Will the Silver Price Remain Soft?
One of my clients recently posed the following question:
“What is your professional outlook for the next 12-18 months for silver? Will prices remain soft for some time and will the debt ceiling coming up cause more concern for inflation pushing further flows into hard assets? Appreciate the advice. Thanks!”
My response is as follows:
Two thoughts on silver. First, I think the price will stay suppressed with all the easy money that will continue to pour out of the Fed – at ever increasing rates. Silver for delivery on the COMEX is adequate to meet short term industrial demands. Silver investors are apathetic as it has been almost 2 years that the price has been trading sideways. A few are even beginning to throw in a small piece of the towel (always a bullish sign) as the lure of a 14,000+ Dow and 1,500+ S&P is too hard to resist.
Wall Street and public investors love easy money. In the back of their mind they know they will eventually have to pay, but not today. Officially reported inflation, CPI & PPI numbers, etc., will stay low due to the manipulated calculations used. The Dollar will continue to serve as the reserve currency, but everyone except those living on planet Mars are wondering for how long. In fact, the dollar index could rise to 90 or better, given there are no viable dollar options at present. However, a basket of currencies including oil and gold, to replace the dollar are seriously being discussed as an eventual replacement.
On the other hand, silver is extremely undervalued relative to gold based on the historic Gold/Silver ratio. Mine yields are down. New physical investors (new Aftershock investors) are favoring silver. Silver is increasingly becoming “poor man’s gold”. And the silver market is over 100 times as thin as the gold market making the possibility of a significant rise much greater.
Bottom-line: The silver price channel is narrow and narrowing even further. The price, having been range bound, this long cannot last. A breakout to the upside will come with a slow, not crazy, rise to resistance at $49.50. Very, very strong resistance at $50 exists, which will be tested repeatedly before that level is eventually penetrated successfully. Thereafter, there is no further upward resistance other than psychological levels at $100, etc.
Finally, whatever is fake and manipulated is always eventually found out. That is when the big rises will occur that will make current prices look just next to free.
