Owning silver is more important than ever.
Despite the recent price drop earlier last week, both gold and silver recovered towards the end of the week. However, both metals were slightly off their recent highs. But, even though gold made new historic highs recently, silver is still way below its previous all time high.
This price differential has now set the silver gold ratio close to 70:1. Even though the ratio has been this high several times in the last 30 years, invariably, when it got this high the price of silver rose significantly. But, in the past the fundamentals for silver were not as bullish as they are now.
In addition to its monetary value, silver has many industrial uses. And, of course we all know that the price of silver has been suppressed by a few dominant bullion banks, in particular J. P. Morgan. With regard to the price suppression, in April the US Department of Justice made an announcement that it was going to investigate these allegations of price manipulation in the gold and silver market. But, we are still awaiting some feed back from their investigation.
Last week, Ted Butler, said. "It is the silence itself that is most unprecedented. It is the avoidance of a legitimate response to the specific questions that promises to blow the roof off the silver market. The reason is simple – no one wants to be the one who sets off silver. They all know just how severe the silver manipulation problem has become. They think if they don't say anything at all, they won't be blamed for it." Butler is a world-renown expert on silver and it is because of his relentless actions over the last decade or so that government regulators are now investigating these allegations.
It is commonly known that JP Morgan is the major player in commodities futures markets trading. Not only do they take massive naked short positions they do it with large substantial leverage. What isn't as well known though is that JP Morgan acts as the agent for the Federal Reserve Board and other central banks in "managing" the markets on their behalf. Prudent investors generally understand why central banks don't want to see a rapid rise in the price of gold and silver. In a world of fiat currencies, a loss of public confidence in paper "money" is the worst nightmare of bankers. And, a rapid rise in the price of gold and silver simply alerts individuals that the purchasing power of their currency is being eroded by the monetary policies of these banks.
If position limits are imposed in the silver market not only would the bullion banks have to buy back silver to close their current open short positions, they would have to refrain from taking the short side in the future. This would of course cause the price to soar. But, even if nothing is done by the US regulators ultimately the price is going to go higher simply because a silver shortage will eventually drive up the price.
While investors can participate in this market through silver exchange traded funds and mining companies, I would strongly advocate buying some physical silver. This can be done by acquiring silver bullion bars or bullion coins and rounds. While the best selling silver bullion coins is the US American Silver Eagle there are numerous privately owned mints in the US producing great silver rounds. And, recently a South African company introduced a one ounce silver round known as the Silver Rhino.
The price of silver is attempting to break through a key resistance level of US$19/oz – US$19.50/oz. I am totally convinced that we will see this break in the not too distant future. This will set up the price of silver for a move to US$ 22, then US$25. But, I expect to see prices trade towards US$40 within the next 18-24 months.
About the author
David Levenstein is a leading expert on investing in precious metals.
For more information go to: www.lakeshoretrading.co.za
Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice.