Wednesday, November 14, 2012

Wed Post #2: Silver to gain 400% in next 3 years

Faithful readers know this blog is bullish on precious metals, particularly silver.

Some followers have lamented about the dearth of posts on the topic as of late.  Reality is the movement in real estate is the bigger story right now.  Silver and Gold have been in holding patterns and there hasn't been much to talk about.

That may be about to change.

And it is the British newspaper, the Daily Telegraph, that catches our attention today.

In an article yesterday, the Telegraph proclaims: Silver price to 'increase 400pc in three years'
Silver will increase in value five times over the next three years, according to mixed asset fund manager Ian Williams. 
"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," he predicted. 
"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 an ounce in 2008 to its current price of $32 an ounce – having hit $50 an ounce in 2011."
Mr Williams said that the silver price was more volatile than gold, but that he expected 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.

Darius McDermott of Chelsea Financial Services agreed that QE means good news for precious metals. 
"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."
This follows recent observations that, despite naysayers claiming gold is falling out of favour with large buyers such as China, that 2012 is turning out not only to be a record year for gold purchases by China - but that China is now officially saying it must add to Gold Reserves to promote Yuan globalization.

From Bloomberg:
China needs to add to its gold reserves to ensure national economic and financial safety, promote yuan globalization and as a hedge against foreign- reserve risks, Gao Wei, an official from the Department of International Economic Affairs of Ministry of Foreign Affairs, writes in a commentary in the China Securities Journal today. While gold prices are currently near record highs, China can build its reserves by buying low and selling high amid the short-term volatility, Gao writes in newspaper. China’s gold reserve is “too small”, Gao says
Gao Wei is a Chinese official with a key political post. And he has just given the first hint that China is preparing to give its official gold far greater focus.

China has not given an update of its official holdings of Gold in nearly 4 years (2009).  At that time they reported they moved from 500 tonnes to just over 1000 tonnes.

The Chinese government is secretive about its gold diversification and buying and does not disclose gold purchases to the IMF.

In 2009, State Council advisor, Ji said that a team of experts from Shanghai and Beijing had set up a task force to consider expanding China’s gold reserves. Ji was quoted as saying "we suggested that China's gold reserves should reach 6,000 tons in the next 3-5 years and perhaps 10,000 tons in 8-10 years”.

China is likely to have been quietly accumulating another 1,000 or 2,000 tonnes in recent years. 

Whenever they do announce their updated holdings, it will no doubt create the same firestorm of interest it did back in 2009. The very low level of the People's Bank of China's gold reserves vis-à-vis their massive foreign exchange exposure and compared to western counterparts gold reserves is of continuing concern to the Chinese.

When the time comes that China releases an IMF update on its official reserve holdings, the impact on the price of gold will be measured in days if not hours.

Much like the impact on our real estate, it is not hard to foresee what is coming for both Silver and Gold.


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  1. I wonder why it takes so long for the public at large to realize that printing money is making the money out there less dear, even if the nice man in the suit says it ain't so....

    1. You know why. The sheeple tune in to the mainstream media everyday and do what they're programmed to do.

      Isn't it great to be awake!

  2. If I was single I would've liquidated everything and bought physical silver by now. Instead I have to satisfy that craving with buying 20-30 ounces per month and hope the craze doesn't hit until I top 500 ounces.
    Even if I do though, I'll just keep buying more.

  3. I simply don't believe this. The silver market is too manipulated and every time the price rises to anywhere near where it should be, it gets knocked back down by CME Group and whomever else (investment banks) that can control the speculation. I do agree that the silver price is way too low but unless there is a divergence between physical silver and paper silver, there will be no $50+ silver.

    1. COMEX and the COT runs the show, I certainly agree. Maybe one day in the not too distant future they will mistake shorts for longs and it will rise.....and rise!

    2. This is why this is a very good thing for us.... Silver is nearly mined out... and with expensive diesel... its 5 or 10 years before it becomes nearly gold.

    3. I have been following the commentary out of China with interest as well, Whisperer. What we are learning is that stealth buying is being strategically employed by China's Central Bank as a means to build core reserves while simultaneously keeping metals prices flat. This is incredibly significant where pricing is concerned. One of the worlds biggest accumulators (if not THE biggest buyer) has chosen to play off market volatility as a route to expanding core reserves to back its currency. That news came as a holy-shit moment for many people who doubted the idea before now. If you or I tried the same technique meanwhile we might easily lose our shirts on the daily ups and downs of the market but if you are the largest force in that market you can be almost assured of remaining on the winning side of the trade at all times. China as it turn out may the one that is behind current price suppression algorythms and it may be doing so to ensure it captures the supply it needs at prices it dictates through periodic volume sales. Again...holy crap....the Chinese might just be behind the price capping we are seeing. Interesting times indeed. There is a commentary over at Max Keiser that may be of interest and another on Zerohedge. I do not doubt for a moment that when China finally does acknowledge how large its precious metals reserves are that both Gold and Silver prices will move explosively to the upside. That day is probably further off than most gold buyers would like as secrecy is still the name of the game in Asia. But you had better have some physical in your possession before that day arrives or you will be kicking yourself in the ass long afterwards. The key moment for Gold in the coming two years will almost certainly be China's report to the IMF of the size of its total reserves. That will be the same day most people find out that the stuff is too expensive to acquire and they have lost the opportunity to invest profitably.