Silver to Break $40, Gold $1,550 in “next couple of weeks,” says James Turk

Speaking with Eric King of King World News, James Turk is back with another prediction.  Silver and gold will move decisively higher by the end of June, with silver breaking back above $40 and gold breaching $1,550 per Troy ounce in a mere two weeks, he told KWN.

For now, Turk believes the bottom is in for the two metals, and expects the rally to begin now.  And not many traders will be expecting a rally in precious metals during the traditionally weak summer months of June, July and August.

“The sharp rally that occurred today off of those support zones suggests to me that the correction is over,” said Turk.  “In other words, we are going to see silver back above $40 and gold above $1,550 within the next couple of weeks. Everything is all set for new record high prices in both metals this summer, which is going to surprise a lot of people.”

Turk reminded investors that sometimes investment demand trumps seasonality for gold and silver, as was the case in the early 80s during Mexico’s currency crisis.  Record high interest rates toppled the Mexican government’s ability to remain solvent following a U.S. tight monetary policy induced recession and resulting falling crude prices (Mexico’s largest export).  Several brutal devaluations of the peso took place during the crisis.  Gold prices soared.

“I just think that people don’t really understand what can happen this summer,” Turk continued.  “We’ve spoken before about the summer of 1982 when the gold price rose 50% from June to September, propelled back then by the Mexican debt default.”

According to Turk, today’s financial crisis dwarfs the scare in 1982, in that the bond market has priced in 17%, 11% and 10%  10-year bond rates for Greece, Ireland and Portugal, respectively, according to Bloomberg this morning.

“There are so many potential debt defaults going on today it is hard to figure out which one will be the tipping point,” Turk warned.  “But whether it is Greece or Ireland or someone else, it doesn’t really matter Eric, it will be a clear sign that today’s fragile monetary system of fiat currencies backed by nothing is imploding.”

The 2008 collapse, which took down all asset classes but sovereign debt securities, won’t be repeated for the precious metals during the coming currency crisis, according to Turk.  What was a liquidity crisis in 2008 has turn into a solvency crisis, leaving few choices for investors other than the precious metals to run to for safety as the world wonders which currency will collapse next.

“This summer you could see a move higher in gold and silver that literally shakes the world, more than it was shaken when Lehman Brothers collapsed,” said Turk.

Turk concludes, “A lot of people ask if we get another Lehman style collapse, will gold and silver fall like they did in 2008?  I say no they won’t.  The reason is back in 2008 the primary driver after Lehman collapsed was a rush by investors, hedge funds and everyone else for liquidity.  Most people learned a very valuable lesson from that event.  Consequently, this time around you are not going to see a rush for liquidity, you are going to see a rush for safety.  The safest haven of them all is physical gold and physical silver.”

Jim Rogers: I did buy some Silver this Week

Speaking with India business news channel, ET Now, Jim Rogers of Rogers Holdings said he’s buying silver at current levels.  On Friday, Rogers told ET Now that he recently bought silver last week.

“I did buy some silver this week, but if they go down, I hope I will buy more,” he said.

Many investors wanting the white metal in their portfolio have been gun shy throughout the volatile period following the correction during May.  Given his reputation as a man who has traded commodities successfully for more than 30 years, Rogers’ comment on Friday may embolden some investors back into the silver market.

Additionally, signs of strength in the silver futures market chain, which shows the front-month trading at a price level near the prices at the back months, coinciding with Rogers’ sentiment on silver at this time .  As of 9:31 a.m. EST Monday, the July contract stood at $35.57, while the Dec. 2015 contract traded at $35.58.

When asked to provide a synopsis of his portfolio to viewers, Rogers said, “I am long commodities and I am long currencies. I have sold short emerging market stocks, and I have sold short technology stocks. I have sold short bonds in the U.S., and I have sold short a large bank in the U.S.”

And when asked about his thoughts on the likely reaction in the markets post QE2, Rogers doesn’t believe that the U.S. Fed will allow the economy and markets to implode into a deflationary collapse as was the case in the 1930s.  He expects the Fed to prop up asset prices.

And for a good reason, too.

Fed Chairman Ben Bernanke is well-known for having become an expert on the central banking policies as well as the politics during the Great Depression, and had famously vowed in a speech at economist Milton Friedman’s 90th birthday in 2002 that the Fed would not standby and watch the U.S. economy sink into another depression if a threat emerged.

“I would like to say to Milton and Anna [Schwartz, Friedman's coauthor]: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again,” Bernanke said at Friedman’s birthday party, referring to the Friedman’s [also Schwartz's] theory that the mistaken policies of the Fed to allow money supply to contract was the primary cause of the protracted high level of unemployment during the Great Depression.

Within that context, Rogers has repeatedly warned investors of a coming tsunami of more money from the Fed at the first sign of any meaningful threat to the prospects of an economic recovery.  And Rogers hasn’t budged from his position regarding the Fed’s next move if/when confronted with more disappointing economic statistics, such as the May 3rd jobs report. He appears more assured than ever of a Fed announcement regarding further stimulus measures now that the U.S. is entering a presidential election cycle.

