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Silver Seen Over $40/oz in 2012 – Store of Value Remains Undervalued

GoldCore's picture





 

 

Gold rose $1.50 or 0.09% in New York and closed at $1,640.80/oz yesterday. Gold traded sideways in a narrow spread in Asia and continued this in European trading climbing up around 0.16%. 

Gold rose quickly from $1,631/oz to nearly $1,650/oz in minutes on volume with some chunky 3000 lot plus batches of orders going through on the COMEX pushing gold up. A determined seller again appeared and gains were capped at that level.

Gold is still firmly within a $27 trading range it has stuck to for most of the week. It is gold’s narrowest range since March last year according to Jan Harvey of Reuters. Once gold breaks out of this range it will likely see sharp follow through moves up or down.  

Gold should be supported by deepening concerns about continuing poor US economic data and the eurozone debt crisis – Spain’s 10 year rose above 6% again today. However, the lack of direction and price weakness has seen weak hands flushed out of the market and has made prospective traders and investors nervous regarding buying. 

Some astute store of wealth buyers continue to buy (gold and especially silver bullion) on the dip but physical demand remains subdued in western markets as both speculators and some investors seek clarity regarding price direction.

In Washington today, finance ministers and central bankers from the Group of 20 economies meet.  Russia said that G20 countries were ready to commit enough new funds to fulfill IMF chief Christine Lagarde's request for at least $400 billion in an attempt, some would say vain, to draw a line under the euro-zone crisis. Russia itself said it would offer $10 billion. 

Also in Washington, the IMF will be holding a panel meeting to discuss the euro area crisis at 1530 GMT.

France’s Presidential elections start Saturday and should Sarkozy lose it could lead to volatility in European financial markets. 

Next Tuesday and Wednesday the FOMC meet and investors expect them to adopt a ‘wait and see’ approach to QE.  However the sluggish economic data out of the US could allow them to announce yet another round of QE which would be bullish for gold.    

Geopolitical risk remains high with instability and unrest in much of North Africa and the Middle East. Tensions between western nations and Syria and Iran continue and risk escalating.

There are also simmering geopolitical tensions between the US and China (see Other News) which could manifest in trade, economic or currency tension and wars.

Silver Seen Over $40/oz in 2012 – Store of Value Remains Undervalued 
Thomson Reuters GFMS, in its annual review of the market published by the Silver Institute, have said that silver could push towards $40/oz in the second half of 2012.

GFMS said that it does not expect silver to approach $50/oz. In February, last year GFMS said the same thing - that silver would reach $40/oz and not $50/oz. Silver subsequently rose to over $49/oz in April 2011. 


Silver in USD 2 Year – (Bloomberg)

 It is worth remembering that at the start of 2012, most analysts were again bearish on silver and there was much speculation that the silver bubble had burst after silver had reached the nominal high of $50/oz and subsequently fell sharply leading to a 10% loss in dollar terms in 2011.

However, reports of silver’s demise will likely again be seen as foolhardy.

Silver was the top performing commodity and currency in the first quarter of 2012 seeing gains of over 16% in Q1 2012.

Silver outperformed gold to the upside and rose 16% in dollars and 12% in pounds and euros, 7% in Swiss francs and by a whopping 20% in Japanese yen.

Yet, silver remains one of the most infrequently covered markets in the world. Non specialist financial press and media rarely if ever cover silver. What coverage silver gets is often quite negative and unfavourable. This has kept animal spirits in the silver market very low and demand continues to be from industry and from Asian, Western and other store of value buyers.

Much of the reporting on silver continues to focus on silver as an investment and on silver’s volatility. It fails to acknowledge silver as a store of value and as financial insurance against monetary and economic collapse.

This is the primary motivation of many silver buyers today and to ignore it is unfortunate and can lead to defective analysis.


Silver in USD 5 Year – (Bloomberg)

Some of those who bought silver in 2011 as an investment may have sold or may be reluctant to buy more silver due to the volatility seen. We have long pointed out that silver is not an investment rather it is a store of value and a form of financial insurance. It is a long term buy - until it has to be sold– or a permanent holding.

