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Gold, Silver, How High? When?
Investors and Traders charged with deploying Assets to acquire Precious Monetary Metals are impelled to first Forecast the likely Future Course and Timing of the Price Moves of the Precious Metals, as they do with other prospective acquisitions. Then, they must actually Deploy Assets based on those Forecasts. Therefore, it is important to make Educated Forecasts about Gold and Silver Prices. Specifically, one must forecast "How High?" (or "How low?") and "When?" Since there are simply too many variables (some of which are speculative) to address these questions comprehensively in this brief Article, we simply make several Key Observations useful in helping answer them. First, generally speaking (though not in every trading session), Gold (and to a degree Silver) has been strengthening in recent weeks at the same time as long-dated U.S. Treasuries have been strengthening. This tells us that Gold (and, to a degree – see below – Silver) is acting as a Hedge against Deflation as well as Inflation. (Indeed, it is generally agreed that Gold Serves as a hedge against Inflation.) So Gold does Double Duty regardless of the "Economic Weather". And the recent strength (record Nominal Highs in U.S. Dollar terms) of Gold (and Silver) also tells us that Gold (and to a degree, Silver) is functioning as the Ultimate World Reserve Currency. Silver’s recent strength is also informative. Although Base Metals prices have softened recently, reflecting soft Industrial Demand. Silver Prices have remained Robust. Since Silver is both a Major Industrial and a Monetary Metal, recent Robust Silver prices also show that Silver too is functioning as a Monetary Metal, Deflation Hedge, and "Deputy" World Reserve Currency. Clearly, both Gold and Silver are serving as "Safe Havens" in times of Crisis, as they have for Millennia. However, in light of the fact that the World has faced and still faces the Greatest Financial Crisis since the Great Depression, Investors must ask: why have These Precious Monetary Metals not yet surpassed (or even come close to – see below) their inflation-adjusted 1980 highs? Our Regular Readers know the Answer – Cartel* Precious Metals Price Suppression.
But can such effective price suppression last? We make the case that Precious Metals Price Suppression Attempts will continue, and will be somewhat effective, but not as effective as in recent years and likely not sustainable. Consider the following: So far as Cartel Price Suppressions of Gold and Silver are concerned, The Cartel’s motivations for this are clear. To the extent that Gold and Silver become ever more widely recognized as the Ultimate Stores and Measures of Value, that tends to delegitimize the Mega-Banker’s Crown Jewels – Treasury Securities and Fiat Currencies. Thus The Cartel’s focus on Precious Metals Price Suppression. But increasingly powerful forces should continue to impel Gold and Silver upward as Richard Russell explains:
So let’s consider just what those inflation-adjusted Gold and Silver highs could be. John Williams of Shadowstats.com provides a cogent answer:
In like manner, the all-time high price for silver in January 1980 of $49.45 per troy ounce (London afternoon fix, per silverinstitute.org) has not been hit since, including in terms of inflation-adjusted dollars. Based on inflation through May 2010, the 1980 silver price peak would be $139 per troy ounce, based on not-seasonally-adjusted-CPI-U-adjusted dollars, and would be $442 per troy ounce in terms of SGS-Alternate-CPI-adjusted dollars." (emphasis added) "Inflation Update, Housing and Production" - John Williams’ Shadow Government Statistics, 6/17/10
From an historical and Supply perspective, Silver is a better Buy now than Gold (But given the figures above, both are Sweet Deals). This Historical Trading Ratio of Gold to Silver in Price is 16:1. But recently it has been 68:1 up from 64 in December, 2009. And while there are about 5 billion ounces of above-ground Gold extant today, there are only 1 billion ounces of above-ground Silver left (Prior to WW2 there were 10 billion above-ground ounces of Silver) And Silver is not only a Monetary Metal, it gets widely used, and used up, by Industry. So today, Silver would seem to have much higher price Appreciation Potential than (the admittedly very high Price Appreciation Potential of) Gold EXCEPT that it is, a smaller, and, if anything, a more heavily manipulated (by The Cartel) Market than Gold. Thus in light of repeated Cartel attacks on Gold and Silver Prices in recent years, Deepcaster has developed a Strategy to Maximize Profits and Minimize losses from these Cartel Price Suppression attacks. Key Aspects of that Strategy are:
"CNBC, GLD is dissed for not investing in physical gold" - Chris Powell, GATA, 5/12/10 These reports are doubtless leading Major Gold Investors to demand Delivery and possession of Physical Gold.
Indeed, because Physical held in one’s personal possession is so precious, some forms of it trade at as much as a 20% premium to the spot price of "paper" Gold. But not all forms of Physical are Equal, as it were. Some forms are much more liquid than others, and some are much more susceptible to counterfeiting, as e.g. by Tungsten-lacing. Deepcaster has recently recommended Purchase of One Form of Physical Gold (and Silver), that is quite liquid, not easily susceptible to counterfeiting, and commands a considerable premium over the spot price of Paper Gold (and Paper Silver). See Deepcaster’s Alerts "Real Moves & Fake-outs Launching; see Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds; & Buy Reco." (week ending 5/14/10) and "Cartel Failing? Precious Metal Buy Reco! Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & Bonds" (week ending April 16, 2010) in the ‘Alerts Cache’ at www.deepcaster.com.
But purchasing shares of these should be done with particular care, because, being "paper" (or, usually, electronic entries on some remote server) Miners shares are especially vulnerable to periodic Cartel attacks and Price Takedowns Thus, they are most profitably accumulated near interim lows resulting from Cartel Interventions. In order to estimate these interim lows one needs not only to consider Fundamentals and Technicals, but also Interventionals.
"Interviewed by Eric King of King World News, Jim Rickards, senior managing director of the Omnis Inc. consulting firm in McLean, Virginia, says:
In sum, had the price of Gold not been suppressed, and in light of the ongoing Economic Crisis, it should already be priced in excess of $7,600/oz (and Silver in excess of $450/oz), the approximate 1980 inflation-adjusted highs. It is reasonable to expect to see those prices in the next very few years, or sooner, given the Cartel’s recently impaired ability to sustainably take down Precious Metals Prices. The Gold and Silver Bull Market has only just begun. Copyright © 2010 DeepCaster LLC DEEPCASTER FORTRESS ASSETS LETTER Wealth Preservation, Wealth Enhancement, & Financial and Geopolitical Intelligence. Gravitas, Pietas, Virtus DeepCaster LLC USA | Email |
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"The environment we’re moving into will steal money from the conservative, the prudent, the cautious investor – through currency debasement…[Investors] have to understand that they have to work to protect themselves because I see a time coming that’s going to be very painful. I hope it doesn’t come, but I think it will." - Rob McEwen, CEO, US GoldCorp