Adventure Gold Inc. (PINK:AGONF, CVE:AGE) stock forecast

Adventure Gold Inc. holds rights to more than two dozen potential gold properties in the Abitibi Greenstone Belt located in north-western Quebec and north-eastern Ontario.

This post is part of series where we’re checking in on the Top 500 junior gold and silver mining stocks profiled in our book Top 500 Gold and Silver Mining Stocks: Metalproofing Your Portfolio from the Coming Inflation Shock.

Performance: First, let’s compare Adventure Gold’s performance against the AMEX Gold Bugs Index (HUI) – a basket of industry-leading gold stocks.

Time Span AGONF Performance HUI Performance
1 Month +61% +13%
3 Month +44% +3%
YTD -15% -12%

Adventure Gold’s following the usual trend: it’s more volatile than larger equities. When times are good, they’re really good for small cap miners. When times are bad, the declines are steeper. Still, AGONF’s performance over the past three months has been particularly impressive.

Profile: Adventure Gold Inc. holds rights to more than two dozen potential gold properties in the Abitibi Greenstone Belt located in north-western Quebec and north-eastern Ontario. The company plans to spend $14 million on exploration over the next five years. Most recently, Phase 2 drilling has begun on the Lapaska Property in Quebec. Highlights from previous drilling there showed 1.0 g/t gold over 103.4m including 10.3 g/t gold over 3.8m. http://www.adventure-gold.com/

Risks: Volume on AGONF is extremely low. Some days no shares trade hands. That means that even if you want to sell your shares, there might not be a buyer out there. If there is a buyer, they probably want a discount to the current quote. Volume currently averages 2,500 shares per day.

Recent News: Phase III drilling has kicked off on the company’s 100%-owned Pascalis-Colombiere gold property in the Val-d’Or mining camp in Quebec. The most promising hole showed 3.1 g/t Au over 27.0 metres. Click for more drilling results. Pascalis-Colombiere is a proven property. It yielded just over 200,000 ounces of gold for Cambior Inc. (now IAMGOLD) between 1989 and 1993. That’s a plus over more speculative explorers with unproven plots of land.

Adventure Gold had $5 million on hand as of April, and they have partnerships with two major mining companies in Agnico Eagle (Dubuisson in Val d’Or) and Lake Shore Gold and RT Minerals (Meunier-144 in Timmins West). They’re planning $2 million in drilling through next April with additional work commitments of $10 million over the next 5 years. Promising results would be a boon to the company’s shares.

Check out our book Top 500 Gold and Silver Mining Stocks: Metalproofing Your Portfolio from the Coming Inflation Shock (pictured above) to uncover more undiscovered gold and silver mining stocks.

How to identify silver mining takeover targets in 2012

The only reliable way to predict what sorts of junior silver mining stocks will get acquired is by looking at the types of companies that have gotten acquired in the past.

At one point or another, everyone who invests in the junior mining sector thinks about the big buyout their company could get. You’re more likely to pick a dud than a winner, though, and that means it’s all the more important to do your due diligence before plowing into a mining stock.

The only reliable way to predict what sorts of junior silver mining stocks will get acquired is by looking at the types of companies that have gotten acquired in the past. And contrary to a common investor belief, it’s producers (companies that are already pulling silver out of the ground) – not the hotshot young explorers that have uncovered a giant deposit – that tend get acquired.

“As silver miners continue to amass healthly cash treasuries, the sector looks primed for a spate of merger and acquisition activity,” Haywood Securities wrote in a recent research report on silver mining stocks (per Mineweb). “Producer/producer-sector consolidation seems – at the moment – to be a preferred route for silver producers to add to their production growth profiles. For example, Pan American’s recent acquisition of Minefinders, First Majestic’s proposed acquisition of junior producer Silvermex Resources, and Endeavour Silver’s proposed acquisition of AuRico Gold’s El Cubo operating silver-gold mine.”

