Perfect Storm For Gold & Silver - Silver Surges 6% In Week To $40.28 – GFMS Forecast $50/oz This Year

Tyler Durden's picture

Submitted by Gold Core

Perfect Storm for Gold & Silver - Silver Surges 6% in Week to $40.28 – GFMS Forecast $50/oz This Year

Gold and silver reached new record all time and 31 year highs again yesterday and this morning – both nominal highs. Silver has surged to a new 31 year nominal high of $40.28/oz and may now target next resistance at $50/oz – the 1980 nominal high.

Gold is now targeting $1,500/oz after just reaching new nominal highs at $1473/oz. Gold is higher in all currencies this week but especially the beleaguered yen which has fallen 4% against gold in the week so far.

The gold and silver markets are experiencing a perfect storm due to the heightened level of geopolitical and macroeconomic risk.

Debt concerns in the eurozone and in the US (possible government shutdown), surging oil prices due to geopolitical risk in the Middle East and Africa, deepening inflation and the Black Swan risk of natural disasters (another Japanese earthquake has led to problems at a second nuclear plant - Onagawa) is leading to continued safe haven demand from a minority of astute buyers.

These include high net worth individuals, hedge funds, pension funds and central banks.


 
“Speculative froth” remains subdued as seen in the COT and ETF holdings data.

The vast majority of the public in the western world do not know how much an ounce of gold or silver bullion is. A small minority know how to invest in or buy bullion and an even smaller minority having any allocation to gold, let alone silver, whatsoever.

The majority of the western public’s only experience with regard to gold and silver is with dodgy “cash for gold” merchants who have lured millions of people to sell the family gold and silver (jewellery) in exchange for fastly depreciating euros, pounds and dollars.


 
In years to come people will be shocked by the ignorance of the western “cash for gold” phenomenon - while people in the Middle East, China, India and Asia continue to buy gold and silver as timeless stores of value rather than as an “investment” to be timed and bought and sold for commercial gain and profit.

The majority of the western media continue to completely ignore and not report the precious metal markets – especially silver.

Even in the face of surging oil and food prices and deepening inflation and after consecutive days of record nominal high prices, most media in the UK and Ireland barely reported the news – let alone analysed it for the benefit of their readers.  

The notion that silver is a bubble continues to be propagated by many. Indeed, the Financial Times reports that ‘Silver set to reach $50 before plunging in value, study says.’ The study is by GFMS who have been at best lukewarm on silver for a number of years.

Silver’s gains have been sharp but the fundamentals remain very sound due to a very limited supply and a very substantial increase in investment and industrial demand especially in China and Asia.

The GFMS World Silver Survey released yesterday shows that investment demand increased by a very 47% in 2010 and industrial demand is very robust.

Silver’s nominal high of $50/oz is looking like it will be seen sooner rather than later given the degree of demand and momentum. Any sell off will likely be short but sharp prior to a resumption of silver’s secular bull market and silver’s inflation adjusted high of $150/oz remains a long term price target.

The long term silver chart above shows how silver rose from $1.28 to $49.45 (on a weekly basis) from 1971 to 1980 or a rise of 38 times. Given that the conditions today are far more bullish than they were in the 1970’s silver may replicate this performance.

Were silver to replicate the 1970’s performance it would have to rise from a low of $4.10 in 2001 to over $150/oz – which as it happens is the all important inflation adjusted high.
 
Whether silver will plunge or not at some stage is irrelevant if one is buying for diversification, safe haven and store of value reasons. When silver reached $10, $15 and $20 there were similar warnings which may have dissuaded some of the public from buying for the long term and diversifying.

Rather than attempting to predict the future price movement of markets, the western public would be better served by acting like their Eastern counterparts and buying bullion for long term financial insurance and store of value reasons rather than speculation and making short term returns.

Diversification and wealth preservation is fundamental in these uncertain times.

Max Keiser’s “Silver Liberation Army”

An increasingly important phenomenon in the silver market is that of the “Silver Liberation Army” which appears to be going viral. Former Wall Street broker and current broadcaster and journalist Max Keiser wants to put silver in the hands of the people in the belief that it will stop banking corruption and allow people to take back some of the wealth that has been transferred to bankers.

This is leading to a small but growing minority of hard money advocates and others unhappy with government and banking corruption and abuses to buy silver coins in volume and through the use of viral messages, video etc encouraging the rest of the public to do the same.

