Jim Rogers wants more Silver – after the Market “calms down”

In an interview with India’s television program, ET Now, Jim Rogers said he wants more silver, but won’t consider another purchase until the silver price “calms down.”

“I’d rather see silver go down, yes, for a while,” said Rogers. “And I don’t know how far down, again, depending on what causes it to go down.  Then, I hope I’m smart enough to step in and buy some more.”

As the co-founder of the famed Quantum Fund, the 68-year-old Roger has witnessed various commodities get overstretched in prices throughout the years, so he remains cautious after a 149% rise for a Troy ounce of silver to as high as $49.79 on Apr. 25, from a closing price on Sept. 14 of $19.99.

But, according to Rogers, the price of silver has not gone “parabolic,” yet, but he’s worried that the silver price may continue its breathtaking climb, turning him into a seller of the monetary metal.

“Well, I hope it stops going up so fast.  I own silver,” he said.  “But if it keeps going up it will turn into a problem. If it goes parabolic, I certainly hope silver calms down and goes down for a while.  I say that as somebody who owns it.”

Rogers has repeatedly stated he’s heavily invested in commodities—especially, now, holding those commodities which have not reached nominal all-time highs, as is the case for silver—for the duration of the bull market—a duration that he has previously suggested could run another decade, maybe longer.

“If it [silver] goes down, I hope I’ll buy more, and ultimately it will go much, much higher,” he said.  “But if it goes up too much too fast then I’ll have to sell.”

When asked about a short-term outlook for the commodities rally—as investors weigh the prospects of a U.S. Federal Reserve jumping on the interest-rate-hiking bandwagon—Rogers facetiously responded by suggesting that investors should take advice from proclaimed market timers on television programs.

However, on a longer-term investment horizon, Rogers expects he’ll make money in all commodities, including silver, in one way, or another.  If the world’s central banks are successful restarting an overall sluggish global economy, demand for commodities is forecast to continue outstripping supply.  If the world’s largest and second-largest consumer-driven economies, the Eurozone and United States, continue to struggle, then the prospects for an acceleration in the rate of currency devaluations of the euro and dollar will re-emerge, according to Rogers.

“If the world economy gets better, I’m going to make money in commodities because shortages are developing,” he said.  “If the world economy does not get better, I’m going to make money in commodities because they’re going to print a lot of money.”

When asked to comment about what would make him a seller of silver, Rogers doesn’t take cues from a chart.  The time to sell silver depends upon a context of fundamentals by which the price is driven, he said.

“If silver went to $150 this year, I’d have to think about selling because then obviously it would be getting parabolic and it would be very, very dangerous,” said Rogers.  But, “If suddenly WWIII breaks out, I wouldn’t sell silver at $200 this year.  It depends on what’s happening and what causes it.”

For the past couple of years, Rogers has underscored silver as a commodity whose time has yet to come because of its relatively low price compared with the metal’s all-time high price of $50.35 set in the first quarter of 1980. If, or when, the price of silver eclipses its 31-year all-time high, the only commodity left behind the all-time record price parade would be natural gas.

Dollar poised for “waterfall decline,” says James Turk

—U.S. Dollar breaks 2009 support, silver eyes $50, gold $1,520

Investors again woke up Monday to soaring gold and silver prices in Asia as the U.S. dollar crashed through technical support on the USDX index.   Adding to last Monday’s news shock of Standard and Poor’s downgraded outlook for U.S. government debt, China’s monetary authorities issued a shock statement of their own over the Easter weekend.

News reports out of China, indicating Beijing’s appetite for U.S. Treasury debt has reached the limit, sent the dollar declining to 73.93, below its previous technically significant low of 74.227, set Nov. 25, 2009.

Gold futures touched $1,517.20 per Troy ounce during the dollar’s fall, while May silver reached a high of $49.82—just shy of the all-time high of $50.35 achieved in the first quarter of 1980.

“China’s foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March,” China’s Xinhua News Agency reported on Sunday.  “Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient.”

Back-to-back dollar-negative news events aren’t likely to surprise chairman of Goldmoney’s bullion storage service, James Turk, however.  The old hand of the bullion business had been making the rounds within the bullion community during the month of April, promulgating to clients and financial public of his expectations of an imminent plunge in the U.S. dollar and strong reflexive rise in gold and silver prices in response to the dollar’s woes.