Haywood’s report almost reads like a manual for identifying mining takeover targets. Look for small and medium-sized producers that control large deposits. Why, after all, would a large mining company take a chance on acquiring a potential deposit when they can go after one that’s going to start generating income from day one?

Knowing what the majors are looking for makes our job easier. Haywood even went on the record with a list of their favorite producers in their report. Among them? Endeavour Silver (NYSE:EXK), Fortuna Silver Mines (NYSE:FSM) and Mandalay Resources (PINK:MNDJF).

A few we’ve identified? Scorpio Mining Corp. (PINK:SMNPF), Golden Minerals Company (AMEX:AUMN) and Great Panther Silver Ltd. (AMEX:GPL). We’ve identified several other silver producers in our new book, The Top 500 Gold and Silver Mining Stocks.

Like this post? On Saturday, we also wrote about Haywood Securities’ fascinating silver price forecasts through 2016.

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Is this the beginning of the end for silver prices?

This could very well end up being the worst week for silver prices since 1975, but that doesn’t mean the end of the bull market in silver is near. In fact, it could mean the opposite.

It looks like you couldn’t have found much better of an investment than betting against silver this week. The white metal’s fallen 25 percent since the start of the week. According to the San Francisco Chronicle, this could very well end up being the worst week for silver since 1975!

It doesn’t look like things are going to get any better in the short-term either, though. The CME Group, which owns the Comex, announced on Wednesday that it was raising margin requirements yet again. This time to $21,600 as of the close of trading on May 9. That’s more than 80 percent higher than margin requirements just two weeks ago.

When traders are unable to come up with the extra cash to meet their margin calls, their accounts are typically liquidated. That further lowers silver futures prices and potentially triggers more margin calls for other traders.

Where do silver prices go from here?

The fundamental mood of the markets appears to be shifting. Investors grew pessimistic after a report showed an unexpectedly high number of jobless claims. All told 474,000 people applied for benefits last week. That was a jump of 43,000, and it set us back to where we were in August.

The Bloomberg Consumer Comfort Index also fell to its lowest level since the end of March, according to BusinessDay. Analysts speculate that high gas prices are to blame.

The net result, though, is a growing sense that we’re still a long way from a recovery, and if the global economy begins slowing, the demand for industrial silver could compound the price erosion we’ve already seen.

And yet, I’m still bullish on silver. Here’s why: the inflation story hasn’t changed. In fact, a worsening economy means we’re probably going to see even more reckless policy decisions come out of the Federal Reserve – a fact that will eventually push the dollar lower than the multi-year lows we’ve already seen.

I won’t deny that the plunge in silver prices doesn’t feel like a panic, but it’s important to realize that the run-up over the past two months felt like a mania. Even at $35.50 an ounce, silver’s still trading where it was just two months ago at the beginning of March.

The metal’s 18 percent higher than it was on Jan. 1. Eighteen percent is a price appreciation most mutual fund managers would kill to have over the course of a year. So long as the price of the white metal can hold above $30 an ounce, I’d look at this a temporary blip in a longer-term trend that’s pointing up.

Yes, some of the richest investors in the world – Carlos Slim, George Soros and Eric Sprott, for example – might be selling off chunks of their silver holdings, but I wouldn’t be surprised if they move back into the space in the days, weeks or months to come. After all, there aren’t many other good places to hide in the face of inflation. Until we see more fiscal responsibility out of Washington or a pronounced improvement in the U.S. economy, that’s one story that isn’t going to change.

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Why silver, why now? Here are five reasons

Silver bulls still have lots of compelling arguments for a continued rally in prices. Here are five reasons to invest in silver now.

Silver’s allure and extreme volatility have earned it a rather disconcerting nickname: the Devil’s Metal. On Monday, silver’s price briefly surged over $49 an ounce putting it within $1 of a 30-year-high. A few hours later, the white metal had shed 8 percent – plunging by more than $4 an ounce.

