Gold and Silver have generally moved hand in hand since a long time with almost identical price movements as both Precious Metals enjoy a safe haven status. But of late Gold Prices seems to have declined by 12% at its price of $16980 today from its lifetime peak of $1921 in 2011, whereas Silver has slumped by over 40% to $30 from its lifetime high of $50 in 2011. With Silver, you can benefit from both sides: its safe- haven status and the fact that it’s also an industrial commodity. It seems clear that Silver Prices are being massively manipulated to remain artificially at low levels very, very stubbornly. Silver Price Manipulation was attempted by the Hunt Brothers earlier, albeit, in a different manner & direction. But this kind of manipulation may not last long enough & Silver Prices may soon explode as low prices soon create a supply vacuum or a crunch. Same as very high prices trigger heavy supplies to bring prices under control. Commodity Market play is all about demand and supply. If the supply gets thinner, as being seen in Silver now (explained below), a price explosion may just be around the corner on heavy demand. Radical changes are bound to occur after such manipulations cross the sustaining limits. And when this happens, large organizations or entities, capable of cornering & manipulating the markets, though for a small period of time, will crumble as like nature, the markets & price discoveries take their own right course. I have mentioned in my Forecast 2013 article that such large organizations which are working against the society & for personal gains will face the axe soon enough, though may have lasted doing the same for years earlier. The “Too Big to Fail” formula or concept will no longer hold true. Silver Prices may soon start on a north bound & a seemingly non-ending flight. Remember – Every Action has an Equal & an Opposite Reaction. In case of Silver, the Reaction may be more than expected as Silver historically, has been one of the most volatile Trade.
The U.S. Mint sold 6.01 million ounces of American Eagle Silver Coins so far this month due to soaring investor demand. That’s the most since the 6.11 million ounces sold in January last year, its website shows. December’s total was 1.64 million ounces. The US Mint sold out of 2013 American Eagle Silver Coins at a time when investors bought the most metal in five years through the biggest exchange-traded product. The mint’s Silver Coins sales are “temporarily” suspended and will resume on or about the week of Jan. 28 when inventory is replenished. Holdings in the iShares Silver Trust jumped 571.6 metric tons on Jan. 16, an increase now valued at $584 million. Prices may rise as much as 27% to $40.25 an ounce this year, a Bloomberg survey of 49 analysts, traders and investors last month showed. Global assets in Silver ETPs climbed to a record valued at $20.1 billion as central banks from the U.S. to China pledged more steps to boost economic growth. The stimulus is raising demand for precious metals as a hedge against faster inflation and currency debasement. Strengthening economies may also benefit silver, because 53 percent of it is used in everything from televisions to batteries, the Silver Institute says. Given some positive leading indicators, especially in the U.S., investors would probably prefer turning to SILVER rather than to GOLD. Global Silver ETP assets were at an all-time high of 19,686.55 tons yesterday, equal to about nine months of mine production. The increase in the iShares Silver Trust two days ago was the biggest since December 2007. It is easy to infer that some element of the Fear Trade may be at play. The ETP and coin demand comes amid political wrangling between President Barack Obama and Republican lawmakers over the US debt ceiling. Since 1960, Congress has raised or revised the debt limit 79 times. It is expected that Silver Coins sale volumes will remain elevated as the Debt Ceiling showdown plays out.
The Gold and Silver bulls have had a good week as prices late this week have hit four-week highs. Silver has surged in all currencies this week. It is up 4.5% in dollar terms, 4.2% in euro terms, 5% in yen terms and 5.4% in pound terms. Investors see the recent sell off as overdone and are buying Gold and Silver on the dip in anticipation of further gains in 2013. While Gold looks poor from a technical point of view, after a series of weekly losses, Silver meanwhile seems to be getting quicker support. The recent jump in Silver Demand may be as some investors seek an alternative to the lackluster performance by Gold Bullion in the last few months. Investors appear to be putting their money increasingly into Silver ETFs as an investment alternative. It can only be a question of time before the buoyant Silver ETF demand causes the Silver Prices to simply shoot up. The almost certain higher weekly close today may embolden Silver Bulls who are expected to come back into the market. Gold and Silver Prices will be supported by the U S political standoff about the Debt Ceiling and some expectations of continual Quantitative Easing. Gold may eventually lack the punch in breaking above $1810-1855 as no more QE may get announced, as the QE continuations have been the biggest supporter for higher Gold Prices. Silver may actually gain twice as much in the bargain as it is a also a more financially viable safe haven investment as compared to Gold with a higher target objective. The current Silver Demand is expected to rise to crazy heights as supply weakens further on low current prices. Silver needs to rise almost 70% just to achieve its highs of 2011 whereas Gold just needs to rise by less than 20%. Just think of the gain statistics.
CNBC reports that traders are concerned about the German repatriation of Gold. The concern is that the US Federal Reserve and other central bank Gold Reserves are not backed ounce for ounce. This is fertile ground for so called “conspiracy theorists” and the Bundesbanks’s actions have ironically highlighted the issue and led to deeper suspicions. Questions are being asked regarding the extremely long delay of 7 years to repatriate just some of their gold from the U.S. Federal Reserve’s subterranean vault in flood prone lower Manhattan. A lack of trust regarding central bank gold reserves could lead to a form of a run on central banks Gold Reserves.
The jump in the Silver ETF holdings to a new all time high shows how some investor’s see the poor man’s Gold as a cheaper alternative to Gold and are allocating to it. Yet, allocations to Silver remain very small which suggests that the holdings could go higher resulting in higher Silver Prices again in 2013, – much higher than as seen in 2011. Gold Prices generally gain on the rising Euro & the declining US Dollar. Gold Prices may remain unidirectional as both currencies – the US Dollar & the Euro get whipped at the same time. Another but an important point of concern for Gold is that – India‘s Gold imports could fall much further, by 60% to 70% if the government also presses ahead with plans for Gold bonds and a controversial proposed tax amnesty on such investments. Outflow of the foreign exchange on account of Gold imports, in the world’s largest consumer of Gold, is impacting the country’s current account deficit heavily. Current account deficit has widened to $38.7 billion or 4.6 percent of the GDP, an all-time high figure, during the first half of the current fiscal. Of the $71 billion current account deficit, as much as $51 billion is on account of gold imports. Indian buying has been holding generally steady between mid-December last year through to January so far, with volumes above average for this time of year. Demand at the beginning of 2013 has only been a reaction, considerably to headlines on the potential for further import tax rate hikes. The threat of higher customs duties typically prompts local market participants to frontload their buying to avoid having to pay the more expensive tax rate. This will soon collapse as taxes are hiked. Indian households are estimated to have holding up to 25,000 metric tons of gold for generations, but much lesser in Silver Holdings.India too may soon turn to Silver for Investment purposes, if not for jewelry. When the world’s largest buyer of Gold turns its attention to Silver Investment, what happens next will be of no Big Surprise. A Silver Price Explosion!
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