I've followed Jim Sinclair profitably for many years. As we approach $1,650 gold, his long term conservative price target, his words and analysis ring more true now than ever to me.
I continue to believe that over the intermediate and long term silver will substantially outperform gold even as silver drives through $1650 in route to $2000 this year based on increasingly clear signs of distress in both the European and US debt based fiat currency economies. The driving rationale is that the one thing the giant banks that the Fed represents need to avoid is sovereign default as was witnessed in Iceland. Given that both the US and Italy are headed towards debt to GDP ratios in the range of 130, and given the increasing resistance by the populations to "austerity to bailout out casinos, sorry, financial amalgamations some call banks" and the increasing liklihood of social unrest, I believe it is likely that defaults will occur in increasing frequency. Its either that or QE to infinity and beyond. In either scenario, fiat currencies will lose more and more value vs. real money as stability becomes increasingly more tenuous.
This is one of the most important interviews since the planned raids on silver and gold over the last week or so. I was fortunate to have sold somewhat over 40% of my PSLV towards the top of the market but have seen the virtual losses caused by 5 consecutive margin hikes on the COMEX along with the planned access hour raids and press manipulation. I've seen it all before. All the fundamentals for silver remain extremely good. I am very close to re-entering at this level but will wait for further consolidation. I personally believe that silver will eventually exceed $100 without any problem and could easily exceed $300. Silver is money and it is also far more useful than Gold and there is a lot less available above ground silver bullion than gold. I highly recommend listening through the entire interview with Sprott.
"…Eric Sprott, who according to some catalyzed the initial move lower in silver following his sale of PSLV units, to be followed by a bullish clarification that he transferred all proceeds into other silver holdings, was on Max Keiser late last week in an interview that anyone interested in the silver market should listen to. Among the key summary highlights: "I will be a buyer of silver today. I will be a buyer of silver tomorrow. We have not lost any faith in what has happened to silver." As for what happened with that instantaneous $6 dollar drop in silver on May 1: "In my mind it was just one of those raids that we experience from time to time. There was no particular reason for it. And then we end up with 5 margin rate increases. It just reeks of someone manipulating the price of silver down. I have no fear of silver here. Yes it will be parabolic, but it's going to be way more parabolic than what we have today… I believe that gold today is the de facto reserve currency. It's outperformed everything for 11 years. Silver has always been a currency, people are now treating it as a currency, and it's a very, very small market. There is no way that with roughly $50 billion of silver inventory around that we can make it a currency, so I see the price going much higher." And on the ridiculous recent trading volume in silver: "One of the things we should look at is the trading of silver in the paper markets, I mean the Comex and the SLV. Last week it averaged 1.2 billion ounces per day. There is only 700 million ounces mined in a year. There is only 33 million ounces of physical silver that is available for delivery by the commercial shorters. If something like 3% of the people that were trading silver in one day demanded physical delivery, there would be no silver on the Comex…. The key market is the physical market. I don't think this raid is going to work." Much more on Sprott's views of the silver raid and the silver market in general in the full interview…."
I sold about 40% of my PSLV when Spot silver was trading at about $47. Comex did its thing, singling silver out for multiple and large margine hikes. The predictably mindless algorithms started selling. I would say we are approaching the end of the mindless selling and an entry point is at hand. Ultimately, silver is going well over $300 in my opinion and the dollar doesn't have a leg to stand on.
The moral of the story remains, don't buy on margine. Silver is becoming increasingly rare and their are in fact, in my opinion, substantial physical shortages and we will see silver reclaim all its manipulated paper losses very shortly. I am using my french curve and other tools to see where this bottom is. Intuitively, I feel we are close.
Never forget what is driving commodities and all natural stores of wealth. Debt. The fed can say what it wants but it is locked into the world's largest interest rate derivatives play imaginable and the only way it can prevent it from exploding and making them the insolvent counter party is to find a way to purchase US treasuries either outwardly through QE 3 or through more sublime techniques.
One could argue that the margin increases in silver are part of a coordinated plan to scare the markets enough to have political cover for QE3. I wouldn't doubt it. However, given the fundamentals of the dollar, gold, the global hyper inflationary scenario, I believe we are at a new entry point. Buy cash, and sell 1/3rd into parabolic up moves and wait again. Silver is volatile. I've been in silver in one way or another since it was trading around $6 an ounce. You have to have patience with silver. I probably will give it to early next week to do another gut and technical check and then I'll be all in after all the weak and automated hedge algorithms have finished their panic selling.
In my opinion there is no finer analyst in the precious metals trading arena that Dan Norcini, a long time and ongoing contributer at Jim Sinclair's JS Mineset WEB site.
Dan also has his own blog and if you are serious about trading in precious metals, in my opinion, you should check his site every day. In the meantime, I'm posting a recent article here entitled: Share on Facebook
Bolivia is one of the largest providers of silver in the world. They are also undergoing a reversal of the long term trend (supported by the IMF and USA) of privatizing many industries that were once run by the government. It is no surprise that that US has been treating Latin American countries that are working towards serving the poor so cruelly of late. That cruelty is not having the desired affect it seems. None the less, as a silver investor, this is critical information in my opinion:
Here is the article from Zero Hedge
"…Two weeks ago the precious metals space was closely following the fate of Sumitomo's San Cristobal mine, where a long strike had paralyzed work at the world's third largest producer of silver and sixth-largest producer of zinc. While the strike was eventually resolved with concession to the domestic workers, a far more troubling report from Bolivian daily La-Razon states that Bolivia's president Evo Morales is now planning on expropriating zinc, silver and tin mines sold off by previous governments. Bloomberg reports that "Morales will announce a decree May 1 to “dismantle the privatization model,” said Nicolas Fernandez, a spokesman for state mining company Corp. Minera de Bolivia, known as Comibol. "The government is recovering all the privatized companies,” Fernandez said today in a telephone interview from La Paz. “When the decision is taken, Comibol will be ready to manage these mines.”" Among the contracts to be affected are those with Glencore International AG, Pan American Silver Corp., and most importantly, Coeur d’Alene Mines Corp., which is operator of the San Bartolome mine: the world's largest pure silver mine. Notably San Bartolome and Sumitomo's San Cristobal "account for about 83% of the nearly 1.1M tons of fine silver Bolivia produced in 2009, according to Mining Ministry data" according to The Gold Report. If indeed this news is proven true, and we will know for sure in 16 days, looks for the price of silver to spike considering about 1.33 million kilograms of silver was produced in Bolivia 2009, according to the U.S. Geological Survey: an amount which will likely fall off a cliff following the utter chaos that is unexpected nationalization.
Bloomberg's report on this important development confirms that the potentially affected producers seem to be in a state of denial about this absurdly irrational development:
“Our property title is not subject to expropriation by the government,” Coeur spokesman Tony Ebersole said in e-mailed comments to questions.
Glencore spokesman Simon Buerk declined to comment and Pan American spokeswoman Kettina Cordero didn’t return telephone calls and e-mails seeking comment.
Bolivia produced 430,879 metric tons of zinc, 84,537 tons of lead, 19,581 tons of tin and 1.33 million kilograms of silver in 2009, according to the U.S. Geological Survey.
Nationalizing private industries is nothing new for the embattled Morales:
The government of then President Hugo Banzer sold off mining assets such as the Vinto tin smelter in 1999 in a drive to shed money-losing state companies and attract private investment. Morales seized the smelter from Glencore in 2007.
Morales took over gas fields and refineries on May 1, 2006 in a bid to increase state control over Bolivia’s natural resources. Private investment in the industry plunged 69 percent to $271 million in 2009 from $865 million a decade earlier, according to state energy company YPF Bolivianos.
With the political situation in Bolivia deteriorating (read the following update from La Razon on the strikes and blockade gripping La Paz) it is increasingly probably that the country's president will take irrational steps in order to safeguard his image, and supposedly to fill his coffers.
Full report from La-Razon here.
I sold my primary and trusted silver paper proxy (PSLV) when silver was trading around $36.95 and missed most of the recent up move. I've been a little neurotic around the macro mind set of the Fed and what is likely to happen to the GDP, QE3 and so on.
Here is my thinking on this which I posted at the Duffminster Times
Personally, I'm on the sidelines. If the stock market and commodities keep climbing the dollar is likely to crash through 74 and break through the low of 72 and from there the abyss. I believe the Fed and other members of the ESF and related entities will engineer another market pullback as both political cover for QE3 … QEN and that there will be continued and uncertainty in regard to QE3 and possibly enough of a delay and enough jaw boning to cause a substantial across the board pull back in all equities, gold and silver included.
If I am wrong I will have missed a little of the continued insane and economically damaging run up in commodities ensuing from all the Hot Fed money and I'll enter a little later in the parabolic curve. If I am right I can re-enter at substantially lower levels. I believe that debt is the driver of gold and silver prices and I believe that there are two major factors that will likely have a strong negative impact on the GDP going forward.
The extreme bias for taking the needed balancing of the budget out on the back of the most vulnerable, the women and children, the veterans, the sick and the elderly, (the one's who spend every dime they get and stimulate the consumer economy the most) coupled with increasing vacuum operation where the super rich vacuum up money from the middle class and poor, will have a huge impact as the Koch party has their Tea and Crumpets too on the backs of the destruction of humane society and that all that spending will have a massive and rapid impact on GDP, while at the same time, hammering an already very poor consumer sentiment level down substantially and cause the broader middle class to substantially pull back on spending.
The Kleptocrats want to destroy the fabric of the US civil society by undermining the social justice and social security elements of our civilization while concurrently brain washing and "dumbing down" as much of society as possible. Having mastered framing and using moral semantics (in a highly immoral manner) and by using divide and conquer and media domination and other methods of misinformation and mind control have turned the poor and middle class on themselves as they make off with the wealth and liberty of this nation.
For the moment, I think rather than allowing interest rates to rocket and the dollar to plummet by pulling plans for QE3, they will need gain political cover and provide a giant short term opportunity to the largest market bookies, sorry "market makers" to profit from a short term market panic, not unlike 2008, allowing further consolidation and expansion of the too big to fails, more opportunities to get free money from the poor and then essentially put QE on an infinite footing.
If that is not the case, then the results will simply be a massive deflationary/depression and associated implosion. I can not say for certain but with investors turning markedly bullish at this time, given the inputs towards massive chaos, I am for the time being keeping the ammo dry and waiting patiently. Greed and fear are the enemy of the investor. I've had a great run with silver and gold and commodities up until now. I believe silver stands on its own above all other so called commodities as real money and that it will climb much higher. Short term however, I am sitting it out for a while longer. I exited paper proxies of silver (PSLV) and mining stocks when spot silver was trading at $36.95 or thereabouts.
I thought the pullback would go a little deeper but it seems that the central banks are on full print mode and the situations in Japan and the Middle East are going to end up causing fiat to flow from the presses for an indefinite period, perhaps 20 or 30 years. I got back into PSLV when spot silver was at $36.50. I exited when it was at $35.90. I should have bought back in around $34 after selling at $35.90 but that is life. All indicators (margine hikes by the authorities aside) point to parabolic lift off to me.
While may enter stagflation, the central banks would rather that then a complete meltdown of the banking system, massive social unrest and basically global depression and associated social revolution. On the other hand, something has to be done to stop the QE money from flowing into oil and food. This will cause social unrest almost as much as a global depression because either way, the giant too big to fail banks are starving people.
In addition to physical silver I have held PSLV as a large portion of my investments. I regularly read the best of the non-mainstream, including zerohedge, infowars, and many other resources.
While I hope and pray that the situation improves in Japan, short term I think it is quite possible that the situation in Japan could get much worse. If it does all markets and equities will sell off and this is especially true given how much of the major market positions are based on margin. I am taking a play it safe approach. I may well miss part of the next big upleg in silver while I wait but I don't want to get caught flat footed when the alarm bells are saying more clearly than ever that we may see a substantial short term total market liquidation.
I will not sell physical silver or gold as I still believe silver is going to $500 + in the next few years and gold to at least $2500 and that we may in time say gold and dow parity around 5000, once all the smoke and mirrors behind fiat based debt and dampenign affect of an increasingly oligarchic system of control in the political and financial systems takes the consumer markets apart through massive inflation and stagnation. Its just that for the short term I think the markets may be heading towards a substantial correction of up to 25% and that will take everything down, including the very best investments, silver and gold.
This isn't fear. Its just common sense to me at this time. I hope I am wrong. If I am then I'll be back in as soon as it becomes clear that Japan is stabalizing the reactors and that the Plunge Protection Team is still intent on Dow 15,000 via QE3.. QEn
While I continue to believe the monetary authorities could attempt to pull the plug on the broader equities market to support the bond market, looking at the geo political situation, the current wiki revelation in regard to Saudi peak oil and the fragile condition in the economy and the very bad housing and durable goods numbers, I believe that the authorities will not dare pull the plug on the stock market POMO and other float mechanisms or on QE anytime soon. To do so would cause a disaster worse than 2008. With that in mind, and given reports of worse than extremely short supplies of vaulted physical silver, I believe silver is as safe (if still volatile place for wealth protection and for a period of a few years probably wealth creation) as any fiat currency or stock.
With that in mind, I rentered my IRA positions in PSLV this morning with spot silver trading at about 33. Listening to James Turk and the discussion on silver backwardation did have some influence on my thinking.