Those who realise that can stomach the short term price swings that are typical in the silver market.

Those who do not will be end up selling the precious metal that will protect them from currency crises and or a systemic collapse.

Silver remains undervalued from a long term historical inflation adjusted perspective (see chart below).

Our long held belief that silver could reach the real high, inflation adjusted, of $130/oz from 1980 remains. 

Immediate support is at $31/oz and below that at $27/oz and store of value buyers should continue to accumulate on the dip.

However price forecasts by all should always be taken with a pinch of salt and silver’s value is as financial insurance and a store of wealth that cannot be debased and cannot go bankrupt.

OTHER  NEWS
(Bloomberg) -- Silver Below $32 May Attract ‘Bargain Hunters,’ Commerzbank Says 
Silver prices below $32 an ounce should attract “bargain hunters,” Commerzbank AG said in a report e-mailed today.

“The hybrid character of silver – store of value and participating in an economic upswing due to its mainly industrial use – should mean that this precious metal remains attractive and in demand,” the bank said.


Silver in USD 1971 – 2012 (Bloomberg Inflation Adjusted Index)

 

 


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Sun, 04/22/2012 - 21:14 | Link to Comment Xrated
Xrated's picture

How can i get out of my gld ira position without the 20% ira early withdraw penality and 28% irs capital gains tax on collectibles.
I want physical gold and want out of this etf without getting my profits wiped out. Thanks

Fri, 04/20/2012 - 22:19 | Link to Comment Peter Pan
Peter Pan's picture

I believe that the real purpose of manipulation is not so much to depress the price of gold and silver but to make huge profits by creating volatility.

We the suckers try to make money slowly slowly on the way up while the manipulators make a killing on the sudden drops which they engineer.

If the true aim was to supress price then how does one explain the sevenfold increase in gold price?

Sat, 04/21/2012 - 00:21 | Link to Comment akak
akak's picture

"Suppress" does not necessarily imply total control --- something can be suppressed and yet still move in the opposite direction to that of the suppression, just more slowly and/or to a lesser degree than it otherwise would.

Sat, 04/21/2012 - 03:18 | Link to Comment Dr. Sandi
Dr. Sandi's picture

Like the truth, for example.

Fri, 04/20/2012 - 20:30 | Link to Comment brokenspoke
brokenspoke's picture

manipulation is good. It assures me that the metal is actually worth much much more than the quoted price or they wouldn't be bothered with it.

Fri, 04/20/2012 - 20:47 | Link to Comment BanjoDoug
BanjoDoug's picture

AMEN to brokenspoke

Fri, 04/20/2012 - 20:42 | Link to Comment CURWAR2012
CURWAR2012's picture

I go to work for the fiat, pay the bills, then stack the rest in beautiful silver and gold coins every week. The price of silver is favorable for those of us who have any sense to save.

Fri, 04/20/2012 - 16:06 | Link to Comment MrBoompi
MrBoompi's picture

Don't get me wrong, I buy the silver dips.  But I can't stand the obvious manipulation of the price.  The fact the regulators do nothing about it reeks of organized crime.

Sat, 04/21/2012 - 03:17 | Link to Comment Dr. Sandi
Dr. Sandi's picture

Why do you think you never hear about big busts of organized crime anymore? (Non-CIA Drugs excluded.)

The mob guys are all now holding down respectable jobs running everything they only dreamed of running in the good old days. No need to do nickel, dime crime when you can run and eventually own the entire fucking planet.

John Gotti was a little ahead of the curve, that's all.

Fri, 04/20/2012 - 19:28 | Link to Comment CompassionateFascist
CompassionateFascist's picture

For those of us into accumulation not speculation, these criminals are a godsend. They're selling us cut-rate silver for ponzi-paper, and eventually we will pay them back...with lead. looks like a good deal to me.  

Fri, 04/20/2012 - 21:44 | Link to Comment Uchtdorf
Uchtdorf's picture

How right your are. And I just noticed that if one transposes the "D" and the "L" in "deal" you get the word "lead" which really is a good deal.

