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Monday, June 4, 2012
Silver Stock Report
Silver Headed to $75-$125/oz. in 1-2 Years
(An Educated Guess for a Short-Term Price Prediction)
Silver Stock Report
by Jason Hommel, June 2nd, 2012
My experience and the charts tell me that silver prices are likely to head to $75 to $125/oz. in the next one to two years. That's about a 150% to 230% gain for those who buy silver under $30/oz.
The reason why is that we are in a bull market for silver, where silver prices will likely continue to increase until and unless something major changes. There are many fundamental things driving this bull market in silver, such as:
1. Runaway government spending that is devaluing the dollar due to socialism.
2. Instability in paper currencies around the world due to socialism.
3. Central banks buying gold to protect their national currencies and to protect the value of their foreign exchange reserves which are all going down, due to failed socialism.
4. The tiny size of the silver market, under $3 billion/year worth of investment demand.
5. The unknown and unpublicized supply and demand figures in the silver market (point 4) and unpublicized ten year bull market in silver.
6. The huge short positions in the silver market, up to $200 billion worth of paper silver sold to silver investors who are too lazy to take delivery, and continue to trust the untrustworthy banks who don't have the silver that they sold to clients.
Until and unless all of those things change, silver prices will continue to go up, as they have for the past ten years. Silver prices will thus continue to increase for probably the next ten years also, at about the same rates, or even faster than they already have.
The prior peaks for silver have been reached every 2 years or so. Each peak price, from $8 to $13 to $20, has been about 50% greater than the last peak, except for the most recent peak of $50/oz., which was 150% higher than $20, and took 3 years after the prior peak. The last peak was nearly $50/oz. around April, 2011. The next peak is thus due in about 1-2 years, and could be from $75 to $125/oz., or higher, as bull markets tend to move up in a parabolic way, moving up in ever faster rates, as silver is already doing.
Prices move up in a parabolic way, probably because people, I mean investors, like to jump on the trend. In fact, American investors are mostly trend investors, not value investors. (If most were value investors, silver would not remain the undiscovered low value that it is!) The issue with silver is that the silver market is so tiny, that by the time even 1% of the public jumps on the trend to buy silver, the silver price will be $500/oz. How so? Because the world is nearly out of silver, and consumes nearly all that is mined each year, leaving so little left over for investors. Also, there is so much money in the banks that if even 1% of the money in American banks tried to buy silver, which is $180 billion of buying power, that if that money tried to buy about 350 million oz. of silver available (about half of annual mine supply), that would drive the price to $500, as follows: $180,000 million / 350 million = $514/oz.
Now that silver has put in a ten year positive price trend, the silver market will be increasingly difficult for the financial world to ignore. Silver will inexorably, inevitably pull paper money into itself like a magnet, destroying the false and fraudulent value of paper money.
See, the problem with all frauds, is that they tend to end rather suddenly.
We are at the point where if 1% of paper money buys silver, it will destroy 94% of the value of the remaining money that was too foolish to buy silver at prices under $30/oz. The math is as follows: $30 to $514 is a gain of 17 times greater. When money loses that much purchasing power, the other way to say it is that the remaining money that now must buy silver at over $500/oz. to protect itself from total destruction, rather than $30 which is the price it could have bought it, represents a loss of 94% of the value of the dollar.
There is no way to stop this process. It has repeated itself again and again throughout all of history.
See, the problem with socialism is that you eventually run out of other people's money to steal to prop up the welfare state that tries to give handouts to the insatiably greedy and lazy people. We have long passed that point, as the government now collects $2 trillion to fund a $3.5 trillion budget, spending (and printing/borrowing) an additional $1.5 trillion per year. That's $1500 billion.
And I was just talking about the dangers to the dollar, and the rise in silver to $514/oz. if only $180 billion tried to buy silver. See the problem? The solution is simple. Buy silver before the next guy does!
See, the math shows that there is no possible way that the brokerage houses have bought and are holding people's silver for them. If they did, the silver price would be $500/oz. already. And it's not. Being defrauded is simply one penalty for being bad at math. That's life. Sorry. I didn't make up the rules. Don't shoot this messenger.
Now, those are the prices that experience and the charts predict. My gut and the fundamentals of the math tells me a bit more. This is a manipulated market, and the math shows that the manipulation is failing, but still in place. I expect there to be an epic battle at around $50/oz., that might last 6 months to two years, because they won't want headlines that say "silver moves to an all time high". That's bad for business, the business of printing fraudulent paper money.
Also, since it is a manipulated market, they try to create prices and short term trends that are unexpected and discouraging. They will paint the tape with any price that puts a damper, or discourages, physical silver buying. If higher silver prices will scare off physical silver buyers, then higher it will go. If lower prices will do the trick, then lower it will go. Physical silver buyers are creating this market, but in a counter-intuitive way.
I'd thus expect to see large and sudden price jumps, both up and down, in order to create the illusion of instability of silver. Volatile silver prices are also a function of the tiny silver market. But they are also a function of the instability of the dollar. The sudden price changes of 10% in one day that we used to see only in silver stocks are now seen regularly in major stocks valued in the hundreds of billions on the major exchanges!
Conversely, stable silver prices also discourage physical silver buyers, because investors at this stage of the market are trend investors. If there is no clear trend up, people today tend to lose interest and forget about the fundamentals, or they foolishly think that the manipulations can continue forever. Not so. The fundamentals are so out of balance, I'm surprised that prices remain this low. My problem is that I over estimate the intelligence of the general public.
I feel that we have hit a bottom in silver prices for several reasons.
First, it's time. Low interest in silver, and moderate price changes, can't last forever.
Second, we recently ran out of 90% junk silver, both in our shop, and at the wholesale supplier level. This indicates renewed investor interest.
Third, if they push silver any lower, they will create extraordinarily fantastic gains for the next group of value investors who jump into silver, which will also create extraordinary losses for the bankers who manipulate prices, and the bankers, such as JP Morgan, are hurting badly as it is from the housing crisis, and Euro crisis, and "hedge book" problems.
If I were the one manipulating prices, I'd let silver jump up to about $49 nearly overnight, and then try to slowly grind prices downward for the next year or so, back to about $35, if I could do it. That would be the way to create the greatest kind of discouragement among silver investors, because it would create a short term downward trend. Then, let silver explode again super fast, over some fake semi-positive silver news announcement, almost like a vertical line up, to nearly $75, and then do the slow grind down again. These are the kind of counter intuitive moves I'd expect in a manipulated market, designed to keep physical silver investors away from the major trend.
But enough about short term price predictions. Another point to keep in mind is that in the last bull market, in the 1970's, gold prices stagnated below $200 for 4 years. So silver may be a great investment for fast major gains, but you also need to be patient. Sometimes, it takes a while for others to see what is obvious to us
at 10:30 AM
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