Best of the Week
Most Popular
1.Trump Delirium Triggers Stock Market Brexit Upwards Crash Towards Dow 20,000! - Nadeem_Walayat
2.The Future Price Of Gold Will Drop Below $1000 In 2017 -InvestingHaven
3.May Never Get Another Opportunity to Buy Gold at this Level Again - Chris_Vermeulen
4.Delirium - The Real Reason Why Donald Trump Won the US Presidential Election - Nadeem_Walayat
5.Why Nate Silver / Fivethirtyeight is one of the Most Reliable Election Forecasting Indicator? - Nadeem_Walayat
6.Gold Price Forecast: Nasty Naughty November Gold Price Trend - I_M_Vronsky
7.Gold Mining Stocks Screaming Buy! Q3’16 Fundamentals - Zeal_LLC
8.Delirium of Trump Mania Win's Mr BrExit US Presidential Election 2016 - Nadeem_Walayat
9.The War On Cash Goes Nuclear In India, Australia and Across The World - Jeff_Berwick
10.Hidden Signs for Gold and Silver - P_Radomski_CFA
Last 7 days
First UK BrExit then Trump, Next BrExit Tsunami Wave to Hit Italy HARD Sunday! - 3rd Dec 16
The 10YR Yield and SPX Stocks Bull Markets - 3rd Dec 16
Gold And Silver – Do Not Expect Much Difference With Trump Compared To Obama - 3rd Dec 16
Gold, Currencies and Markets Critical 61.8% Retracements - 2nd Dec 16
Gold Junior Stocks Q3’16 Fundamentals - 2nd Dec 16
Adventures in Castro’s Cuba - 2nd Dec 16
We Are Putting Off the Inevitable - 2nd Dec 16
Macroeconomic Cycles & Demographics - A Fuse, An Explosive and The Igniting Catalyst - 2nd Dec 16
How Moving Averages Can Identify a Trade - 1st Dec 16
Silver Prices and Interest Rates - 1st Dec 16
America, is it Finally time for us to say Goodbye? - 1st Dec 16
Blockchain Technology – What Is It and How Will It Change Your Life? - 1st Dec 16
Burn the Flags, Can Trump Salvage The Sinking US Economic Ship? - 1st Dec 16
Will US Housing Real Estate Market Tank in 2017? - 1st Dec 16
Referendum Puts Italy's Government to the Test - 30th Nov 16
Why We Haven’t Seen Gold Price Rally after Trump Victory - 30th Nov 16
Breakdown and Slide in Crude Oil Price - 30th Nov 16
A 'Wicked Rally' in Gold Price Predicted - 30th Nov 16
Silver Market Sentiment Looks Golden - 30th Nov 16
Indian Demonetization Denotes Severe Stress in the Global Gold Market - 30th Nov 16
Owning Gold and Silver in Troubling Times - 29th Nov 16
Trump's Presidency - Stock Market Crash or Start of New Mega-Trends - 29th Nov 16
Prime Minister Modi's War Against Corruption, Black Money and Fake Currency Notes in India - 29th Nov 16
Can President Trump Really Drain the Swamp? - 29th Nov 16
President Trump’s Economic Plan Isn’t Going to Work - 29th Nov 16
The US Bond Bear Market Has Begun! - 29th Nov 16
Simple Yet Powerful Technical Trading Tools - 28th Nov 16
Public Infrastructure – Welcome to the World of Waste, Fraud, and Abuse - 28th Nov 16
Fifty Years Later, Moore's Computing Law Holds - 28th Nov 16
An Elusive Stock Market Top - 28th Nov 16
This Past Week in Gold - 27th Nov 16
Italian Bank Collapse European Sovereign Bond Carnage, Criss-Crossed Fuses & Lit Bonfire - 27th Nov 16
How to Beat UK Savings Crisis with Child Junior Cash ISA, Pension's and Life-time ISA - 27th Nov 16
Castro Was Not Who You Thought He Was - 27th Nov 16
Understanding the Trump Presidency , Beyond Merkel - 26th Nov 16
US Stocks Bull Market New All Time Highs - 26th Nov 16
Silver Mining Stocks Q3 2016 Fundamentals - 26th Nov 16
MSM's Stock Market Druck'n Suck-In Continues - 26th Nov 16
Gold Price Down 13.5% In 13 Days - Opportunity For Geometric Price Cost Averaging - 26th Nov 16
Tips for Trading Options with Elliott Waves - 26th Nov 16
Germany Pulls the Plug on Market Oracle site for 24 hours, German Election BrExit GerExit Warning Shot? - 26th Nov 16
New NS&I 2.2% Savings Bond Ahead of 2017 Stealth Inflation Theft of Purchasing Power - 24th Nov 16
Establishment Controlled Mainstream Media Launches War on Alternative 'Fake' News - 24th Nov 16
Black Friday Cheap Christmas Lights, How Long do they Last ? B&M Stores Review Video - 24th Nov 16
War On Cash Goes Global – India and Citibank In Australia - 24th Nov 16
Stocks, the Politically-Driven S.O.D. to Lose Again - 24th Nov 16
One of the best buying opportunities in history? - 24th Nov 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