“We’re closing in on those lows of 74.17.  Once that level breaks, the floodgates open. Put another way, the dollar falls of the edge of the cliff,” Turk warned listeners of King World News.

April has become the month of truth for whether the U.S. dollar would regain a bid following a decline of 16.4% off the Jun. 7, 2010, high of 88.70.

The triple-whammy of a failed effort by Congress to move in a Greece-like direction  to rein in government spending, a long-awaited downgrade of U.S. by Standard and Poor’s, and, now, a Beijing bombshell announcement regarding its intentions to impose its own limit on a profligate U.S. spending spree, has conspired against the dollar bulls—all of which taking place within two week in the month of April.

“The politicians unwillingness to cut spending or have any kind of discipline forced on them, the S&P credit rating, putting the U.S. government’s AAA rating on negative credit watch, cumulatively all of these things like one stone at a time or one straw on the camel’s back, eventually the camel’s back is going to break,” Turk added. “That’s why when I talk about a waterfall decline, I think we are really at that stage where this is going to go all at one time.”

Turk’s observation of the dollar’s remarkably weak bounce during the rapid spread of civil unrest and chaos in N. Africa and Middle East, the absence of the typical sell-on-the-news profit-taking out of the euro and into the dollar following the rate-hike announcement from the European Central Bank, Beijing’s move to support the euro through its participation in troubled Portuguese debt markets, and PIMCO’s boycott of the U.S. Treasury auctions, indicate a profound change in sentiment of the dollar’s premier reserve currency status among those most influential for determining its value.

Moreover, China’s most recent announcement, signaling an end to its tolerance for any additional dollar reserves held at its central bank, coincides with Beijing’s recent steps taken to pop a real estate bubble within the People’s Republic.

Turk had forecast the eventuality of bad news coming out of Beijing regarding its intent to further diversify its currency reserves, offering it as one of a number of catalysts that would trigger a dollar breakdown against a USDX basket of euros, yen, sterling, Swiss francs, Canadian dollars and Swedish krona.

“Chinese unwilling to buy U.S. debt securities can’t really forecast what that one little news item is going to be,” said Turk.  “But that will break the confidence and then you are going to see that waterfall decline.”

At 07:51 EST, the USDX stands at 73.89.

$100 Silver in 2011? Jim Rogers Weighs In

Speaking on Financial Survival Radio, commodities investor, author of several financial books and chairman of Rogers Holdings, Jim Rogers, told FSR host, Jay Carter, he expects the silver price to reach the triple-digit price level, but is increasingly “worried” that a $100 silver price tag by year end would qualify the move in his mind as “parabolic.”

“I certainly hope it [$100 price in 2011] doesn’t happen because I own silver and want to buy more,” Rogers said.

Rogers, the 68-year-old Quantum Fund co-founder (with George Soros), doesn’t believe the 153% move higher in the silver price from the July 28 low of $17.35 should be characterized as a “parabolic” one.  “No, not yet,” Rogers maintained.

However, if the silver price continues to soar along its recent two- to three-week trajectory and pass through the $100+ level, Rogers would most likely be a seller—but qualified his comment with an important condition: if a parabolic move in silver is not accompanied with a collapsing U.S. dollar against other major reserve currencies, he would consider offloading his silver holdings. If the dollar collapses during a parabolic move in the silver price, he intends to remain hedged against a dollar devaluation.

“My hope is, silver and gold and all commodities will continue to go up in an orderly way for another ten years or so, and eventually the prices will be very, very high,” he said.  “Yes, we’ll have triple-digit silver, but if it happens this year, Jay, I would probably start to think about selling.”

Rogers added, “Now, maybe the U.S. dollar is going to become confetti in 2011, and if that’s the case and silver goes to $150, then obviously I wouldn’t sell my silver.  It would be the U.S. dollar which is collapsing. But if silver goes up the way you’re talking about without currency collapse, I would be very worried.”

To understand better Rogers’ opinion about the possibility of $100 silver in 2011, his earlier comments about his outlook for the U.S. dollar for 2011 may help add context to his expectations for the silver price in 2011.

