Thursday, May 31, 2007

There is still a bright future for silver and gold

Overall, May has been a poor month for Gold starting about 680, peaking at about 688.80 and falling to 652.50. There certainly have been some good dips for buyers and with the added strength of the loonie in recent weeks now certainly looks like a great time for Canadians to add a bar, coin or nugget to their stash. For Americans however, they’d better RUSH to get into the market before the dollar totally dissolves.

Silver was similarly brutal this month but with yesterdays and today’s move back up towards 13.44 it’s nearly recovered it’s entire months loses in 2 days, I hope it holds. The gold silver ratio is almost back to 49, a signal that silver will continue to out perform gold?

Recent reports on the silver industry have disputed the arguments that silver stocks are declining. My take on this issue is; if 77 million ounces of government sales are required for supply to meet demand, then the shortage is still growing. These governments’ vaults are not endless and will be drawn down to nothing eventually, likely sooner than later.

Silver investment demand is raging (64.5 million oz) and if the market thinks greedy little investors like me are going to part with our hoards before we see multiples of 10 they’ve got another thing coming. They assume that invested silver will be available to the market when they need it, yes it is available, but certainly not at today’s prices. As prices rise more investors will see the trend and will jump in making it harder for silver users to shake loose supplies. Once that silver vault in India runs dry or the demand for the superconducting cables from AMSC takes off prices will run and run hard. Supply is tight and a relatively small investment fund of 500 million could suck up 27% of NYMEX’s 130 million oz supply at today’s prices. If each Canadian tried to buy 4 ounces or $60 worth they would run out. Less than ½ of all Americans could buy 1 ounce before they ran out. Now imagine the world population…… WAITING……..STILL WAITING…… ah, now you get it, there is almost none left. In pure, deliverable form there is less silver in the market place than gold. Today's price does not reflect this and I'm not selling until it does.

So why haven’t you bought any yet? Yes I mean you, and you too Lois.

There has been a lot of waffling by metal commentators in the last 2 weeks, I guess they are taking heat from their subscribers and are trying not to over inflate expectations of an immediate rally but I don’t see anything to worry about long term, which is the only thing I’m concerned about.

I see Spain verging on bankruptcy as bullish for metals and dangerous for the Euro

I see the U.S. Democrats bending over backwards to let Bush continue his war and his spending, as adding more market risk, more debt, more chance of a U.S. fiscal crisis, and in the end more need for a metals hedge.

I see reports of 6.7% food inflation in the U.S., U.K. 6%, and China 7%, Government claims of 2-3% core inflation are garbage.

This week Kuwait unpegged its currency from the U.S. dollar and has moved to a basket of currencies. If the other oil states go this route it will signify a vote of no confidence in the greenback and greater weakness will follow.

Iran’s move to no longer accept the dollar for oil is gaining momentum as current figures has non dollar transactions near 70%.

All these things paint a picture of fiscal mismanagement, political risk, and inflation. Sounds like trouble to me.

When troubles hit you want to be debt free, have real money, and even better your own productive land, if you have all 3 you’re laughing.

1 comment:

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