Not everyone’s ready to toss their silver positions overboard, though. Silver bulls still have lots of compelling arguments for a continued rally in prices. Here are five reasons to invest in silver now:

1) The ultimate hedge against inflation. This is one of the hardest things to convey to non-investors, but the past has shown us that precious metals act as a store of value during inflationary periods. Here’s how it works: since the dollar is no longer on the gold standard, it’s subject to supply and demand just like any other asset. If you increase the number of dollars in circulation, the value of existing dollars falls.

Let’s say you have $1,000 in the bank, and inflation is growing at 10 percent a year (which it is currently is according to Shadowstats.com). At the end of a year, your dollars are actually worth 10 percent less than they were at the beginning of the year. The number written on the bills hasn’t changed, but the amount of milk or gasoline or the number of Oreos you can buy with that $1,000 has certainly changed.

Now, let’s suppose you’d sunk your $1,000 into silver coins on Jan. 1. By the end of the year, you could sell those same coins for (in theory) $1,100 and buy the same amount of milk, cookies and gasoline you could have at the beginning of the year.

That’s a highly simplified example. Last year, for instance, silver appreciated 80 percent in nominal terms. That means your $1,000 would have been worth $1,800 by the end of the year. It wouldn’t have acted solely as a store of value, it would have grown, too. Call it the miracle of finite commodities.

When you print a limitless supply of dollars, your actions aren’t impacting the finite world of silver. That means as the supply of dollars increases, their value goes down. Silver, on the other hand, can’t be mass produced in a laboratory, so its prices aren’t subject to the whim of the Federal government.

2) The historic gold:silver ratio. Precious metals investors closely watch what’s known as the gold:silver ratio. It’s found by dividing the current price of gold by the current price of silver. As of this writing, for instance, gold’s trading at $1,497 an ounce and silver’s at $44.91 for a ratio of 33:1. In other words, it would take 33 ounces of silver to buy one ounce of gold.

Depending on your time frame, the historic gold:silver ratio could be anywhere from 10:1 to 70:1. Over the past 100 years, the ratio has hovered close to 65:1. In centuries past, that ratio was much lower – somewhere around 16:1. That’s pitted two different types of silver investors against one another: those who use modern history as a scale for the gold:silver ratio and those who look at things over a much longer time horizon – say over the past 1,000 years.

Nick Barisheff president and chief executive of Toronto-based Bullion Management Group argues that silver has historically traded at a ratio of 16:1 – a number that’s roughly equivalent to the ratio of silver to gold in the ground (per the Toronto Sun). “In terms of that ratio, silver should be twice the price that it is,” Barisheff tells the Sun.

3) Industrial demand. Unlike gold, which is primarily used in jewelry and as a monetary metal, silver is used for a wide range of industrial applications. In 2010, industrial demand for silver climbed above 487 million ounces, according to the Silver Institute. That accounted for nearly half of the worldwide supply of 1.05 billion ounces. Silver is consumed by industry for use in batteries, bearings, soldering, electronics and catalysts. In addition, a number of new and emerging uses for the metal prove promising in diverse fields from medical applications to solar energy and water purification.

4) Volatility is your friend. If you believe in the underlying argument for higher precious metals prices, silver will give you more bang for your buck than gold in the event that you’re correct. Because the silver market is smaller and more liquid than the gold market, its price can swing aggressively. Where gold goes silver does, too, but it does it faster. The trade off is a greater degree of risk. If you can stomach the powerful price swings, you’ll probably make more in silver than you would investing in gold.

5) The high cost of mining. Most of the silver that’s mined from the earth (about 70 percent of it, in fact) is mined as a by-product of mining for other metals. Even with silver trading over $45 an ounce, that’s not quite enough to bring costly, full-scale silver mines into production. That means we probably won’t see a large influx of fresh silver production hitting the market anytime soon – even in the face of rising demand. Without more supply to meet growing demand, prices have just one direction to move; and that’s up.

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How can American Apparel avoid bankruptcy? (AMEX:APP)

It’s too late for anything but a Hail Mary from American Apparel Inc. (AMEX:APP), but here are three things the company possibly do to avoid bankruptcy.