In a Mar. 17th interview on Yahoo Finance’s new daily trading and investing program Breakout, Rogers had said he was considering buying the U.S. dollar, but was also fearful that the tipping point for the U.S. dollar could conceivably be only weeks away.  He had said he was going to monitor the movements of the dollar very closely.

“Somewhere along the line we’re going to have a tipping point for the dollar, then, it’s all over,” he had said in the Breakout interview. “I thought it would happen in a few years; maybe it’s going to happen in a few weeks.”

Rogers had stated, “If it [dollar] keeps going down, I’m going to have to dump the rest of my dollars, and then it’s all over for the dollar.

“If it [the U.S. dollar] goes down 3% or 4% from here, I would have to sell and get out and hope I’m still solvent.  Then it’s going to, you know, multi-decade new lows.”

On the day of the Breakout interview of Mar. 17, the USDX closed at 76.04.

As of 08:45 EST on April 20, the USDX stands at 74.36, down 2.2% from the March 17 close and trades only 14 cents from its cycle low of 74.227 set on November 25, 2009.

Marc Faber: $1.5T U.S. budget deficits “for the foreseeable future”

Speaking with CNBC’s Squawk Box Asia hosts Martin Soong and Karen Tso early Monday morning, editor & publisher of the Gloom Boom Doom Report Marc Faber expects a minimum of $1.5 trillion U.S. budget deficits for some years to come.

“I don’t think it is possible to reduce the deficit meaningfully unless you increase taxation significantly, unless you cut spending meaningfully,” said Faber.  “And therefore, having the Democrats on one side of the aisle and the Republicans on the other, I don’t think they will compromise.  I think the debt ceiling will be increased—yes—but I think deficits will stay around minimum $1.5 trillion for the foreseeable future.”

If Faber’s prediction comes to pass—coupled with Goldman Sachs chief economist Jan Hatzius’ recent downward revision for 2011 U.S. GDP of $14.91 trillion—the U.S. deficit, as a percent to GDP, calculates to a Portugal and Greece size fiscal problem of more than 10 percent.

Of the $38.5 billion in cuts to the federal budget hammered out between President Obama and Republicans, only $352 million in savings was actually cut for this fiscal year, according to the Congressional Budget Office.

Now that the budget has been finalized without any substantial consideration to cutting entitlement programs, raising taxes drastically, or a combination of both, Faber suggested that the U.S. is on track for unsustainable deficits and repeated raises to the debt ceiling.

Who will be forced to pay for budget shortfalls is the age-old question that both political parties face.  But both Democrats and Republicans won’t agree to forge politically unpopular solutions and face an already-angry, anxious and financially struggling constituency.  Instead, both parties have taken a familiar politically expedient course—that is, to kick the can down the road until after the next election.

“I think the Democrats want the well-to-do people to accept higher taxes, the well-to-do people want to accept essentially the lower-income groups to accept lower spending,” Faber continued.  “So they will not agree.”

“But both benefit from high deficits.  The Democrats because they get handouts, although these handouts are eaten up by inflation. In other words, price increases . . .  (audio cuts out), so in real terms their incomes don’t go up.  But, maybe, they don’t see that this way.  And the Republicans, they don’t have increased taxation, so they also believe they benefit. And in addition to that, there is a lot of spending that benefits well-to-do people, like defense expenditures,” he said.

When asked to comment on a bi-partisan committee in Washington that has identified $4 trillion in budget cuts over 12 years, Faber was amused by the attempt to temper his dire view of the U.S. budget deficit and the implications for the American dollar.

“There have always been deficit reduction plans, and none of them were sic kept because of politics and of the economic situation,” he chuckled. “I think maybe you can cut the deficit from say $1.5 trillion down to $1.4 [trillion] dollars, by a $100 billion, or so.  But they argue now for almost six months to cut the deficit, or reduce the deficit, by $40 billion.  What does it matter, $40 billion on $1.5 trillion dollars?”

“Insufficient silver to meet the settlement,” says Rick Rule

In a startling interview on King World News yesterday, Rick Rule told KWN’s Eric King the suspicion surrounding COMEX inability to settle the March and subsequent nearby contacts could be justifiable.