The Million Ounce March is a campaign started by Keiser to encourage the public to protect themselves against inflation by purchasing silver. Money printing leading to inflation, hyperinflation and destruction of fiat currencies has been seen throughout history and Keiser rightly believes that silver will protect people from this and other risks posed by the financial system dominated by Wall Street banks.

NEWS

(FT) -- Inflation concerns drive silver above $40

Silver is the focus of a buoyant commodity complex after the grey metal hit $40 an ounce for the first time since 1980 as traders ride the “bullion-as-inflation-hedge” bandwagon.

The same strategy has also on Friday driven gold to a fresh record of $1,469 an ounce, with investors pouring funds into precious-metal exchange-traded funds.

The SPDR Gold Trust, the world’s biggest gold-backed ETF, said its holdings of the yellow metal had risen to 1,217 tonnes, the most since mid-March, while the iShares Silver Trust’s holdings hit a record high of 11,193 tonnes, according to Reuters.

Silver is up 65 cents to $40.16 an ounce, advancing 30 per cent in 2011, while gold is up 0.8 per cent to $1,468 an ounce.

The latest burst of bullion buying seems to be predicated on oil’s surge to its highest levels since August 2008. Worries about supply from Libya and Nigeria, ahead of elections in the large West African exporter, have pushed Brent crude above $124 a barrel, feeding input cost inflation fears.

(Bloomberg) -- Silver 2011 Price Forecast Raised 20% at Morgan Stanley 

Morgan Stanley raised its silver price forecast for 2011 by 20 percent to $31.39 an ounce, according to a report e-mailed today.

(FT) -- Silver set to reach $50 before plunging in value, study says

The silver market is likely to continue its spectacular ascent and to touch a record high at more than $50 a troy ounce this year – but could then crash back to earth, according to new forecasts by GFMS, a leading precious metals consultancy.

The grey precious metal has soared 121 per cent during the past 12 months to touch a 31-year peak of $39.73 this week as investors, disillusioned at the actions of central banks and governments, bought it as an alternative to paper currencies.

“In the short term, things have moved spectacularly fast because of the amount of money from investors,” said Philip Klapwijk, executive chairman of GFMS. “I think $50 will probably be taken out this year.”
However, Mr Klapwijk warned the market could suffer a steep correction if investors were to withdraw their funds because without their buying, the supply of silver would be expected to exceed demand. “When you see prices moving up so fast you have to be careful. There’s no convincing economic reason for why this is happening. It is still a market with a very large surplus,” he said.

Investors ploughed $5.6bn into the $21bn-a-year silver market in 2010, according to statistics published on Thursday by GFMS in its annual report on the silver market published by the Silver Institute, a mining industry group. Mr Klapwijk forecasted investment in silver would rise by about 50 per cent in dollar terms to hit $8bn this year. A surge to more than $50 an ounce would see silver surpass its peak of 1980, when the billionaire Hunt brothers notoriously attempted to corner the market. In its report, GFMS said that there had been “a major move into the silver market by a number of hedge funds”.

Mr Klapwijk said one possible trigger for a correction in the silver price could be a decision by some investors to cash in: “I can’t help but think that if we hit $50 we could see a significant correction driven by profit-taking.”

Non-investment consumption of silver is rising sharply, with industrial usage up 20.7 per cent last year, but supplies are also increasing.

Total supply increased by 14.6 per cent last year, driven largely by a dramatic swing by producers to start a fresh wave of hedging, or selling their output forward at fixed prices, a trend which has continued in the first quarter of this year

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tellsometruth's picture

I believe we will hit $50 by the end of June, expect a little pull back to come next week to 37-38 where I will buy mooaarr!

tellsometruth's picture

Will it come to this for Barry Obama/USD? I love the coincidence that the Protaganist in this clip is named Barry too.  (Beerfest Zjay clip)

http://www.youtube.com/watch?v=feKbhuZIeBk

Long-John-Silver's picture

Paper Silver perhaps but the Chinese are in the process of cornering the physical market. The cornering operation by the Chinese has been so successful the US and Canadian Mints have no Silver for coins.

mrgneiss's picture

Not saying this isn't the case, but links would be nice

tarsubil's picture

I remember you saying something about a pull back in silver to about 36 or something. Is that still a possibility?

Turd Ferguson's picture

I'm sorry, tarsubil. I try to keep everybody posted on my ZH-inspired blog.

After about 48 hours of nothing but resilience in silver, I bought back into some May 40s and 41s yesterday.

http://tfmetalsreport.blogspot.com/2011/04/greed-vs-fear.html

 

RockyRacoon's picture

It's back to the drawing board with ye, Long John.

