By: Patrick Heller, with commentary by John Fisher
2/23/2011
There are so many reasons why gold and silver, especially silver, are set to continue rising in price. Here are some of the more notable ones:
· JPMorgan Chase just announced that it is willing to accept physical gold as collateral for loans made by the bank. In effect, the bank is accepting gold as representing liquid money! JPMorgan Chase is also a major custodian for gold exchange traded funds. Therefore, it should know whether the ETFs really possess all the gold it supposedly owns to cover 100% of its outstanding shares. Well, JP Morgan Chase specifically will not accept gold ETF shares as collateral against loans made by the bank. Does someone at the bank know something they are not telling the public?
It is possible that Rep. Ron Paul (R-TX) may use his subcommittee chairmanship to pressure the Fed to disclose more information about it gold holdings and trading practices, which efforts were blocked by Congressional leadership in the previous Congress. He will push to audit the Fed.
· The COMEX is continuing to lose physical silver inventories. Total inventories are now down more than 10% since mid-June 2010. Registered (dealer) inventories now only cover about 6.6% of open contracts, well below the normal 10-15% coverage.
The growing backwardation (futures prices are less than cash prices) in both the London and COMEX silver markets indicate a huge supply squeeze is developing.
· Demand for US Silver Eagle Dollars was so strong in January that the US Mint had to begin rationing the coins part way through the month. Still, total sales of 6.4 million coins in January far exceeded the previous monthly sales record.
Refineries are experiencing a shortage of silver to process. There are reports in the past week of refiners turning away new orders for silver as they cannot obtain enough silver to fill the orders.
· With the refiners suffering a shortage of physical silver to process, delays are starting to develop in deliveries of various sizes of ingots.
When a financial planner in Georgia tried to find $1 million of physical silver to purchase for his personal account this week, he had to place partial orders with a number of vendors as he could not find any with sufficient inventory to handle the trade. While such a trade may be huge for you or me, it is insignificant in global financial circles.
US jobs and unemployment report The Bureau of Labor Statistics fudged to get a lower unemployment rate by reclassifying a half million unemployed people as no longer being unemployed—even though they have not found a job. The report was so poor that even the mainstream media began taking the government to task for their manipulation of the data.
· As for Bernanke’s claim that consumer prices are not rising in the US, here are some wholesale food price changes as reported by The Wall Street Journal from the start of 2011 through yesterday: hogs up 16.5%, beef 3.0%, wheat 13.8%, corn 8.9%, soybeans 4.6%, butter 27.1%, cheddar cheese 36.8%, corn oil 7.4%, flour 12.4%, lard 30.0%, and oats 7.4%.
A BOLD FORECAST FOR GOLD AND SILVER
The US dollar is at high risk of a major decline in the next seven weeks. The rising interest rate on Treasury debt is the alarm that other nations will be more aggressive at trying to get away from the dollar.
Look for gold to reach $1,600 and silver reaching somewhere in $38.00 to $45.00 range by the end of March.
All Things Considered – John’s Commentary
Action to take: Slow and steady plodding wins the race. The days of trying to save a few bucks by waiting have left more of the people I talk to in the dust, than has afforded them the opportunity to pick up bullion cheap. As always – buys small amounts in regular intervals and don’t watch the price too closely. If you watch too closely, you will fake yourself out.
What to buy: Inexpensive bullion 60/40 in favor of silver.
Quote of the day: “The Federal Reserve printing press is a form of taxation.” – Steve Forbes