“There has been so much physical buying that it’s widely reported that the mints are having difficulty obtaining coin strip in the face of overwhelming coin demand,” said Rule. “There has been suspicion with the March settlement and with subsequent near-term settlements that there will in fact be insufficient silver to meet the settlement requirements in those near month futures contracts.”

Rick Rule, founder of Global Resource Investor, now part of $9 billion Sprott Asset Management, suggested that global investors seeking haven from an unprecedented coordination between central banks to devalue its respective currencies have turned to gold and silver as a final refuge.

It should be noted that today’s currencies of choice, the Swiss franc, Canadian dollar, Aussie dollar, Brazilian real and Malaysian ringgit are tiny markets struggling to offset the onslaught of newly created dollars by the U.S. Federal Reserve into the global monetary system.

Most recently, central bankers of these currencies have been watching export data especially closely during the dollar’s plunge below the 78 level in the USDX for signs of slowdown in vital industries and employment within their respective economies.  Too much tightening hurts demand for exports, whereas too little tightening exposes consumers further increases in the rate of change in consumer prices without the mitigating effect of a strong currency against the global commodities complex priced in U.S. dollars.  Gold and silver, Rule said, are “without a political constituency for devaluation.”

“It is true the dollar is the world’s reserve currency so it’s the fiat currency that everybody is reserving special wrath for, particularly in view of the profligate nature of US debt issuances,” Rule continued. “But there’s a bigger problem with regards to fiat currencies that people have, because if you are going to somewhere other than gold, what is the fiat haven? I don’t see a fiat haven, and that’s problematic.”

If there was any doubt of today’s silver market once again proving the principles of Gresham’s Law (also known as, Copernicus-Gresham Law) cannot be denied forever, a plausible explanation for a remarkable 144% rise in the silver price from the Jun. 7, 2010 low of $17.22 would soon be forthcoming from Fed chairman Ben Bernanke.

But, alas, Bernanke won’t be cornered into Gresham’s argument.

“I don’t fully understand movements in the gold price,” Bernanke said on Capitol Hill in early June 2010. Ditto, of course, for an explanation for the rise in gold’s kissing cousin, silver, which historically takes center stage with its breathtaking moves in previous capital flights out of the U.S. dollar—post Brenton Woods.

According to Wikipedia, “Gresham’s law states that any circulating currency consisting of both ‘good’ and ‘bad’ money (both forms required to be accepted at equal value under legal tender law) quickly becomes dominated by the ‘bad’ money. This is because people spending money will hand over the ‘bad’ coins rather than the ‘good’ ones, keeping the ‘good’ ones for themselves.”

Fears of the U.S. entering a full-scale, third war in Libya; the effects on global markets post a bona fide end to QE2 in June; another financial blowup in Europe (this time Spain); a business-as-usual approach to a fiscal 2011 $1.6+ billion deficit in Washington; Japan; further oil price shocks; or a combination of any of these are driving an increasingly jittery investor into taking the plunge into an asset class which has been out of favor for more than 30 years.

And since silver’s tiny $75 billion market remains the smallest against all competing legal tender “currencies” (none of which, is backed by gold or silver bullion; the Swiss franc came off the gold standard in 1999) near-panic demand is overwhelming available supply, suggesting further increases in the silver price may be needed to induce potential sellers to meet current demand for the metal.

“Well I think part of what’s happening in the silver market is the fact that the market is in backwardation which is to suggest that the spot price is ahead of the futures price,” Rule explained. “This is the opposite of a contango which is what normally what happens in metals markets.  It is obvious that there is incredible tightness in the physicals market.”
“It’s obvious from those statistics that the near-term silver supply, in particular the physical supply, is extremely tight, and as a consequence of that extremely volatile…We’re in an extraordinarily tight market.”

 

At 9:55 a.m. (EST) spot silver trades at $42.54 per Troy ounce, up $0.89, or 2.13 percent.

 

Think you’ve Missed the Gold and Silver Rally? Think again, says Marc Faber

Each time the two monetary metals reach new highs, calls for the end of the bull market in gold and silver come quickly and frequently.

At $500, $850, and ever since gold first cracked $1,000 per Troy ounce in March 2008, the gold price remained the focus of those paid to report a popular view among those firmly entrenched in a fiat paper system that’s rewarded them handsomely for two generations.

Those unencumbered by a financial system—a system that pays its employees “more than four times the average salary in the rest of the economy,” economist Paul Krugman wrote in 2008—make a living by developing a reputation for accurately appraising the current state of the vilified gold and silver market.  Otherwise, these unleashed analysts and money managers will no longer retain their flocks and fortunes.

One such tell-it-like-it-is investment manager is the publisher and editor of the Gloom Boom Doom Report, Marc Faber—who, as a side matter, says that the choice for the name of his report, Gloom Boom Doom, came about from his observations of changing investor sentiment during complete market cycles.

So, is it Gloom, Boom or Doom for the precious metals?  Faber rejects the notion of a precious metals market soon entering a “Doom” stage.

“If it [gold] were a bubble a lot of people would have gold.  The whole world would be trading gold 24 hours a day,” he told CNBC’s Joe Kernen. “But I don’t think it’s really a bubble. I think gold is maybe cheaper today than it was in 1999, when it was $252.”

The rise in the gold price (but more spectacularly, in the silver price) has been primarily driven by the Fed’s unprecedented easy-money policies, first, following the popping of the NASDAQ bubble in 2000, then again, much higher in price following the collapse of the financial system, starting in March 2008, with the fall of Wall Street broker-deal/investment banking firm Bear Stearns.

Not unlike most global pricing, the world’s traditional monetary metals are denominated in U.S. dollars, so a decline in the dollar’s relative value to world supply of precious metals lifts the price of gold and silver in dollar terms.

The future of the gold price is bright as long as Fed chairman Ben Bernanke continues a policy of negative real interest rates—when compared, that is, with the rising rate in living costs, Faber has repeatedly stated.

Even if the Fed followed last week’s European Central Bank’s (ECB) quarter-point interest rate hike, the competition for dollars between paper assets and tangible assets won’t tip the tide among investors in favor of paper assets, according to Faber.

“One day they [the Fed] will increase it [federal funds] by a quarter percent. But what does it mean when commodity prices are going through the roof, energy prices are going up, health care costs are going up, insurance premiums are going up?” he said.

Therefore, Faber posits that cash and debt will lose value relative to “commodities, real estate, art, collectibles and so forth, anything that essentially cannot be multiplied at the same rate as paper money, that is subject to the printing presses of Mr. Bernanke.”

 

Eric Sprott: “Silver is the investment of this decade”

As the rising price of silver takes center stage within the financial community, an ever increasingly large number of investors wonder if now is the right time to make a move into this performing asset – or, better stated, to seek haven from a virtually hopeless slide in the value of the U.S. dollar (hand-in-hand with competing currencies) and make a real return on risk capital.

As long-time student of monetary history, founder of one of Canada’s largest independently owned securities firms Sprott Securities, and founder of Sprott Asset Management (with $9 billion under management), Eric Sprott told MineWeb’s Geoff Candy on April 5 that he expects the silver price to “treble that of gold over the next three to five years.”

And Sprott anticipates gold’s move higher is far from over, offering a short-term target for the yellow metal of another nearly 35% rise from present levels of approximately $1,470.

“I think gold will continue to move on here,” he told King World News a day earlier on April 4. “We’ve certainly opined before that it will go north of $2,000 and the wind is at our back because the printing is increasing at a very fast pace here.”

Sprott suggested that if investors like the fundamentals of gold’s potential allure as a moving vehicle away from a more profound currency storm yet to come, they’ll like the potential of silver’s added octane more.

“The fundamentals for the two metals are entirely different,” he told MineWeb.  “There is huge industrial demand for silver; there’s not much industrial demand for gold.” After factoring out industrial usage of silver, “ there are 10 times more gold available for investment in dollars every year, than there is [for] silver.”

Sprott added, “So if the guy is just as happy to own silver as gold, the fundamentals are going to diverge markedly here, and that’s essentially what we believe – that silver’s performance would treble that of gold over the next three to five years.”