U. S. silver coins are required by law to be made from silver mined in the U. S.

So the foreign silver markets have no direct bearing on that.

This is one of the goals of Dr. Paul's inquiry into the coinage problem.

 

Bullion Demand Overwhelms US Mint
DosZap's picture

Rocky,

They are NOT using Silver from US mines 100%

They are using a foreign contractor for silver blanks.

They are breaking the law.

Questionmark's picture

AFAIK the law only states that they have to use US silver so long as there's still any available.

RockyRacoon's picture

U. S. silver is shipped to manufacturers in Australia to be made into planchets and then back to the U. S. for coining.   I won't comment on the insanity of that, but it is the case.

Pool Shark's picture

 

Hey Rocky!

I'm lovin' those US Mint proof AB Quarters I got a few weeks back. Who'd have thought I'd already be up on the deal? Proof US Mint silver coins worth more in melt value than I paid for them just three weeks ago!

After increasing the price from $32.95/set to $39.95/set, I see the Mint has now pulled the new price!

http://catalog.usmint.gov/webapp/wcs/stores/servlet/ProductDisplay?catalogId=10001&storeId=10001&productId=15252&langId=-1&parent_category_rn=45005

Silver is increasing too fast for the Mint to keep up with it!

btw, you trolls out there: here's $5; dig me some silver out of the ground...   ;-)

 

RockyRacoon's picture

I'm glad you took advantage of the situation.  I loaded up at $32 and again at the last price.   Can't go too wrong with .9 oz of pure silver in 5 proof quarters. 

Heads up:  Take a close look at the 2011 issue of the silver quarters:

2011 United States Mint America the Beautiful Quarters Silver Proof Set™ (SV5)

Price: $41.95
bbq on whitehouse lawn's picture

I have been wondering about this myself. If China were to try for a resurve currency and back it with silver not gold. That would be a game changer. Possably war.

If your going to create a reserve currency you need to make sure you have control of it. Buying up all the silver would do that.

psyclopz's picture

Rubbish report from mainstream papers. In the long haul, the sky is the limit for silver..

Pladizow's picture

Look out below - DXY breaks 52 week low!

overmedicatedundersexed's picture

Pladizow, please hit the enter key more so we all can get the benefit of those tata's

Long-John-Silver's picture

Mr Klapwijk is an idiot.

Mr Klapwijk warned the market could suffer a steep correction if investors were to withdraw their funds because without their buying, the supply of silver would be expected to exceed demand.

Snidley Whipsnae's picture

Klaptrap is obviously unaware that billions of SE Asians, Indians and Mid Easterners are buying PMs. Another example of an Americacentric 'economics advisor'...

EscapeKey's picture

"If people stop buying AAPL, the share price will drop".

That's some mighty fine work, Lou.

aVian's picture

great time for an IRS tax audit

DavidC's picture

Hmmm, while every time a Tomahawk missile gets fired and obliterates kiolgrams of Silver, I'll stay long.

DavidC

EscapeKey's picture

I still haven't seen the actual source for this. Every time I search, I get into a circular list of links, with no actual source backing.

Vendetta's picture

There was an article over on SilverBearCafe that wrote this, again is was without a reference.  However, it is irrelevant to the silver market except war in general is bullish for PMs.  I was a rocket and missile engineer years ago and there is not that much silver in the systems.  Batteries were regular 'ol lead acid type (good quality) and only had to last 5 to 10 minutes (enough juice for some ground testing and enough to last the 'mission'). Transmitters and receivers had gold plated connectors, not much silver and it doesn't take much gold to plate the connectors and contact surfaces (even on circuit boards).  I'd guess there is less than 1 ounce of silver in any of the systems unless the warheads require it which I doubt. 

Debtless's picture

"Morgan Stanley raised its silver price forecast for 2011 by 20 percent to $31.39 an ounce, according to a report e-mailed today."

ROFL

Vagabond's picture

I got a good giggle out of that too

tek77blu's picture

excellent interview with peter grandich on silver, gold, and the mining stocks: http://www.contraryinvestorscafe.com/peter-grandich/

Snidley Whipsnae's picture

'Excellent interview'??? If you want to hear Grandich's life history, his favorite pro sports players, his views on spirtualism, his advice to sell anything that has gone up triple digits, etc.

gordengeko's picture

http://vigilantcitizen.com/vigilantreport/mind-control-theories-and-techniques-used-by-mass-media/

Don't forget, all of the MSM on the planet is owned by 5 companies.  They are all in with the large banks with financial interests in fiat.  It wll be impossible for them to ignore soon and they know it.  Silver is their worst enemy, not gold.  This is a financial battle, their recourse will be to crash the market again unfortunately and insitute a global currency controlled by them again.  Just my opinion

gordengeko's picture

for the junker, all it takes is a little initiative to do some research and you will see for yourself.  Unless you are a troll, which case you know the deal already.  And for those of you who think you are free and that these people don't know everything about you already.  go to http://www.spokeo.com/ and type your name in.  Anyone can pay a few bucks and know more about you than you know about yourself.  Imagine what you could do with a little intelligence and unlimited fiat??  FYI for to the privacy tab at the bottom to remove yourself.  Fuck this, it's time for a change.

overmedicatedundersexed's picture

I will call a top in PM's when we can call a bottom in fiat..no sooner.

Triggernometry's picture

I warned all my family, friends, and colleagues about spokeo when I first heard of it last summer. Some took it seriously, others blew it off. Third party info policies allow aggregated data of individuals to be traded between marketing firms.

I've always had my facebook locked down, so I actually couldn't find myself on spokeo, but I found my father and he's never touched social media. The data on him was undoubtedly collected from various open sources- local tax filings, magazine subscriptions, etc, but its scary to think what will come next.

As for your previous post on mind control; the more innocuous term currently in use is "social influence." You can find a declassified CIA research on the subject at www.blackvault.com the research was done at Stanford by none other than the famous Dr. Zimbardo. If you recall, he devised the inmate/guard experiment which was forever banned because the "guards" immediately began abusing the "prisoners." The paper on resisting social influence is a great read for anybody interested in strengthening the mental defense to being misled/misinformed.

LudwigVon's picture

the privacy tab at the bottom to Verify yourself

Creed's picture

gordon

 

remember the full court press in the media about how pm's were overvalued blah blah blah back in what, January?

Then there was a correction lasting 1-2 weeks.

They'll either jawbone it down again or pull liquidity to rein the markets in, same result.

gordengeko's picture

Remember it very well.  Caused a tremendous buying op in AGQ at 118-130, I was trying to get a few people to buy physical but only 1 did the rest bought AGQ.  They will believe me soon and transfer that wealth (or at least some of it) into physical.  Which is why I believe we won't see 30's again, the average investor doesn't quite understand whats going yet.  Greed will set in and we'll see 50 very soon.

Creed's picture

yep, and addenda

I mentioned on a thread last night that Mr. Walmarts statement concerning serious price inflation due over the next several months may be the awakening that brings the herd to the sparse pm table

(not that there hasn't already been serious inflation over the last few years alreaduy; I suspect that joe 6 pack is about to get slapped in the face with it; I'm even shocked and I expected this;

3 WEEKS after Katrina '05 some items we buy regularly at Walmart went up over 20%)

Snidley Whipsnae's picture

To the moon with PMs. The train is leaving the station...get on or stay home.

ParaZite's picture

50 dollars an ounce for silver.

I have the strangest boner right now. 

Long-John-Silver's picture

I was up last night watching Silver break $40. Strangely, it was like watching exceptionally good porn.

youngman's picture

That shows us just how old you are.....

OldTrooper's picture

Wise, not old, youngling.

Al Gorerhythm's picture

Does it look like a hockey stick?

ak_khanna's picture

The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.

The markets will fall only when the banksters have eliminated all the short positions and only they themselves have positioned themselves to profit when the market falls

OR

When an unexpected world event catches the banksters with their pants down and the softwares they use to rig the markets go berserk beyond their control.


http://www.marketoracle.co.uk/Article24581.html

Snidley Whipsnae's picture

PMs are moving up on fiat printing, instability in Mid East, Japanese disasters, extremely heavy buying in SE Asia/India/Mid East, etc. If the 'banksters' could stop PMs in their tracks they would do so. No central bank's currency looks good when PMs are rocketing up.

Long-John-Silver's picture

Very soon no one will exchange PM's for Fiat Bank Paper.

Pladizow's picture

AMEN - and fuck the hired junker trolls!

Vendetta's picture

they forgot to incorporate the black swan PM price control algorithm into the shake and bake software package.

bool controlAgPrice ( short AgControlParam)

{

    if didnotfakeeveryoneout

       call JimCramer

       wait_3days

       OverwhelmAgMarketwithshortbuying

       return true

    else

       continue

     return true

}