Icebergs are looming for the cotton T-shirt shipwreck otherwise known as American Apparel Inc. (AMEX:APP). The company warned on Friday that it may need to file voluntary Chapter 11 bankruptcy. Things look so bad, in fact, American Apparel may be forced to liquidate its assets if it can’t find bankruptcy financing or put together a Hail Mary reorganization plan.

It all comes down to cash, of course, and American Apparel has gotten very good at losing it. During the company’s Q4 earnings report out Friday, APP reported a loss of $19.3 million ($0.27 per share). A year ago, they actually made $3 million during the same quarter.

Revenues have been plummeting alongside profits for the retailer. They were down 9 percent from $158.1 million to $144 million for the three months ended Dec. 31, according to ABC.

Just when things look like they can’t get any worse, American Apparel is also getting squeezed by surging cotton prices. Costs for the key ingredient in APP’s soft tees has doubled in six months. The vultures are circling, and there don’t appear to be many bullets left in the corporate gun.

How can American Apparel save itself from bankruptcy?

It might be too late. Shares in American Apparel are down 45 percent since the start of the year. Over the past 12 months, shares are down more than 70 percent, and they now trade at a mere $0.90. If there is a pool of capital out there looking for a home, you can bet it won’t land in American Apparel’s hands without a lot of cotton strings attached.

Here are three key things American Apparel could do to move toward profitability:

1) Hog-tie the CEO. CEO Dov Charney runs American Apparel like he’s at the helm of a tech company in 1999. He’s most definitely not. He’s in one of the most cut-throat retail markets known to man: t-shirts. Negative press from a string of female employees alleging Charney of inappropriate sexual conduct just doesn’t engender confidence with Wall Street bankers – and those bankers are the ones with checkbooks. If Charney’s out of the picture, the company looks a little less ugly.

2) Trim the fat. When an individual’s having trouble paying off their mortgage, they stop buying those triple-pump caramel macchiatos at Starbucks (in theory, anyway). American Apparel is unable or unwilling to do the same. The company’s spending madly on new stores, administration and marketing even as revenues are sagging. “Selling and admin costs were all up (last year),” writes Jim Edwards at BNET. “Even advertising costs — at $18 million — returned to the level they had been in 2008, up from $11 million in 2009. Ask yourself: Who increases their marketing costs when they know their revenues are declining?”

3) Close the ugly ducklings. The time for hard decisions has come and gone. Now, the company needs to make the gut-wrenching decisions: mass layoffs, mass closings of unprofitable retail outlets and wage freezes would be a good start. Last year, American Apparel closed 14 stores and opened six new ones. And the CEO seems to think opening more new stores is the answer. That’s the last thing they need to do. If an outlet’s sales are suffering, that outlet needs shuttered and every effort from here on out should focus on making the profitable stores even more profitable.

The only saving grace in all this is I don’t feel like the public’s soured on American Apparel’s brand. The company makes the most comfortable t-shirts known to man, and their brand name has the power to bestow cachet on any run of the mill mall. If American Apparel does go bankrupt, I expect a lot of holding companies might be game for gobbling up the brand, re-working it under new, untainted management and – who knows – signing paperwork for a brand new IPO in 2015.

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India silver price to outpace rise in gold?

A number of factors have vendors looking for big gains in India’s silver prices in 2011, gains that could easily outpace the rise of the price of gold.

Rapidly rising gold prices have made it more acceptable for Indian families to offer gifts of silver rather than gold at their daughters’ weddings. “Only poorest among the poor in India could have thought of buying silver jewelry for the marriage of their daughters some years back,” writes CommodityOnline. A number of factors are driving up demand for silver in India, though, and here are a handful of reasons why silver’s price rise might outpace gold’s in 2011:

1) The high cost of gold. At $1,430 per ounce, the cost of gold jewelry is moving out of reach for low-income Indians. “Silver has emerged as a fashion statement as many people find difficult and unrealistic to buy gold jewelry at these high prices,” John Luckose, the owner of a small gold and silver shop in Kochi, tells CommodityOnline.

