Noel Gallager, Sid Waddell, Anna Wintour, hemlines, and cartels — just some of the subjects covered in the latest Thunder Road report from market analyst Paul Mylchreest.
But what has caught the attention of traders are Mylchreest’s thoughts on silver. He reckons big money is about to move into the metal and the price could be headed for $50-$100 an ounce.
Silver, of course, has already enjoyed a strong run. On Wednesday the spot price hit its highest level since early 2008, according to Reuters.
Silver <XAG=> was last quoted at $20.00 an ounce at 1122 GMT, up from $19.83 at the close on Tuesday, having touched an intraday peak of $20.04, its highest since mid-March 2008, when Bear Stearns collapsed under the weight of its losses stemming from the global credit crunch.
And silver has certainly been acting somewhat strangely in the past couple of weeks, although this could be put down to robust industrial demand – silver is used in batteries, glass and electronics – as the manufacturing cycle picks up after the summer lull.
But Mylchreest thinks something more is going on:
The Achilles Heel of the Cartel in the gold and silver markets (i.e. the US government, Federal Reserve and their bullion banking agents) is almost certainly PHYSICAL SILVER BULLION. Just like gold, silver is money (as well as being a vital industrial metal) – which scares the Cartel to death and is behind its attempts to suppress the price going back more than a decade. Gold and silver not only compete with fiat currency but also against Government bonds – the market for which is developing into one of the biggest bubbles in the history of finance. That assertion is refuted by the majority, which is another classic indication of a bubble. But back to silver:
– Unlike gold, silver is no longer held as part of central bank reserves to any significant extent;
– 76% of newly mined silver is consumed in non-investment applications (industrial, photography, etc) thus further depleting above ground bullion stocks,
– Banks (primarily the one whose name begins with the letter between i and k) are short 21.8% of all of the outstanding contracts on the COMEX exchange in New York. These 26,855 contracts amount to 134.3m oz of silver or 4,176 tonnes. This is equivalent to 19% of all the silver mined in 2009 and 15% of total silver production if we include the recycling of scrap. Let’s think about that a different way. If one or two banks were long the entire annual oil output of Saudi Arabia and Norway combined, it would be equivalent to 15% of the world’s 2009 oil production. Can you imagine the outcry from the public and politicians about market rigging, greedy speculators pushing up the price of gasoline, etc? In terms of wheat, it would be the same as a position in 100 MILLION tonnes, equal to the entire aggregate production of agricultural giants the US and France.
And the conclusion:
The silver price is just under US$20/oz so almost everybody (“tramps like us”) can afford at least a small amount. I’ve bought a bit more physical silver from ATS Bullion which has an office next to the Savoy Hotel in London (you can just phone them up and take some id when you go to pick up your silver). I even had to pay more than a 20% premium to spot plus VAT, but that’s going to be irrelevant if I’m right and the silver price goes to US$50-100/oz (note: I deliberately avoid silver and gold ETFs). This is part of my “Cascading Defensive Strategy” in gold and silver, i.e. have a bit of physical CLOSE BY, buy some ALLOCATED bullion at closer to the screen price (e.g. from the likes of BullionVault or goldmoney.com – which can also store it overseas) and have some exposure to the EQUITIES, both the MAJOR producers and a few JUNIOR exploration plays.
Buying some physical silver is an opportunity to send a powerful message to the corrupt interventionists in the Cartel.
Er, yes, Paul…
Related link:
Silver surges as global industrial appetite revives – FT