Fri, 04/20/2012 - 20:53 | Link to Comment BanjoDoug
BanjoDoug's picture

BTW, since the topic of lead (as a precious metal?) came up,  22LF circulars might be great barter items downstream....   3 cents today, 50 or 100 cents later....  almost eveyone has grampa's old 22 somewhere in a closet....

Fri, 04/20/2012 - 15:48 | Link to Comment BanjoDoug
BanjoDoug's picture

Looking at Precious Metal Ownership in a Different Way –

Too often we reference the value of <anything> in U.S. Dollars.    But since everything we buy or sell is measured in some fiat currency this is quite natural,  yet it is a stumbling block to owning physical precious metals.    Thus, I would like to suggest an alternate way of viewing precious metals, which is pretty simple and goes like this: “I own <insert a number here> ounces of silver (or gold, or ???)”,   OR “I own <insert a number here> one-ounce gold eagles or silver eagles”.      This distinction divorces the link between fiat currency and precious metals that hold real value.    Fiat currency only holds “faith” value on a temporary basis.   I might ask, how strong is that faith today for the long haul?   BTW,  I would not suggest you tell anyone (but yourself, or spouse) you own any precious metals.....

I hear folks all the time say, “Oh, gold is down, I better not buy, I might lose money” (as measured in fiat paper),   or they say, “Oh gold is too high now, I can’t buy now, I missed out.”   Each of these expressions measures precious metals against a fiat currency that has no real value at all.  

If you want to trade in precious metals on a daily or hourly basis, then the ETFs are wonderful,  but don’t assume that any paper metals are backed by anything but paper, and maybe a casual promise (maybe).    

If you are going to acquire physical metals for the long haul, don’t ever compare your asset against a fiat paper currency.  The exception to this is when you need to know how much of that fiat currency in your wallet you’ll have to part to buy your favorite gold or silver coin or other physical  commodity.   And BTW, if you order from some outfit like APMEX.com and you use a credit card (& pay a premium) and then pay for shipping too (& the insurance) consider it a privilege to be able to exchange those pretend dollars for something that has intrinsic, genuine value.   In the long run you'll be ahead, probably WAY-AHEAD.....

Fri, 04/20/2012 - 16:05 | Link to Comment SilverTree
SilverTree's picture

I discuss gold and silver with an EXCHANGE RATE, not price.

Fri, 04/20/2012 - 15:50 | Link to Comment ebworthen
ebworthen's picture

Wonder how much the Illegitimate Monetary Fund will steal from us U.S. taxpayers to bail out their Euro-Bankster friends this time around?

Silver, Gold.  It's pretty, and even if it loses half it's value it isn't supporting corruption and theft by banksters and their politician lapdogs.

Fri, 04/20/2012 - 15:04 | Link to Comment MrBoompi
MrBoompi's picture

I'm kinda wondering if I can ever beat a robot who can sell a zillion times more silver than has ever been mined in less than second.

 

 

Fri, 04/20/2012 - 15:14 | Link to Comment SilverTree
SilverTree's picture

Nope, never.

Fri, 04/20/2012 - 19:20 | Link to Comment CompassionateFascist
CompassionateFascist's picture

Wrong. When the power grid dies, no more HFT. An oz. of silver - reinforced with lead - will buy U 2-3 days of food. Real prices and real value, coming soon.

Fri, 04/20/2012 - 21:08 | Link to Comment BanjoDoug
BanjoDoug's picture

When the manipulation ends, as it will, then maybe silver WILL revert to the old 15:1 ratio (to gold),  if yes, then silver would be about $110 in todays fiat dollars....   this should buy a lot more than 2-3 days of food....   maybe a couple-three weeks worth (in today's prices).....

Fri, 04/20/2012 - 21:10 | Link to Comment BanjoDoug
BanjoDoug's picture

just see above...

Fri, 04/20/2012 - 14:29 | Link to Comment El Oregonian
El Oregonian's picture

JUST KEEP STACK'IN, Quit your yapp'in...

Fri, 04/20/2012 - 15:16 | Link to Comment SilverTree
SilverTree's picture

Today I exchanged $9988.42 for 407 Silver Dollars and you should too.