$10000 Gold

Silver Price Could Double by Year End

Commodities / Gold and Silver 2012 Feb 19, 2012 - 08:54 AM GMT

By: Jason_Hamlin

Commodities

Best Financial Markets Analysis ArticleWere you cursing at your computer screen when silver nearly tripled during the short 9 months from September 2010 to May 2011? Silver at $20 seemed like an insurmountable threshold for quite some time. This caused many silver investors to give up just prior to the ascent, completely missing the ride towards $50. I believe silver is about to offer a similar ride. While it is unlikely to match the 180% advance mentioned above, look for silver to make new highs in the coming months, with the potential to double to $65 by year end.


Following the record gains in silver during late 2010 and early 2011, the metal crashed towards $25 and has since rebounded to around $33. Investor sentiment has crashed along with it. The threat of Euro nations defaulting, banks announcing they are, well, bankrupt, and a series of other factors have scared away many of the Johnny-come-lately silver bulls.

I think too many investors are underestimating the power of the central banks. While I agree they are running out of options, it seems that their ability to kick the can down the road has yet to expire. Given that the United States is heading into election season and President Obama is in full campaign mode, I expect the administration to pull out all stops in order to continue the illusion of economic prosperity a while longer. Every economic fire of consequence is being extinguished with fresh liquidity, more funny money or new legislation. In case you missed it, QE3 has been in full force for quite some time, albeit executed in a somewhat stealth manner.

The implications for silver (and gold to a lesser degree) are going to be incredibly bullish. Absent a deflationary sovereign default that spirals out of control and takes down major banks with it, stocks will continue to creep higher in volatile trade throughout the year. Once fear begins to subside, look for precious metals to come roaring back to new highs by mid-year. Whenever the next financial crisis finally hits, we are likely to witness a new injection of quantitative easing that is even stronger than what transpired in 2008.

Will a major debt default pull down gold, silver and mining stocks with it? Absolutely.

Will it last? Not likely.

Investors are a predictable bunch. They always overshoot on emotions in one direction or another. A rush for liquidity and the perceived “safety” of government bonds or U.S. dollars will be incredibly short-lived and viewed in retrospect as immensely short-sighted. Everyone that rushed for the door by dumping real assets will soon regret their folly. When the fear subsides and some semblance of rational thought returns, the realization of the worthlessness of government paper will be widespread and cause a mass exodus of fiat money.

So while it is prudent to hold a decent amount of cash in the short term, hoping to buy the irrational dip, the medium to long-term investor might consider buying silver aggressively at this juncture. In my view, commodity prices are either going to continue grinding higher throughout the remainder of the year, or there will be a short and steep dip, following by a resumption to new highs.

Either way, the silver price has a long way to go before reaching previous inflation-adjusted highs. It would need to climb to $150 to reach its 1980 high using officially-suppressed inflation statistics and closer to $300 using honest inflation statistics. Seeing as you can buy silver at around $33 today, the upside potential remains absolutely huge. Let’s take a look at the long-term chart to determine price targets for 2012 and 2013.

Charting back to the start of the silver bull market, we can see that silver remains firmly in its multi-year uptrend. Contrary to negative sentiment expressed by some analysts, there has been no significant chart damage or other action to suggest that the bull market has run its course. Silver recently bounced off the bottom line of its trend channel, which also corresponds roughly with the 100-day moving average. This line has provided support during every one of silver’s corrections over the past decade, with the exception of the 2008 financial crisis. I expect it to continue to provide support during the current correction/consolidation.

While we could see one more quick dip below $30, I think any talk of a decline to $25 or lower is now firmly off the table. Silver is currently facing resistance at the critical level of $35. If it breaks to the upside through this level, I believe silver will quickly climb to challenge the $50 mark once again and reach a high between $55 and $65 by year end. To the downside, I think the lowest silver will close out the year is around $31, in the event that short-term deflationary forces take hold. But as mentioned earlier, I think the central banks stand ready to do whatever is necessary in order to prevent such an outcome.

These projections are relatively conservative and based on the long-term trend trajectory. Any number of events could send silver parabolic in the blink of an eye. The silver market is tiny in relationship to the paper money market and if even a small percentage of those dollars decide to buy silver, demand will overwhelm supply and send prices into triple digits. I ultimately believe silver could reach $500, but the more important consideration is the value/purchasing power increase of silver. One thousand ounces of silver used to be able to buy a median-priced home in the United States and I believe one thousand ounces will once again achieve this same feat in the near future.

Some view silver as an inflation hedge or way to preserve purchasing power. I see it as a way to vastly increase purchasing power over the next several years, with the worse case scenario being wealth preservation. I’ll take that risk/reward scenario any day.

The fundamentals are very strong for silver at this juncture. The Obama administration just put forth a budget that will result in another annual deficit of over $1 Trillion, despite promising to cut the deficit to $650 billion. The ECB is bathing Euro banks in liquidity and the US Fed has literally guaranteed an inflationary environment until late 2014. These policies create ripe conditions for commodities overall and precious metals in particular to make new all-time highs.

With less above-ground investment-grade silver available than gold, the supply/demand situation can not persist much longer at such depressed prices. Physical silver demand is growing and confirming our bullish view, as Silver Eagle sales for January posted the second strongest month ever at 6.1 million ounces!

Lastly, silver is the best form of money to own in the event of a collapse in fiat currencies. It will be difficult to use a gold eagle for small purchases, but silver eagles and junk silver will be ideal to use in purchasing food and other goods when the U.S. dollar is no longer accepted. This makes silver attractive not only for the strong returns and ability to increase an investor’s purchasing power, but also as a valuable insurance policy should the current monetary system break down.

So don’t miss the train again this time around. While silver is currently in consolidation mode, this is not likely to last long. When the silver price finally takes off once again, there will be little notice or opportunity to jump aboard the speeding train. Silver remains severely undervalued in my estimation and I expect the price to skyrocket in the near future as it approaches new highs.

You need only have the courage to take the path less chosen, buy when others aren’t interested and sell when the herd is clamoring to buy silver at any premium. While the next financial crisis may begin with panic selling of precious metals, I believe it will quickly flip to panic buying at very high premiums to spot price. I want to be well-positioned before this occurs and also have some funds on the sidelines to relieve panic sellers of their gold and silver at discount prices. A sensible approach that I advocate is to purchase in tranches, building a position now and adding to it every month or two. This will help to ensure that you don’t go “all in” at a short-term top and have funds available to take advantage of any major dip. Attempting to time the absolute bottom is nearly impossible, so I view this a opportune moments to establish or increase positions in silver.

I am currently adding to my positions, both in physical silver and undervalued silver mining stocks. The equities underperformed significantly last year, but against the backdrop of unlimited central bank easing and liquidity, I think we are likely to see a return to the leverage offered during the early stages of this bull market. Junior mining stocks in particular appear very undervalued at this juncture and could offer staggering gains if my analysis is correct. If you would like to receive the GSB Contrarian Report, download my guide to buying and storing physical precious metals and view all of the stocks that we hold in the Gold Stock Bull portfolio, click here to become a Premium Member.

By Jason Hamlin

http://www.goldstockbull.com/

Jason Hamlin is the founder of Gold Stock Bull and publishes a monthly contrarian newsletter that contains in-depth research into the markets with a focus on finding undervalued gold and silver mining companies. The Premium Membership includes the newsletter, real-time access to the model portfolio and email trade alerts whenever Jason is buying or selling. You can try it for just $35/month by clicking here.

Copyright © 2012 Gold Stock Bull - All Rights Reserved

All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The information on this site has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any information on this site without obtaining specific advice from their financial advisor. Past performance is no guarantee of future results.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

abrash zaki
09 May 12, 11:35
silver buyer

it will spark as he mentioned ....silver has more power than gold while pick up and down,....now itz the turn of silver to go upppppppppp


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife