Friday, November 30, 2007
Ok this installation is the big stuff, lets look at precious metals.
based on U.S. dollar weakness, flight from risk and the instability of paper assets world wide I believe 2008 will see $1200 dollar gold. This of course is based on a continued, somewhat orderly fall in the U.S. dollar. That said there is still the chance of the Chinese nuclear option of dropping all U.S. debt or some other calamity still leaves the possibility of astronomical gains. 1980 saw what panic/mania/ can do to a market in a very short time and while destined to happen the risk of panicked spike is much higher than the chance of peace, goodwill and sound fiscal management fixing the worlds woes and dropping gold back down to $400.
Based on the same factors as gold, silver will go to $25 in 2008.
There are slight differences in the markets however, while I believe silver is money many still look at it as only a commodity so naturally in a crisis more money will move to gold than silver. This is where it gets complicated, first there is much less silver available in the world so it would take much less new investment to bid the price up, that’s good for us. The Nymex is evil and quite probably allowing manipulation, that’s bad for us.
The Nymex holds about 133M oz of silver and between it and the silver EFTs accounts for most of the available silver. The Nymex also has regulations limiting how much you can have delivered per month making it difficult for any one person or institution to accumulate large quantities or bleed off their stockpiles quickly.
Eventually however enough people will quit trading paper and demand delivery, a quick move towards delivery that takes down stock piles 20-30% would at today’s prices only cost 600 million, a drop in the bucket compared to the values of hedge funds, pension funds, and sovereign wealth funds. This kind of move will panic industrial users to secure a year or twos supply rather than accept the security of just in time delivery, the ensuing rush will push silver much higher. It can’t all be bought by one entity but it will get bought, delivery will be demanded and eventually there will be default as far more paper trades than silver exists.
I’m not saying this will happen next year but this is destined to happen. The default is the magic moment physical silver holder must wait for; the silver/gold ratio will go from today’s 55 to 17, 10, maybe 3.1212232332? I don’t actually know, I do know silver is way below it historical ratio, it’s natural ratio, and it’s above the above ground ratio.
While my status quo prediction for 2008 is $25, a silver default could price silver over $200.
Platinum and Palladium.
I don’t usually mention these because they are not now and have never been money. That said, there is a lot of risk with these metals, short supply, strikes, hostile and potentially manipulated producers, mine accidents all of which could pump the prices. I won't set a price for these but I do expect them to go up. Bang for the buck however, Silver has the most potential so I can't see any reason to bother with Platinum Group metlas.
Part 3. will be along in a few days, it will be some general predictions, and a few what if's.
We are having a nice correction likely from Goldman Sachs self serving claim Gold has peaked and the markets are getting over the credit crunch, Bullshit!
My belief is this is a ploy to strenghten the dollar or to cover short possitions by driving the price down. Don't believe them and take this opportuntity to stock up.