2) Fresh investment demand. Year-over-year food inflation is running rampant in India. The rate, as measured by wholesale prices, topped 10 percent (10.05 percent) for the week ended March 12, according to The Economic Times. Inflation is also finding its way into prices for non-food items with manufactured goods inflation at 6.1 percent last month. As prices climb, silver coins and bars present an attractive, low-cost means of protecting assets.

3) The wrong sort of attention. Wearing flashy gold jewelry in India could be enough to get you mugged. “People fear wearing gold jewelry these days as high gold price has led to several incidents of gold jewelry snatching on streets,” Luckose says. “Many customers coming to us say that they feel comfortable wearing silver jewelry.”

4) Some boats rise faster than others. India is the world’s largest consumer of gold. It accounted for around 24 percent of world gold consumption, according to the World Gold Council and the Bombay Bullion Association, and demand for gold as an investment soared 73 percent last year. That sounds like a lot until you compare it to last year’s growth in demand for silver in India. Silver imports climbed more than six times 2009 levels in the first six months of 2010, according to commodities brokerage Karvy Comtrade. If that trend stays intact in 2011, silver’s price rise will likely dwarf gains in the price of gold.

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15 gold price predictions for 2011

A number of influential traders and executives have publicly weighed in with gold price forecasts for 2011. Here’s a recap of the more memorable predictions from 15 trading professionals and individuals.

A number of influential traders and executives have publicly weighed in with gold price forecasts for 2011. Here’s a recap of the more memorable predictions:

Chuck Jeannes: Goldcorp Inc.’s (NYSE:GG) CEO sees gold at $1,500 an ounce as “easily achievable,” and he could see the price eventually rising as high as $2,300 if and when inflation sets in (The Street)

Dennis Wheeler: Coeur d’Alene Mines Corporation’s (NYSE:CDE) CEO “would not be surprised” if gold prices rose to $1,500-$1,600 an ounce in 2011 (Reuters)

Sean Boyd: Agnico-Eagle Mines Limited’s (NYSE:AEM) CEO argues gold at $1,600 an ounce in the next 12 months would “not be a stretch” (Reuters). “Gold will ultimately go above $2,000 and I think it’s going to go in steps so I could see $1,600 this year,” he tells The Street.

Mark Cutifani: The CEO of AngloGold Ashanti Limited (NYSE:AU) see gold range-bound between $1,300 and $1,500 an ounce in 2011 (The Street)

Rick Rule: The founder of Global Resource Investments, which was acquired by Sprott Inc. (TSE:SII), expects “some event-driven spike in metals prices.” “I have no earthly idea where gold will close, but to be a good sport and play the game, I’ll say $1,750,” he says (SeekingAlpha)

Aaron Regent: CEO of Barrick Gold Corporation (NYSE:ABX) tells The Street he believes the “forward curve would suggest a gold price in the $1,500 range” (The Street)

Ian McAvity: The founder of the Central Fund of Canada (CEF), Central Gold Trust (GTU), and Silver Bullion Trust (SBT.U) expects a “monetary panic” in the dollar or euro to push gold to $2,000-$2,400 per ounce this year or in 2012 (SeekingAlpha)

Mark Bristow: The CEO at Randgold Resources Ltd. (NASDAQ:GOLD) expected gold to rise as high as $1,500 an ounce (The Street)

Morgan Stanley (NYSE:MS): The investment bank has set a gold price target of $1,512 an ounce for gold in 2011 (The Street)

Ross Norman: The co-founder of TheBullionDesk.com is looking for gold to trade between $1,350 and new all-time highs of $1,850 per ounce (SeekingAlpha)

The Street reader survey: Of the almost 6,000 people who have taken The Street’s gold poll, 47 percent believe gold prices will finish between $1,500 and $1,800 an ounce in 2011 (The Street)

James Turk: The founder and chairman of online precious metals vendor GoldMoney.com sees gold sprinting much higher “probably in the first half” of this year to $2,000 per ounce (SeekingAlpha)

