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Author has a degree in Engineering and is an avid investor in the market. Experience in industrial materials and structures. In college studied atomic & nuclear physics as well as material engineering. Eastern European
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  • The FED. just made the case for Metals that much Stronger. 2 comments
    Nov 5, 2010 8:33 AM | about stocks: GLD, SLV, EXK, SIVR, KOL, JJC, SCCO, PALL, FCX, REE, MCP, KMT, AEM, ABX, NEM, SSRI, SLW, PAAS, CDE, HL, MVG, SVM, AUY, GFI, AU, GOLD, PKX, BHP, RIO, BVN, GG, AA, X, CLF, TCK, WLT, ANR, MEE, BTU, POT, MOS, CF, AGU, TNH, DE, CNH, CAT, ATI, RS, AKS, MT, UEC, URRE, CCJ, URZ, URG, USU
    Back in Mid Summer analysts were making calls for Gold & Silver to hit parabolic highs and that was before the FED. opened the flood gates of QE2.

    The Silver price manipulation to hold Silver Depressed for a decade while GOLD soared has now come to an end as can be seen by the jump in Silver since breaking $20/oz.

    Historical Silver: Gold Ratio Suggests Parabolic Top For Silver of Over $100 per Ounce!

    By Lorimer Wilson
    Jul 6 2010 4:24PM

    Approximately 70 respected economists, academics, gold analysts and market commentators (see list below) are of the firm opinion that gold is going to go to at least $2,500 if not as high as $10,000 per ounce (or more) before the parabolic top is reached. As such, just imagine what is in store for silver given its historical price relationship with gold. We’re looking at an extreme case scenario of a future parabolic top of perhaps as much as $714 per ounce for silver, the ‘poor man’s gold’. Let me explain.

     The current price of gold and the price of silver – the silver:gold ratio - continues to hover around the 67:1 range which is way out of whack with the historical relationship between the two precious metals.  It begs the question:

     “Is now the perfect time to buy silver instead of the much more expensive gold metal?”

    It is critical to step away from all the noise and clutter that passes for knowledge and take the time to gain perspective on where the price of gold and silver are in terms of the ‘big picture’, i.e., where they are in their individual performance channels and in respect to their historical relationship with each other over the long, medium and short term and, based on those relationships, how they might perform in the future.

    Bull Market Stages

    The key to a secular gold/silver bull is the collective gold/silver transactions of investors worldwide buying and selling gold/silver that ultimately sets the price and determines their fortunes. The collective demand trends of gold/silver investors effectively divide precious metals bulls into 3 distinct demand-driven stages, namely:

    1. Stage One which occurs when a devaluation of the dominant currency in which gold is priced, i.e. the USD, leads to a moderate increase in the price of gold. Stage One for gold began on February 15th, 2001 when it reached a 22-year secular low of just $255.10.

    2. Stage Two which occurs when the decoupling of gold from local-currency devaluation begins to outpace the dollar’s losses and gold starts rising significantly in virtually all currencies worldwide. Stage Two began on June 5th, 2005 when gold (at $417.67US) first surpassed 350 Euros for the first time.

    3. Stage Three which occurs when the general public around the world starts investing in gold and this deluge of capital into gold causes it to escalate dramatically (i.e. to go parabolic) in price. We are approaching Stage Three and it will become clearly evident when the price for gold begins its daily record ascents to dramatically higher prices.

    Gold

    We are now in the very early stages of Stage Three with gold having gone up 24% in 2009 and up 13.3% in the first 6 months of 2010. As such there are no shortage of prognosticators who see gold going parabolic reminiscent of 1979 when gold rose 289.3% in the course of just over a year (from a $216.55 closing price on Jan. 1, 1979 to a closing price of $843 per ounce barely a year later on Jan. 21, 1980) and 128% higher in a late-1979 parabolic blow-off of just under 11 weeks! A 289% increase in the price of gold from $1250 would put gold at $4,866.   That being the case what appear on the surface to be rather outlandish projections of what the bull market in gold will top out at don’t seem quite so far-fetched.  

    Below is a list of the parabolic tops for gold as discussed in articles and/or speeches by well known economists, academics, market analysts and financial commentators.  Their prognoses are limited to those above the CPI adjusted 2010 price of $2,300 and they are grouped according to the extent each individual sees gold appreciating over the next few years (and next few months in a few cases).

    The list below is provided on my site - with a link to the actual article in which each estimate was put forth if you care to check out the rationale behind each individual’s projections. 

    Higher than $10,000

    1. Mike Maloney: $15,000;
    2. Howard Katz: $14,000;
    3. Silver-Coin-Investor.com: $7,000-$14,000;
    4. Jim Rickards: $4,000 - $11,000
    5. Roland Watson: $10,800 (in our lifetime);

    $5,001 - $10,000

    1. Arnold Bock: $10,000 (by 2012);
    2. Porter Stansberry: $10,000 (by 2012);
    3. Tom Fischer: $10,000;
    4. Shayne McGuire: $10,000;
    5. Eric Hommelberg: $10,000;
    6. Gerald Celente: $6,000 - $10,000;
    7. Peter Schiff: $5,000 - $10,000 (in 5 to 10 years);
    8. Egon von Greyerz: $5,000 - $10,000;
    9. Patrick Kerr: $5,000 - $10,000 (by 2011);
    10. Peter Millar: $5,000 - $10,000;
    11. Alf Field: $4,250 - $10,000;
    12. Jeff Nielson: $3,000 - $10,000;
    13. Dennis van Ek: $9,000 (by 2015);
    14. James Turk: $8,000 (by 2015);
    15. Joseph Russo: $7,000 - $8,000;
    16. David Petch; $6,000 -  $$8,000;
    17. Michael Rozeff: $2,865 - $7,151;
    18. Martin Murenbeeld: $3,100 - $7,000;
    19. Dylan Grice: $6,300;
    20. Murray Sabrin: $6,153;
    21. Harry Schultz: $6,000;
    22. Paul van Edeen: $6,000;
    23. Paul Brodsky/Lee Quaintance: $3,000 - $6,000;

    $5,000

    1. David Rosenberg: $5,000;
    2. Martin Hutchinson: $5,000 (by end of 2010);
    3. Doug Casey: $5,000;
    4. Peter Cooper: $5,000;
    5. Robert McEwen: $5,000;
    6. Martin Armstrong: $5,000 (by 2016);
    7. Peter Krauth: $5,000;
    8. Tim Iacono: $5,000 (by 2017);
    9. Christopher Wyke: $5,000;
    10. Frank Barbera: $5,000;
    11. John Lee: $5,000;
    12. Peter Dawes: $5,000;

    $2,500 – $5,000

    1. Pierre Lassonde:  $4,000 - $5,000;
    2. Howard Katz: $3,300 - $5,000;
    3. Mary Anne and Pamela Aden: $3,000 - $5,000 (by February 2012);
    4. Larry Edelson: $2300 - $5,000 (by 2012);
    5. Luke Burgess: $2,000- - $5,000;
    6. Ian Gordon/Christopher Funston; $4,000;
    7. D.P. Baker: $3,000 - $3750;
    8. Christopher Wood:  $3,500 (in 2010);
    9. Adam Hamilton: $3,500 (by 2010/11);
    10. Eric Roseman: $2,500 - $3,500 (by 2015);
    11. John Henderson: $3,000+ (by 2015-17);
    12. Hans Goetti: $3,000;
    13. Michael Yorba: $3,000;
    14. David Tice: $3,000 (by 2012);
    15. David Urban; $3,000;
    16. Michael Lambert: $3,000;
    17. Brett Arends: $3,000;
    18. Ambrose Evans-Pritchard: $3,000;
    19. Trader Mark: $3,000 (by mid-2011);
    20. Ian Williams: $3,000;
    21. Byron King: $3,000;
    22. John McAvity: $2,500 - $3,000 (by 2012);
    23. Graham French: $2,000 - $3,000;
    24. Sascha Opel: $2,500+;
    25. Rick Rule: $2,500 (by 2013);
    26. Daniel Brebner: $2,500;

    Silver

    Silver has proven itself, time and again, to be a safe haven for investors during times of economic uncertainty and, as such, with the current economy in difficulty the silver market has become a flight to quality investment vehicle. The 49% increase in silver in 2009 attests to that in spades (albeit up only 10% in the first 6 months of 2010). During the last parabolic phase for silver in 1979/80 silver went from a low of $5.94 on January 2nd, 1979 to a close of $49.45 in early January, 1980 which represented an increase of 732.5% in just over one year. Such a percentage increase from the current price for silver would represent a future parabolic top price of $155.   Frankly, such prices seem impossible in practical terms but that is what the numbers tell us.

    Silver:Gold Ratio

    How both gold and silver perform, in and of themselves, does not tell the complete picture by a long shot, however. More important is the price relationship – the correlation – of one to the other over time which is called the silver:gold ratio.

    Based on silver’s historical correlation r-square with gold of approximately 90 - 95% silver’s daily trading action almost always mirrors, and usually amplifies, underlying moves in gold. With significant increases in the price of gold expected over the next few years even greater increases are anticipated in silver’s price movement in the months and years to come because silver is currently seriously undervalued relative to gold as the following historical relationships attests.

    Let’s look at the silver:gold ratio from several different perspectives:

    - Over the past 125 years the mean silver:gold ratio (i.e. 50% above and 50% below) has been 45.69 ounces of silver to 1 ounce of gold.

    - In the last 25 years (since 1985) the mean silver:gold ratio has increased to 66.9:1

    - The present silver:gold ratio is range-bound between 63:1 and 70:1 (66.77:1 at the end of June 2010).

    - Interestingly, during the build-up to the parabolic blow-off in 1979/80 silver outpaced gold going up 732.5% vs. gold’s 289.3% causing the ratio to drop from 38:1 in January 1979 to 13.99:1 at the parabolic peak for both metals in January,1980.

    Conclusions:

    There are many! Let’s look at the various price levels for gold and the various silver:gold ratios mentioned above one by one and see what conclusions we can draw.
    First let’s use the mid-year (June 30th, 2010) price of $1243 for gold and apply the various silver:gold ratios mentioned above and see what they do for the potential  % increase in, and price of, silver.

    Gold @ $1243 using the current 66.77:1 silver:gold  ratio puts silver at $18.61 (June 30/10)

    Gold @ $1243 using the above 45.69:1 silver:gold ratio puts silver at $27.20 (i.e. +46.2%)

    Gold @ $1243 using the above 13.99:1 silver:gold: ratio puts silver at $88.85 (i.e. +377.4%)

    Now let’s apply the projections made above by the various economists, academics, gold analysts and market commentators listed above to the silver:gold ratio and see what that suggests is the parabolic top for silver.

    @ $10,000 Gold

    Gold @ $10,000 using the silver:gold ratio of 66:1 puts silver at  $150

    Gold @ $10,000 using the silver:gold ratio of 45:1 puts silver at $222

    Gold @ $10,000 using the silver:gold ratio of 14:1 puts silver at $714!!

    @ $5,000 Gold

    Gold @ $5,000 using the silver:gold ratio of 66.1 puts silver at $75

    Gold @ $5,000 using the silver:gold ratio of 45:1 puts silver at $111

    Gold @ $5,000 using the silver:gold ratio of 14:1 puts silver at $357

    @ $2,500 Gold

    Gold @ $2,500 using the silver:gold ratio of 66:1 puts silver at $38

    Gold @ $2,500 using the silver:gold ratio of 45:1 puts silver at $55.50

    Gold @ $2,500 using the silver:gold ratio of 14:1 puts silver at $178.50

    From the above it seems that, any way we look at it, physical silver is currently undervalued compared to gold bullion and is in position to generate substantially greater returns than investing in gold bullion.

    Summary

    History will look back at the artificially high silver to gold ratio of the past century as an anomaly, caused by the dollar bubble and the world being deceived into believing that fiat currencies are real money, when in fact they’re all an illusion. This fiat currency experiment will end badly in a currency crisis. The wealthiest people will be those who bought silver today and were smart enough to research and pick the best silver mining stocks and warrants.

    Indeed, while gold’s meteoric rise still has room to run, silver’s run is yet to get started. As such, it certainly appears evident that now is the time to buy all things silver.

    Lorimer Wilson

     

    ****

     

    Lorimer Wilson is the Editor of both www.FinancialArticleSummariesToday.com and www.munKNEE.com. He can be reached by sending an email to editor@munknee.com

     


    Stocks: GLD, SLV, EXK, SIVR, KOL, JJC, SCCO, PALL, FCX, REE, MCP, KMT, AEM, ABX, NEM, SSRI, SLW, PAAS, CDE, HL, MVG, SVM, AUY, GFI, AU, GOLD, PKX, BHP, RIO, BVN, GG, AA, X, CLF, TCK, WLT, ANR, MEE, BTU, POT, MOS, CF, AGU, TNH, DE, CNH, CAT, ATI, RS, AKS, MT, UEC, URRE, CCJ, URZ, URG, USU
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  • dharma_bear
    , contributor
    Comments (273) | Send Message
     
    "Approximately 70 respected economists, academics, gold analysts and market commentators (see list below) are of the firm opinion that gold is going to go to at least $2,500 if not as high as $10,000"

     

    A contrarian indicator if there ever was one. Since all the gold bugs who follow these guys have already bought, who is left?
    11 Nov 2010, 03:33 PM Reply Like
  • EPS100Momentum
    , contributor
    Comments (46) | Send Message
     
    Author’s reply » dharma_bear asks who is left to buy Gold? The article was partially on Gold and more related to Silver. So how about the short positions that outnumber the bull positions by a 2-1 ratio in silver, those are the people that need to buy with every passing day that they get deeper and deeper underwater by staying short. Some traders are saying a massive squeeze on the shorts could send Silver to $40 to $50/oz in as little as 4 months. That puts it right at Feb. to March 2011, historically a time when the market usually has its biggest money inflows.

     

    Read Article by : Anathan Thangavel of Lakshmi Capital written 11/11/10

     

    2009 Silver demand outstripped supply. In 2009, the world mined 709 million ounces of silver. On the demand side, 352.2 million ounces were used in industrial applications, 156.6 million ounces for jewelry, 59.5 million ounces in silverware, and 136.9 million ounces for investment. An additional 24.6 million ounces were used in photography and coins.

     

    Extrapolating these data to 2010 yields a compelling reason to buy silver. Subtracting 2009 world silver production from all non-investment uses indicates that there were only 116.1 million ounces of silver production available to satisfy investment demand. Projecting the 2010 data as the same as the 2009 data, if there are only 116.1 million ounces of new silver being mined available to satisfy investment demand, (280.2mm short ounces outstanding from commercial traders minus 116.1mm new ounces being mined = 164.1mm ounce shortfall), where will the remaining 164.1 million ounces come from?

     

    This huge shortfall indicates that the outstanding short position cannot be solely on behalf of producers, because there is a far larger outstanding position than could possibly be hoped to be mined this year. Digging further into the Commitment of Traders report shows that 44.1% of the gross short position in silver is being held by the 4 largest traders. Since JP Morgan and HSBC are rumored to be the 2 largest traders of silver, both banks probably have very significant short positions in silver.

     

    The rumor on the street is that both banks will be forced to cover their shorts, and in doing so drive up the price of silver astonishingly. Some traders I have spoken with are targeting the 40-50 level within 4 months. Adding much intrigue to this rumor is the fact that silver began its most recent breakout the exact same day as JP Morgan announced it would be shutting down its proprietary commodity trading business.

     

    Rumor has it that JP Morgan is just looking to cut its losses in silver and cover its shorts. This could be a possible reason why silver has skyrocketed in the last 2 months. Of course, JP Morgan's involvement in the silver surge is little more than unsubstantiated rumor, but the basic premise still holds true.

     

    Regardless of who actually holds these silver short positions, they will be forced to cover at some point, and this could cause an even larger short squeeze than the one we are currently witnessing, driving silver even higher. Given the recent extreme volume we have witnessed in the silver market, it will be very interesting to see the change in short positions in the next Commitment of Traders report. We continue to be long silver futures and call options for clients, and will add on all pullbacks.

     

    blogs.forbes.com/rober...
    11 Nov 2010, 09:04 PM Reply Like
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