Diversify With Silver As Set To ‘Increase 400% In 3 Years’

Today’s AM fix was USD 1,724.75, EUR 1,360.86, and GBP 1,085.23 per ounce. 
Yesterday’s AM fix was USD 1,735.75, EUR 1,365.44, and GBP 1,091.39 per ounce.

Silver is trading at $32.63/oz, €25.76/oz and £20.61/oz. 
Platinum is trading at $1,591.00/oz, palladium at $614.50/oz and rhodium at $1,085/oz.

 
Global Commodity Prices & Data – (Bloomberg)

Gold fell $3.10 or 0.18% in New York yesterday and closed at $1,727.90. Silver slipped to a low of $32.186 and finished with a loss of 0.49%.

Gold edged down on Tuesday on low volumes when the euro dropped to a 2 month low against the US dollar despite confusion about a deeper bailout package for Greece has driven many investors to wait on the sidelines.

Eurozone finance ministers suggested that Athens should be given until 2022 to lower its debt to GDP ratio to 120% but IMF chief Christine Lagarde insisted the current target of 2020 should remain.

Gold’s rally in 3Q saw it hit just short of $1,800, down from the all time nominal record of $1,920 in 2011 when investors turned to the yellow metal as an inflation hedge and safe haven during the height of the European debt crisis.

Barrick Gold’s (the largest mining producer) CEO, Jamie Sokalsky, said prices may rise to $2,000 in 2013 as costs and barriers to production restrict supply, while demand from central banks and Chinese consumers keeps climbing.

New York’s SPDR Gold Trust, the largest ETF, dropped 0.07% on Friday from Thursday, while those of the largest silver-backed ETF, New York’s iShares Silver Trust rose 0.45% percent over the same period. 

The Telegraph has an interesting article on silver which suggests that it might rise by over five times in the next few years.

Emma Wall interviews fund manager Ian Williams who says that "silver is about to enter a sustained bull market that will take the price from the current level of $32 an ounce to $165 an ounce and we expect this price to be hit at the end of October 2015."

"This forecast is based entirely using technical & cyclical analysis and is in keeping with the mathematical form displayed so far in the bull run that has taken silver from $8/oz in 2008 to its current price of $32 an ounce – having hit $50 an ounce in 2011."

Mr Williams noted that the silver price was more volatile than gold, but that he predicts silver to continue to dramatically outperform gold.

The Charteris manager said that macro fundamentals were supportive for the silver price, such as the re-election of President Obama, who supports Ben Bernanke’s policy of quantitative easing.


Gold Spot $/oz, 2 Years – (Bloomberg)

"Strong demand for precious metals will remain as long as we have QE, which do well with each round of money printing. QE is bound to lead to inflation at some point and at that time, real assets will do best," he said.

"Investing in a fund that holds a range of precious metals gives you positive diversification and less reliance on just gold."

We have long been more bullish on silver than on gold and have said since 2003 that silver will likely reach its inflation adjusted high of $150/oz in the coming years. Indeed, we believe that the end of the precious metal bull markets may see the gold silver ratio return to its geological long term average of 15:1. 

Therefore were gold to trade at over its inflation adjusted high of $2,500/oz (as we believe likely) then silver  would be priced at $166.66/oz or $2,500/oz divided by 15.

We have also long suggested that owning both gold and silver was sensible from a diversification point of view. Gold is more of a safe haven asset and currency in general and is more of a hedge against macroeconomic and monetary risk.

Silver is similar, while more volatile, but continues to have the potential for far higher returns.  

For breaking news and commentary on financial markets and gold, follow us on Twitter.        

NEWSWIRE
(Bloomberg) — Gold to Climb to $1,849, LBMA Survey Shows, as Outlook Cut
Gold will probably gain 7 percent to $1,849 by September, according to the average response in a survey of attendees at the London Bullion Market Association’s annual conference, who cut predictions during the two-day event.

Attendees said in a separate survey yesterday that the metal may trade at $1,914 an ounce by the LBMA’s next annual gathering in 10 months, according to Tom Kendall, head of precious-metals research at Credit Suisse Group AG, who presented the findings in Hong Kong today. Rallies were also forecast for silver and platinum, the results showed.

While gold is poised for a 12th year of gains as central banks including the U.S. Federal Reserve ramp up stimulus, it’s 10 percent below the all-time high reached last year. Gold may surpass $1,800 this year depending on further actions from the Fed, according to Kendall, the most accurate precious-metals forecaster in the past eight quarters tracked by Bloomberg. Goldman Sachs Group Inc. expects gold futures to gain to $1,940 an ounce in 12 months, according to a report dated Nov. 9.

“The price can trend a little bit higher,” Kendall said in an interview on Nov. 11. “It’s going to be a market that needs fresh stimulus or a new geopolitical headline to get investors really excited about gold again.”

Gold for immediate delivery declined as much as 0.4 percent to $1,721.55 an ounce and traded at $1,724.95 at 5:33 p.m. in Hong Kong. Spot gold reached an all-time high of $1,921.15 on Sept. 6, 2011.

Montreal Call
At the LBMA’s last annual gathering, held in Montreal in September 2011, the average response in the final survey was for a rally to $2,019 by the time of the Hong Kong meeting. After the results was released on Sept. 20 that year, the highest that gold reached was $1,816.70, touched the following day.

Silver will probably climb to $38.40 an ounce by September, according to the survey today, from $32.27 now. Platinum may advance 14 percent to $1,794.90 an ounce, while palladium may gain 18 percent to $724.70 an ounce, the results showed.

The Fed said on Oct. 24 it will maintain $40 billion in monthly purchases of mortgage debt and probably hold interest rates near zero until 2015 to spur growth and reduce joblessness. The Bank of Japan expanded an asset-purchase program on Oct. 30 for the second time in two months and the European Central Bank has said that it is ready to buy bonds of indebted nations.

“Next year it’s reasonable to be talking about a gold price of between $1,800 and $2,000,” said Kendall. For the metal to reach the “top end of that range, it will require investors to become more engaged in the gold market again, particularly on the institutional side.”

Holdings in gold-backed exchange-traded products were unchanged at 2,594.6 metric tons yesterday after reaching a record 2,596.1 tons on Nov. 8, data compiled by Bloomberg show. They have risen 10 percent this year.

The LBMA is a London-based group that represents the wholesale market for gold and silver.

(Bloomberg) — Gold Mining Breakeven Costs Are Increasing, Barrick CEO Says
The breakeven cost for mining gold is going up on so-called resource nationalization, a shortage of skilled labor, infrastructure access to remote mines and rising capital expenditures, Jamie Sokalsky, CEO of Barrick, said at a conference in Hong Kong today.

(Bloomberg) — Gold Bull Market Shows No Signs of Reversing, Barrick CEO Says
The gold bull market shows no signs of reversing, Jamie Sokalsky, ceo of Barrick Gold Corp., said at a conference in Hong Kong today.

Mine supply hasn’t kept up with demand as production is declining in mature areas and costs are increasing, he said.

(Bloomberg) — Russia’s Palladium Sales Seen Dropping to 250,000 Ounces in 2012
Sales from palladium stockpiles in the country may be lower or zero next year, Mark Danks, marketing manager at Johnson Matthey, says in Moscow. *NOTE: Russia’s palladium sales from stockpiles were 770,000 oz in 2011.


Cross Currency Table – (Bloomberg)

Mark OByrne

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