Charles Oliver: The senior portfolio manager of the Sprott Gold and Precious Minerals Fund, Oliver sees currencies around the world continuing to plummet in 2011. He expects that will push gold up to $1,700+ by the end of the year (SeekingAlpha)

Adrian Ash: A researcher at BullionVault sees individual savers moving into gold bullion this year as negative real interest rates erode buying power. That could push gold 20 percent higher this year to $1,695 an ounce (SeekingAlpha)

Richard O’Brien: The president and CEO of Newmont Mining Corporation (NYSE:NEM) sees gold eventually rising to $1,750 an ounce by 2012 thanks to the protection the metal provides against inflation. In 2011, he sees gold trading between $1,350 and $1,500 an ounce (Reuters)

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Gold price flirts with all-time record highs

With the dollar tumbling to a 15-month low, gold spot prices have risen more than $30 over the past five trading days. That’s pushed the yellow metal less than $10 shy of its all-time record high of $1,444.40 an ounce.

With the dollar tumbling to a 15-month low, gold spot prices have risen more than $30 over the past five trading days. That’s pushed the yellow metal toward its all-time record high of $1,444.40 an ounce – a record that was set on March 7.

Investors have shown a preference for precious metals as a safe haven in the face of turmoil in the MENA region and the devastation in Japan. Traditionally, the dollar has served as a refuge of last resort, but analysts argue that the Fed’s quantitative easing program has encouraged investors to look elsewhere.

“The dollar is not currently a safe haven in times of macroeconomic uncertainty because any downward revision in global and U.S. growth automatically means a higher risk of QE3,” Beat Siegenthaler, senior currency strategist at UBS, wrote in a note to clients (per MarketWatch).

The Fed’s policies are making it more difficult to maintain investor confidence in the dollar, but an unexpected rise in interest rates or a premature halt to QE2 would likely spook the markets as the U.S. recovery looks promising but is far from a sure bet. The end result is a move into gold, silver and other precious metals as investors look for ways to protect their assets.

Gold spot prices spiked as high as $1,435 an ounce in early trading yesterday; less $10 shy of all-time record high prices. It’s a trend that will likely continue so long as the threat of QE3 hovers over currency markets.

Yesterday’s top-performing gold mining stocks (mostly microcaps) all rose more than 10 percent with Vista Gold Corp. (AMEX:VGZ) sprinting up 19.1 percent. Here’s a look yesterday’s other winning precious metals stocks:

  •  Mines Management, Inc. (AMEX:MGN) +18.2%

  •  Alexco Resource Corp. (AMEX:AXU) +12.3%

  •  Kobex Minerals Inc. (AMEX:KXM) +11.3%

  •  Kimber Resources, Inc. (AMEX:KBX) +10.3%

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How would a gold standard work in the 21st Century?

Utah’s proposal presents an interesting wrinkle on the gold standard by allowing an official alternate form of legal tender to co-exist with the dollar. Would such a proposal be feasible? Perhaps.

The recent news that Utah representatives have passed a bill that could usher in a gold standard, got me wondering what it might be like to have a gold standard that co-exists alongside the U.S. dollar.

Traditionally, the gold standard worked by fixing the value of the dollar to a set amount of gold. Consumers bearing dollars could visit a local bank and exchange their dollars for bullion at an exchange rate determined by the government.

The problem, of course, was that by fixing the value of the dollar to a specific commodity, the government no longer had the means to artificially increase the monetary supply. If authorities wanted more dollars in circulation, they’d have to increase gold holdings in order to back those dollars.

Utah’s proposal presents an interesting wrinkle on the gold standard, though, by allowing an official alternate form of legal tender to co-exist with the dollar. Businesses and consumers could exchange dollars OR Federally-issued gold and silver coins during financial transactions.

[Related: Utah gold standard could become a reality]

Would such a proposal be feasible? Perhaps. To illustrate, let’s imagine a world where your bank or financial institution offered you a special, gold-backed savings account. By transferring dollars from your checking account into your gold-backed savings account, you’d effectively be “buying” and holding gold. Rather than being denominated in dollars, cash in your savings account would be denominated in XAU (the currency symbol for gold).

