The real reason 2013 Silver Eagles hit an all-time high in January

The U.S. Mint probably isn’t the best gauge of market demand for silver. It’s too easily overwhelmed by demand, and that pushes sales forward into months when demand could otherwise have been low.

Because the silver investment market is so small, it’s particularly vulnerable to hype. That’s exactly what the commodities research firm CPM Group thinks is happening now as investors trumpet the “incredible” demand for silver coins in January. While the U.S. Mint did announce all-time sales records for 2013 silver eagles in January (with 7,498,000 coins sold), CPM Group argues that’s just a hold-over of pent-up demand from earlier in the winter.

“All of this talk about a shortage of silver is irrational and not supported by readily available market data,” CPM Group says in its latest report.

Specifically, the company cites worries over the Fiscal Cliff in November and December as driving up demand for American Eagles. Since the Mint sold-out of coins in both November and December, that demand rolled forward into January driving sales up to record levels.

CPM Group’s been painting a pretty bleak picture of silver prices going forward. The commodities research firm believes prices will head lower over the next decade (through 2022) rather than higher as most silver price prognosticators would have you believe.

I’m not ready to make that assumption, but there are lessons to be learned from CPM Group. Mainly that the U.S. Mint isn’t the best gauge of market demand for silver. It’s too easily overwhelmed by demand, and that pushes sales forward into months when demand could have otherwise been low.

Silver will surge 400% through 2016, Williams says

A British fund manager looks for silver prices to peak in the third quarter of 2015.

Ok. I’ll admit I’m not entirely sure who Ian Williams is. This UK article describes him simply as “a City-based asset fund manager.” Still, he’s rather brazen in his predictions for the white metal.

Silver is destined to enter a “sustained bull market” in the coming weeks. Mr Williams believes the price of silver will increase fivefold between now and 2016, with a peak expected in the third quarter of 2015.

Good news for silver bulls if Mr. Williams can be trusted. More at livecharts.co.uk.

Four reasons to be bullish on silver in 2013

Global Resource Specialist Peter Krauth of Money Morning believes silver prices could hit $54 an ounce in 2013. Here’s why.

Global Resource Specialist Peter Krauth of Money Morning believes silver prices could hit $54 an ounce in 2013. Here are four reasons why he’s so bullish on the metal:

  1. An expected normalization in the gold-silver ratio
  2. President Obama’s prediliction for money-printing
  3. Hard asset investor demand as paper currencies continue to slide
  4. Growing industrial demand

More at ETFDailyNews.

Gold and silver bubble will ‘dwarf’ the Internet bubble

It’s probably the best risk-reward situation right now as the gold and silver markets have ever seen in terms of the equities.

One of my favorite quotes in recent news came from Bill Murphy founder and chairman of the Gold Anti-Trust Action Committee (GATA). In an interview (that I highly recommend) with Jim Puplava of the Financial Sense Newshour, Murphy argued that the price of gold and silver have been successfully manipulated for decades.

The debt crisis that’s plaguing the U.S., Europe, Japan and other countries will eventually lead to so much money-printing, though, that continuing to suppress the price of precious metals just won’t be possible. That’s when we’ll truly see a tremendous climb in prices.

“When the public comes in here in our tiny gold and silver markets, it will be a bubble, and it will dwarf what the Internet did except it will be real for a long period of time,” Murphy said. “And that’s coming.”

That’s good news for gold and silver stock holders, but it will likely be bad for everyone on the outside looking in. Since Murphy’s certain we’re nearing the tipping point for inflation (especially after the Fed signaled that QEIII is coming on Friday), he looks at buying mining shares as a no-brainer.

“It’s probably the best risk-reward situation right now as the gold and silver markets have ever seen in terms of the equities,” he says.

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Silver outperforms all other precious metals in August; Where do metals prices go now?

Silver rallied more than 4.5 percent to give it as a solid lead as the top-performing metal in August. It could be a leading indicator that now’s the time to move into gold and silver mining stocks.

When Federal Reserve Chairman Ben Bernanke said the Fed “will provide additional policy accommodation” to bolster the US economy on Friday, metals prices sprinted higher in an end-of-the-month surge. Silver rallied more than 4.5 percent to give it as a solid lead as the top-performing metal in August.

Precious Metals Gains, August 2012

Metal Monthly Gain
Gold +4.5%
Silver +12.6%
Platinum +8.5%
Palladium +6.6%

The moves propelled gold to a five-month high while silver’s sitting at a four-month high. Still, leading analysts seem to think the best is yet to come for metals as quantitative easing looks to be more imperative.

“We took the amount of debt owned by major countries that is going to have to roll over in the next three years,” Jim Puplava of the Financial Sense Newshour said recently. “Over 50 percent of US debt is rolling over, 50 percent of Japanese debt, German debt, (etc.), and none of these countries – whether it’s the United States or Europe or Japan – can afford a spike in interest rates. So you know sooner later we’re going to get multiple forms of quantitative easing.”

More quantitative easing means higher inflation and higher precious metals prices as the value of global currencies retreat. That really has me taking a closer look at gold and silver stocks. Many of them have been trending up over the past three months, but they’re still trading below where they were a year ago.

Let’s take a look at a small-cap silver mining stock like Great Panther Silver Ltd. (AMEX:GPL). One year ago, shares stood at $3.19. As of Friday’s close, they were trading at $1.97. If prices return to last year’s levels, that would be a gain of nearly 62 percent.

“When the public comes in here in our tiny gold and silver markets, it will be a bubble, and it will dwarf what the Internet did except it will be real for a long period of time,” Bill Murphy founder and chairman of the Gold Anti-Trust Action Committee (GATA) Jim Puplava in that same interview. “And that’s coming. … It’s probably the best risk-reward situation right now as the gold and silver markets have ever seen in terms of the equities.”

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Silver prices set to surge higher

Bernanke didn’t say the Fed “may” stimulate, he said the Fed “will” stimulate. That was all it took. Gold and silver prices were off to the races.

Silver prices rocketed higher on Friday thanks to hints from Federal Reserve Chairman Ben Bernanke that QE3 could be around the corner. Prices for the white metal traded in a narrow range around $30.70 an ounce Wednesday and Thursday in the run-up to Bernanke’s speech.

Early Friday, prices started climbing and they didn’t stop until the markets closed. By the end of the day, silver was up to $31.74 an ounce – a gain of 4.58% in a single day of trading. The actual quote that had traders salivating is (in typical Bernanke fashion) vague:

“Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” he said (per IBD).

Bernanke didn’t say the Fed “may” stimulate, he said the Fed “will” stimulate. That was all it took. Shares in gold and silver mining stocks were off to the races. Majors like Silver Wheaton (NYSE:SLW) rose 5.2 percent and Silver Standard (NASDAQ:SSRI) climbed 7.9 percent. Some small-cap miners did even better with Great Panther Silver (NYSEAMEX:GPL) rocketing up more than 11 percent.

“My friend Eric Sprott of Sprott Asset Management is one of the smartest men I’ve ever met in my life and a real detail guy – and he thinks silver is going to go well above $100, and you might even be able to pick a number for silver,” Bill Murphy founder and chairman of the Gold Anti-Trust Action Committee (GATA) said in a recent interview with Financial Sense. “I think … people that are willing to do their homework and be patient and accumulate these cheap gold and silver shares will make fortunes in the years ahead.”

Of course, anytime there’s a run-up in gold and silver prices, it doesn’t happen smoothly. Since precious metals act as a barometer of the wider economy, political changes and economic numbers can cause large price swings. When prices are on the rise, though, it can happen violently. And it looks like we could be in the midst of another big upswing.

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Have silver prices finally hit the turning point?

The pop in silver prices on Thursday felt different to me, and I went long silver for the first time in months. Here are four reasons why I think silver prices could be due for a sharp upturn.

Since topping out around $35.50 an ounce late in February, the price of silver has done little except fall. Sentiment in the precious metals market seems to be hovering at multi-year lows with investors shunning the metal for riskier assets. That is until late last week.

The pop in silver prices on Thursday felt different to me, and I went long silver for the first time in months (buying shares in ProShares Ultra Silver ETF – NYSE:AGQ). Why? Here are four reasons why I think silver prices could be due for a sharp upturn:

1) QE3. We thought Operation Twist buried our chance to see further monetary easing out of the Federal Reserve. Don’t give up hope just yet. The metals bounced hard on Thursday after meeting minutes from the latest Federal Open Market Committee gathering held hints that further quantitative easing is still a potential option if the U.S. economy remains sluggish. Another round of QE would likely ignite a surge in commodities across the board.

2) Too far, too fast. Silver prices have crumbled more than 11 percent in the past three weeks. The drop last Wednesday was extreme with the metal shedding $1 an ounce in a single day of trading. A plunge that large feels like concession selling. And we all know when we see concession selling: right before the start of a recovery.

3) The bull market in precious metals is still intact. While we don’t always like to admit it, silver prices generally follow gold’s lead. Sometimes, it can feel like it’s the other way around since the silver market is so much smaller than the gold market, but we’d be kidding ourselves to say that silver prices aren’t extremely dependent on what the price of gold is doing.

And gold’s been flirting with important psychological levels lately. For one thing: last week’s lows (hit on Wednesday) coincided with a 20 percent drop from last year’s highs (per Forbes). That key technical level seemed to awaken a lot of the sleeping bulls who promptly piled back into the metal. After all, a 20 percent drop is considered the cut-off for the transition from a bull market to a bear market. Had gold continued dropping (and particularly if it would have fallen below $1,500 an ounce), you could have taken it as a sign to sell your metals and head for the hills. Until we get that confirmation, though, I’m leaning to the bullish side for gold (and therefore silver, too).

4) The Grecian plot thickens. The primary reason I think last week’s low in silver prices was a turning point is this: fears that Greece would leave or get booted from the Eurozone were still at a fever pitch. For the past month or so, problems in Greece have been amplifying, and I think that’s a big reason the price of precious metals have fallen.

Investors didn’t want a “safe haven”, they wanted cold, hard, highly-liquid cash. Indeed, some €700 billion reportedly left Greek banks in a single day last week. Last Thursday and Friday marked the first two days gold and silver prices have climbed in the face of the fears of a default in Greece. That could be a sign investors are betting the EU will announce new stimulus or that they’ve accepted the fact that a collapse in Greece is unavoidable. Either way, the rise in precious metals – despite the bad news out of Greece – was enough to turn me bullish on precious metals (at least for now).

Will mushrooming supply crush gold and silver prices in the years to come?

One of the most common arguments bears levy against gold and silver is the fact that record prices mean more gold and silver mines. With those mines, they argue, comes a glut of supply.

One of the most common arguments bears levy against gold and silver is the fact that record prices mean more gold and silver mines. With those mines, they argue, comes a glut of supply that could crush the precious metals markets.

One of the leading voices in this debate is Dr. Paul Walker of precious metals consultancy GFMS Thomson Reuters. At a conference last week in Dubai, Dr. Walker pointed out that it takes some $120-$150 billion of investment demand every year just to keep gold prices flat – not to mention see prices climb higher (per Resource Investor).

That a lot of cash to maintain a baseline, and I would argue that bodes well for silver prices.

“The amount of silver that’s available for investment each year is 450 million ounces and the amount of gold that’s available for purchase is about 70 million ounces, which means you have a ratio of about six-and-a-half to one is amount of silver you can buy versus gold,” Eric Sprott said in a recent interview (per ETFDailyNews).

At current prices, that means investment demand needs to grow by $13.5 billion to keep silver prices where they are. That’s far less than the $120 billion gold prices will need to stay afloat.

Still, silver prices tend to follow gold prices as both metals act as stores of value during periods of inflation. The main indicator for whether or not gold and silver prices can keep up with supply then is the expectation of inflation, and expectations are a fickle thing.

As Dr. Walker pointed out last week, it’s probably not supply that gold and silver investors should be concerned about, but rather the possibility that the Federal Reserve might raise interest rates in an attempt to begin strengthening the dollar. That, he argues, could be the true “Black Swan” event we’ve all been worried about.

We’re not there yet, though. In fact, we just might see all-time record high gold and silver prices again before we ever see the interest rates rise. Check out our posts Silver prices setting up for 30-year high? and Why Eric Sprott believes silver prices will triple to $100 an ounce in 2012 for more.

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Why Eric Sprott believes silver prices will triple to $100 an ounce in 2012

Famed investor Eric Sprott of Sprott Asset Management christened gold the investment of the 2000s. Now, he’s loudly proclaiming that this decade will belong to silver.

Famed investor Eric Sprott of Sprott Asset Management christened gold the investment of the 2000s. Now, he’s loudly proclaiming that this decade will belong to silver. His pronouncements are particularly interesting as investors seem to have lost interest in the white metal with prices trending down over the past month.

Of course, silver is still in the green this year (up 7 percent around $30 an ounce), but it’s hard to argue the fact that investors are giving the metal the cold shoulder. The gold-silver ratio is in a strong uptrend (per Seeking Alpha), investors fear that the Federal Reserve could potentially raise interest rates after the presidential election and silver production is on the rise.

Despite all those factors, Sprott believes both gold and silver prices will hit new highs before the end of the year. It’s silver, though, that he thinks will shine the brightest. And he bases some of his reasoning on data from the U.S. Mint:

“They sold as many dollars of silver as they sold dollars of gold last year in terms of gold coins,” Sprott said during an April 20 interview with Goldseek Radio. “That means that essentially, with silver trading at a 50 to one ratio, people bought 50 times the amount of silver as did they gold.”

Sprott’s arguments for new highs in the silver market can be boiled down to three factors: silver price manipulation, a gold-silver ratio that could start shifting back toward silver and demand that’s out-pacing supply.

Indeed, industrial demand will be key to ever higher silver prices.

“Annual production is about 900 million ounces per year, including recycling,” Sprott said (per Frank Curzio at Stockhouse.com). “Industrial usage alone will rise to 660 million ounces by 2015. That leaves only 240 million ounces for coinage, central bank purchases, and investment.”

Sprott’s prediction makes silver mining stocks look particularly attractive. “If Sprott is right and silver prices begin pushing toward $100 an ounce, these companies (Fortuna Silver: FSM, Silver Standard: SSRI, and Endeavor Silver: EXK) could go up several hundred percent from these depressed levels,” Curzio writes.

Economically, things feel like they’re improving in the U.S., but that’s just smoke and mirrors, Sprott argues. “It’s a BS rally,” he told an investor audience in Toronto last month (per Gordon Pape). “We have a system that is breaking down.”

When that systems starts showing cracks, Sprott believes silver prices will start climbing. And they won’t stop until we hit new all-time highs for silver.

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Silver prices setting up for 30-year high?

After silver’s miraculous run-up in prices last year, it’s easy to write the white metal off. Here’s why we think last year was just a teaser for what’s coming soon.

Almost one year ago to the day, silver investors witnessed a miraculous run-up in prices – one of the most aggressive silver price runs in three decades. From late August of 2010 to April of 2011, silver prices did little except go higher from a low near $18 to a peak just below $50 an ounce. That’s a return of 177 percent in 7 months.

Now that the hoopla has died down, a lot of investors are acting like the silver story has run its course. Not so fast says Eric Parnell of Gerring Wealth Management. He argues that what’s really interesting about silver’s peak last year is what happened afterwards – namely that prices didn’t collapse entirely.

“Within two months after this previous peak in 1980, Silver lost over 75% of its value in falling back to $11,” Parnell writes. “However, the same fate has not befallen the white metal this time around. While the losses since have been sizeable – it dropped by -30% within the first month after its April 2011 peak and continued lower through the remainder of the year to post a total peak to trough decline of -44% – it has since stabilized.”

Parnell believes that means silver is setting up to break through that $50 an ounce barrier and keep climbing beyond it. Why? If you look at a three-decade chart pattern for silver, it looks like it’s set the stage for a double top:

There’s been a lot of heartburn for silver investors who held onto their metal after the April highs. And yet, it’s important to remember that the fundamental reasons for the surge in prices still remain intact: governments around the world are aggressively printing money to stimulate their economies. In the face of the inflation that creates, investors and individuals have to find ways to protect their wealth. Silver and other hard assets are one of those ways.

It makes sense after all that silver speculators would aggressively sell their metals when prices neared $50 an ounce. They were in the trade for the quick and easy gain. As soon as the metals started poking its head into uncharted territory, those weak hands jumped ship. Now, we’re trading sideways as bargain hunters wait for prices to fall further. Once we see hedge funds moving back into precious metals, expect the frenzy to start again.

Still not convinced that inflation is on its way? Bookmark the Ludwig von Mises Institute‘s web site, and take a peak at their True Money Supply chart every few weeks:

If that doesn’t keep you honest about the state of the dollar, nothing will.

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