equal amount of investment flowing into silver and gold on a dollar-for-dollar basis. And although the price ratio of silver to gold has fallen substantially since the highs of 2009, our analysis strongly suggests that this ratio must move lower to restore a fundamental balance between supply and demand. Only time will tell how much lower it will go, but we would not be surprised to see it hit single digits before settling into a more sustainable equilibrium.
What the so-called silver‘experts neglect to account for in their models and projections is that the fiat money experiment has failed. And in this context, we believe the market has assigned world reserve currency status to gold — not USD, not EUR, and not JPY. In our opinion, gold’s continued appreciation vis-à-vis every currency is assured because the great flight from fiat has only just begun. Like gold, silver also has a long monetary history, and as such, investors are now also buying silver as protection from the ravages of fiat currency debasement. Yet, when compared to gold, it is silver that offers the most attractive value proposition by virtue of the gross mispricing of its scarcity, which, we might add, has existed for many years. Thus, in our opinion, as this new bimetallic standard takes root, silver investors will continue to be justly rewarded with marked outperformance. We truly believe that this is the investment opportunity of a lifetime, and increasingly so, others are taking heed. What is clear to us is that with equal investment dollars now flowing into silver and gold, the current 35-to-1 ratio is unsustainable and has only one direction to go: lower.
Article by Eric Sprott
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