For its part, the bank would allocate physical gold holdings to your account whenever you transferred cash into your gold account. The bank would store this gold in a vault and, presumably, charge you a fee for the service. Under such a scenario, if the price of gold rises relative to the dollar, your savings would rise, too.

Ideally, your bank would also allow you to make purchases directly from your gold-backed savings account. You’d swipe your debit card as you always do, the gold in your account would be exchanged for dollars at prevailing rates and your purchase would be processed in dollars.

[Related: China gold reserves too small, adviser says]

The beauty of such a scheme is the value of gold to dollars wouldn’t be set by the government as it was in the past, but rather, it would be electronically determined by the current market price for gold.

Sounds like a win-win for everyone. There are dangers in such a plan, though. If the public started to show a preference for holding gold over dollars, the value of the dollar would plummet and the price of gold would rise dramatically. Banks would have difficulty backing your savings with physical gold and investor confidence in the dollar might crumble – not just here but around the world.

[Related: Why invest in silver?]

The biggest threat to any currency, of course, is a loss of faith in that currency. We’ve seen that happen in South America during the ’70s and ’80s, Germany after World War II, even during the dying days of the Roman Empire. If consumers were to lose faith in the dollar, they’d be eager to spend their dollars for whatever material goods they could get their hands on and prices would begin to rise quickly.

Utah’s plan to create an alternate legal tender might accelerate a rush out of the dollar. But it seems to me that process has already started. Perhaps what we’re seeing play out is simply a symptom of a bigger problem: the U.S. debt burden has become too large. No matter how much Americans might like to return to our post-war lifestyles, the balance of power is shifting East. Our consumption levels have to fall more in line with reality, and that’s going to cause pain along the way.

If there is a way to have the dollar peacefully co-exist alongside an alternate tender in the U.S., though, the solution lies in the banking system. Give me the ability to sign up for a gold-backed money market account or a gold-backed savings account, and I’ll happily sign on the dotted line.

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Silver market manipulation can’t be ruled out

Whenever there’s a rise in a particular commodity, you’re going to get investors with very deep pockets who move into the space. Who’s to say we won’t see a repeat of the Hunt brothers episode in the 1970s.

Often cited as the most infamous example of silver price manipulation in history, the Hunt brothers started accumulating the metal early in the 1970s. By 1979, they held an estimated 100 million ounces of silver. The brothers’ treasure chest is generally regarded as the reason why silver would ultimately peak at $50 per ounce in January of 1980.

Not everyone’s convinced, though. In an interview with the The Daily Crux, Jeff Clark of Big Gold says investors shouldn’t conclude that silver’s price spike was solely due to the Hunt Brothers. He offers three reasons why:

1) Strange timing. Rumors that the Hunts were attempting to corner the market in silver really went mainstream in 1974, Clark says. If the Hunts were genuinely buying enough of the metal to affect prices, silver should have went up even then. In fact, prices declined for the next two years.

2) No love for gold. One of the most damning arguments against the belief that the Hunts were the sole cause of silver’s rise during the ’70s is the fact that gold rose, too. Prices for both metals topped out on the same day: January 21, 1980. The fates of the metals were linked despite the fact that the Hunts weren’t accumulating gold. With or without price manipulation, silver would have likely risen dramatically alongside gold.

3) The media machine. There’s a difference between a market that’s manipulated and a newspaper headline that claims the Hunts had “cornered” the silver market. It was likely members of the media, not institutional investors on the ground, who believed silver’s price surge was solely caused by the Hunts.

Whenever there’s a rise in a particular commodity, you’re going to get investors with very deep pockets who move into the space. “Who’s to say that we won’t see other ‘Hunts’ come along today and try to buy up large quantities of the metal?” Clark asks. “I wouldn’t rule it out.” The Hunts, after all, were buying the metal for the same reason investors are today: the devaluation of the dollar. Until that ends, silver will likely continue its upward trend.

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