Fri, 04/20/2012 - 20:45 | Link to Comment CURWAR2012
CURWAR2012's picture

I want your dealer!!!!!

Fri, 04/20/2012 - 16:48 | Link to Comment EINSILVERGUY
EINSILVERGUY's picture

Good News : Today I took delivery of 60 ounces of the medicinal metal to ward off an oncoming cold

Bad News:  It fell off the outboard while fishing for dinner

 

Fri, 04/20/2012 - 14:21 | Link to Comment pan
pan's picture

Dollar cost average purchases, bitchez!

Fri, 04/20/2012 - 14:13 | Link to Comment akak
akak's picture

But, but, but, it only costs $5 to dig from the ground!

Fri, 04/20/2012 - 21:47 | Link to Comment Peter Pan
Peter Pan's picture

But , but it only costs next to nothing to print it.

Fri, 04/20/2012 - 14:18 | Link to Comment Bastiat
Bastiat's picture

And you can put it back in the ground for free!

Fri, 04/20/2012 - 14:27 | Link to Comment akak
akak's picture

Along with all of one's canned hams, bitchez!

Fri, 04/20/2012 - 16:59 | Link to Comment fuu
fuu's picture

I've started putting my hams in silver cans.

Fri, 04/20/2012 - 14:17 | Link to Comment FeralSerf
FeralSerf's picture

True, but only if you tell us where you buried it.

Fri, 04/20/2012 - 14:08 | Link to Comment Bansters-in-my-...
Bansters-in-my- feces's picture

I call bullshit on this article.

Silver will be what ever the pig dog manipulators will allow it to be.

No more no less.

Only the fed,the treasury and the ESF fund that the PPT plays with really knows wht the price of silver will be, EVER.....

Ps.......Fuck you PPT and your CORRUPT to the core ESF.....FuckYous All.

Fri, 04/20/2012 - 19:31 | Link to Comment spinone
spinone's picture

Agreed.  Investors have excess wealth, so by definition we have wants, not needs.  Our needs are satisfied.  If we have only wants, then value is determined by the pig dog market.  The pig dog market clearing price.  And the pig dogs easily control the market clearing price.

If you have a real need, like food or medicine to keep your kid alive, you might find the real market through barter, or fiat, or holding a gun to someone's head.  But you aren't gonna find that real value market for silver ingots.

Fri, 04/20/2012 - 13:53 | Link to Comment junkyardjack
junkyardjack's picture

If you've seen silver over $40 you should arbitrage it, you can buy it for $31 right now

Fri, 04/20/2012 - 13:23 | Link to Comment mt paul
mt paul's picture

long 

Blythe 

bellie button lint..

Fri, 04/20/2012 - 13:01 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Nothing new here.....blah article.

Sat, 04/21/2012 - 00:18 | Link to Comment vast-dom
vast-dom's picture

here's something new, or maybe not: silver should be well over $50!

Fri, 04/20/2012 - 14:12 | Link to Comment TGR
TGR's picture

Indeed...gold core articles are generally akin to anything penned by Simon Black, the caped crusader with 542 passports: mildly inspiring for the uninformed.

Fri, 04/20/2012 - 13:14 | Link to Comment Canadian Dirtlump
Canadian Dirtlump's picture

first is the worst, second the best, third is the one with the hairy chest.

 

More silver buffalos on the way next friday.. fukk da gubment.

Fri, 04/20/2012 - 14:06 | Link to Comment Zero Govt
Zero Govt's picture

I Fourth the Motion

"Gold rose.. 0.09% in New York and ..climbing up around 0.16%."

I think GoldCore was hoping for more killer figures in the Gold price for this article than watching paint dry and relaying to us that the paint was in fact drying at a very, very slow rate! 


Fri, 04/20/2012 - 13:10 | Link to Comment xela2200
xela2200's picture

Second the motion.

Fri, 04/20/2012 - 15:15 | Link to Comment Troll Magnet
Troll Magnet's picture

i'm just glad this shit isn't on the front page.  glad tyler moved this to the contributors' section.

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