On the demand side of the curve, the recently released World Silver Survey 2011, issued by the Washington-based Silver Institute, revealed that investment demand for the kissing cousin to gold rose sharply by 40% last year to 279.3 million ounces, up 169% from 2009.

Supply will struggle while demand is anticipated to soar, creating a set up for a perfect storm for higher future prices, argued Sprott.

Therefore, he, along with another credible source in the precious metals space, Goldmoney’s James Turk, expects silver to continue climbing to a target price of  $50 per Troy ounce, sometime this year.  Both men cite an ancient-held price ratio between the two monetary metals of 16:1 as a guide to their prediction for the silver price.

That ratio has been an accepted rule-of-thumb for pricing the two metals against each other for thousands of years, jibing closely with contemporary geological and production statistics which show earth deposits of 16-times more silver than of gold in Mother Earth.

As of today, the gold price-to-silver price ratio stands at 36.5.

“I’ve always thought that silver would move quickly to $50, and it would move to $50 this year – I thought it would get to $50 before year end,” Sprott said. “If you ask me in the three to five year time frame, obviously I think it’s going to go north of $100 simply because we’ll get that 16:1 ratio.” Gold, he said, is going a lot higher.

“Silver is the investment of this decade as gold was the investment of the last decade.  So we’re sitting back waiting for things to evolve here,” Sprott concluded.

Gold stocks breakout!

—Short covering rally could be imminent, John Hathaway

Yesterday’s continuation of Tuesday’s record high close in the Gold BUGS Index (HUI) has gold traders speculating whether the big rally in gold shares is finally near.

The Gold BUGS Index, which stands for Basket of Un-hedged Gold Stocks, closed at a record high of 597.14 on Wednesday from its previous record high of 576.48 set on Dec. 7, 2010.

As gold traded within a relatively tight range of $1,306.00 and $1,444.40 set on Sept. 29, 2010, and March 7, 2011, respectively, a significant number of gold stock traders remained convinced that gold’s rally would stall for a while, then correct.

Fears of another trigger for a “risk-off” event from growing uncertainties in the Middle East, the protracted European debt crisis, unresolved U.S. budget woes, then, black swan events in Japan, oil and commodities prices, or the steady accumulation of all those episodes would finally crack the equities market’s winning streak.

“Gold shares have been hesitant, acting as if gold didn’t belong at $1,440; and now that gold seems to want to stay there I think people have to revise their expectations for the gold stocks,” John Hathaway, director and general partner of Tocqueville Asset Management, told King World News on Tuesday.

Hathaway’s view of the gold stocks sector is consistent with larger marquis name hedge fund managers John Paulson, George Soros and David Einhorn, who presently hold significant amounts of gold shares among their top picks, according to SEC documents.

But many lesser-known hedge fund managers hold insignificant portions of gold shares, if at all.  In fact, hedge fund managers as a group have taken outright short positions on the gold miners while simultaneously taking long positions in the world’s preeminent monetary metal—a net bet that gold shares will underperform the metal on the way up, or down.  That could change dramatically, according to Hathaway.

“I just see three, four, five percent moves in some of the big cap stocks, not the little ones,” he said, “and that’s a sign of money coming in either to cover shorts or to initiate positions on a breakout.”

Since the start of the gold rally in 1999, gold stocks had outperformed the metal (HUI/Gold ratio) until Jan. 2004.  Since the start of 2004, however, the ratio dropped until May of 2005, at which time the ratio began to rise again.  But as the HUI/Gold ratio neared the Jan. 2004 high in Feb. 2006, the ratio again declined and has not come close to an assault on the Jan. 2004 high since.

Today, the ratio is 0.409 (above the 50-day and 200-day moving averages), down 35% from the Jan. 2004 high of approximately 0.625.

However, the gold stocks may soon have their day in the sun as the HUI achieves a new high, and will soon burn those hedge funds on the wrong side of the gold stocks trade, said Hathaway.

“I keep breadth on my screen and I think it was a 9-to-1 upside day which is very, very good.  You know there was nothing wishy washy about this at all so yeah, I think these hedge funds are going to get roasted.”

3 Gold Stocks on the Move

Goldcorp Inc. (NYSE: GG)

Barrick Gold Corp. (NYSE: ABX)

Yamana Gold Inc. (NYSE: AUY)