“Things are slowing down and if you stop printing so much money, things I hope would slow down some more,” said Rogers.  “The problem is we have an election in the U.S. in 2012, and they are going to come back and start printing money again. They may call it something else, but they will come back and print more money. This is not good for the world, but that’s all they know to do.”

The silver price could soar once again on even a rumor of an announcement from the Fed of some form of a QE3.

Marc Faber: Get your Assets out of the U.S.

In article just published by the Insider Monkey, Marc Faber emphasized that investors should hold investments outside the jurisdiction of the United States, focusing his ire upon the U.S. President as a contributing reason for his advice.

The outspoken Swiss-born editor and publisher of the Gloom Boom Doom report told the Insider Monkey during the Ira Sohn Conference that he believes U.S. President Barrack Obama “is by far the worst president in the U.S. has had,” and is “vote-buying through handing out money and through increased transfer payments.”

Faber also blames President Obama for escalating conflicts beyond the burdensome Bush-era wars in Iraq and Afghanistan to now include Lybia, which only further blows out the already horrendous federal budget deficit.

Tallied on a cash accounting basis, the U.S. budget deficit looks as bad as any of the European PIIGS, but the U.S., unlike the UK, has no meaningful plans to stop the U.S. budget hemorrhaging.  But, the fiscal picture is a lot worse than the projected $1.6 trillion deficit slated for fiscal 2012.  If expenses were reported using the GAAP accrual standard that corporations must report to Wall Street, the U.S. budget deficit would show an excess of $4 trillion per year, according to economist John Williams at Shadowstats.com.

Four trillion dollars. That calculates to nearly 28% of GDP, more than twice federal tax receipts, and nearly as large as the entire Chinese economy!

Even with that bleak fiscal situation facing America, Faber doesn’t expect any changes coming in the form of fiscal responsibility—in whichever form it may take—anytime soon because of domestic U.S. politics.  In fact, in previous interviews he has stated that the U.S. government will most likely find ways of confiscating wealth through legislation over time from the so-called rich (middle class) to cut the deficit.  But those drastic Leninist-like solution that Faber suggests may not come until after Obama is re-elected to a second term.

“I think it is quite likely that he [Obama] will be reelected,” said Faber.  “But that is the problem of the U.S. In maximum 2-4 years, he will be gone, but the big people who vote in the U.S. will still be there. And I think that in today’s presentations many observers have expressed a view that it’s very difficult to cut entitlements. In other words, social security, Medicare, and Medicaid because nobody wants to do that.”

As a result of budgetary impasses, the same old kicking the can down the road legislative maneuvers will lead to a dollar devaluation—the easy way out taken by governments throughout thousands of years of economic history—until, of course, a modern day bond market crisis ensues in U.S. Treasuries—which is a long-held prediction of Faber’s.

“Nobody wants to accept that [budget cuts] because everybody lives from that,” said Faber, “so essentially the fiscal deficit will stay very large, and it will mean that over time the U.S. dollar will lose its purchasing power, more money will have to be printed, more quantity of easy measures will have to take place, and so forth.”

In the present global economic and financial environment, Faber likes equities and real estate in promising countries as well as precious metals.

“My advice would be to diversify heavily and have money in other jurisdictions than the United States, in other assets than U.S. assets,” Faber warned. “In say Asia, Asian equities, Asian real estate. And I would have some money in custody outside the USA, in Australia or in Singapore or in Hong Kong or in Switzerland and not have all my assets here in the United States.”

Jim Rogers’ Top Two Commodities

In an after-the-bell interview with CNBC’s Maria Bartiromo, Wednesday, commodities king Jim Rogers said he’s a bull on all commodities now, but especially likes silver and rice.

The 68-year-old Rogers, known for his partnership with George Soros at Quantum Fund, spelled out what he expects of Ben Bernanke and other central bankers as the financial crisis plays out—that is: print money.

Strong demand from Asia’s growing middle class from a pool of a 3-billion-plus population as well as an anticipated continuation of loose monetary policies by central banks worldwide will lift commodities prices, he said.

“It [print money] is all they know to do in Washington, Tokyo and a few places,” said Rogers.  “They’ll print more money.  And if they print money, you should own silver and rice and real assets.”

If the world economy grows, Rogers likes commodities.  If the world economy goes back into recession, Rogers likes commodities.  It’s a heads you win, tails you win play, he explained.

What happens after QE2 expires at the end of June?  Rogers didn’t venture a guess on the effects on the equities markets as the end of June approaches, but he expects more money printing from the Fed, especially in front of an election year.

“QE2 definitely will go away.  Now it may come back with a different name,” he speculated.  “They may call it cupcakes.  Who knows what they’ll call it, if it comes back.  But they’re going to bring it back, because he’ll be terrified and Washington will be terrified.  There’s an election coming up in 2012.  Washington’s going to print more money.”

On the subject of the debt ceiling impasse in Washington, Rogers doesn’t expect a U.S. government shutdown.  But if the U.S. government didn’t raise the debt ceiling, he surmises that “the dollar would go up,” he quipped.

But a shutdown of the U.S. government won’t happen, he said.  Governments throughout history have all opted to try to inflate out of burdensome debt levels, and this time the response by today’s governments won’t play out any differently, Rogers has repeated stated in the past.

But at some point, the currency crisis comes, and we may be coming close to that tipping point.  “The markets won’t put up with this much longer,” said Rogers.

The billionaire investor’s portfolio is long some currencies (likes the Chinese renminbi) and commodities.  He has no long positions in the U.S., and is short emerging markets and U.S. technology stocks—with the latter, he believes, are in the midst of a bubble, mentioning Facebook (presumably referring to valuation estimates of the social network leader) in particular.

Rogers is also short a U.S. bank stock, but refused to state the name of the bank on two separate occasions during the Bartiromo interview.  Since Rogers initially mentioned more than a month ago that he’s short a U.S. bank, rumors have spread throughout the Web that the bank in question is Bank America (NYSE: BAC).

George Soros dumps his Gold— was it too early?

Soros has sold his gold.

Anytime a famous billionaire investor makes a significant position move in his clients’ portfolio the tag-along investors sifting through SEC form 13-Fs for clues to the thinking of the rock stars of finance will know about it—though with a time lag, as the required filings are submitted quarterly.

The latest musings among financial writers and investors have focused on the disagreement between Soros and another bigger rock star, John Paulson, regarding the outlook for the monetary metal—gold.  Soros is out, and Paulson is apparently holding for the big move.

So who’s right?

Arguments for the end of the decade-long gold rally generally fall into four theses, a combination of the four, or all of them.

1) The Fed is done with so-called “quantitative easing.”

So Bernanke implies—for now.

Unless Fed chairman Bernanke can find a buyer of a trillion dollars of U.S. Treasuries each year, or is willing to face derailing a U.S. economy on the brink of another full blown Depression brought on by more than $2 trillion deficits, which will then include soaring interest payments of more than $100 billion for each 1% rise in rates—then Bernanke is bluffing, again!

Bond king, Bill Gross, asked the question of many investors in his PIMCO March Outlook letter:

“Who will buy Treasuries when the Fed doesn’t?” Gross asked rhetorically.  If the Fed has been buying up to 70% of new issuance by Treasury, who will takeover the massive buying?

So the Morton’s Fork Bernanke faces is to either continue debasing the dollar to “grow” into the unserviceable U.S. debt levels, or face a collapse of the U.S. Treasury market as higher yields blow out an already blown out federal budget deficit, creating a negative feedback loop.

That Morton’s Fork favors gold.  Gold is primarily an alternative to the debasement of fiat paper money AND a place to park capital during times of uncertainty or a deflationary collapse.

2) Inflation is low and will remain low

Does anyone but the Fed chairman and his groupies believe inflation has been low?  That’s one of the big lies from the Fed.  (See Shadowstats.com)

“To tell deliberate lies while genuinely believing in them, to forget any fact that has become inconvenient, and then when it becomes necessary again, to draw it back from oblivion for just so long as it is needed. …”

George Orwell, 1984

3) In the end, the U.S. dollar will eventually become stronger than the euro

That may be true.  But does it matter if the euro falls faster than the U.S. dollar on its way to the “currency graveyard” as James Turk of Goldmoney has said?  Both central banks are debasing their respective currencies.  In fact, the world’s top two currencies have been devaluing against all widely-traded commodities, (except natural gas) what appears to be, in a coordinated manner.

And Bernanke’s suggestion, which he made in his speech in Atlanta yesterday, that soaring commodities prices have little to do with Fed policy of a dollar devaluation rings, at best, conveniently incomplete and hollow, and at worst, another lie—through omission by the Fed chairman of widely-know correlations documented between a currency’s purchasing power against a basket of commodities over time.

4) Everyone’s in gold.  It’s a bubble.

That’s probably the weakest argument of all.

Marc Faber, editor and publisher of the Gloom Boom Doom Report, was asked by CNBC’s Joe Kernen in April if he thought there was any truth to the gold bubble thesis.

“If it [gold] were a bubble, a lot of people would have gold.  The whole world would be trading gold 24 hours a day,” said Faber. “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.”

Faber also said he routinely assesses sentiment among investors regarding gold at his speaking engagements.  Usually, he counts less than five percent of the audience who raise their hands in favor of gold as an investment. Sometimes he sees no hands raised, he said.

“And my daughter, she lives in Germany. She walks by a shop when she goes home from work. She said people are lining up to sell gold—the jewelry. So, I don’t think that it’s a gold bubble,” Faber added.

Following Soros’ investment themes may be better than most fund managers of his size.  But investors should remember that another investor legend, who may be more well-know—and liked, Warren Buffett, sold his monstrous stake in silver at approximately $8 per ounce.

Unless Soros is waiting for a big drop in the price of gold (or is pondering buying physical metal, instead), he’s most likely far too early in calling for a long-term top in the gold price.

Wasn’t he who said in June 2010, “We’ve have entered act II” of the crisis, referring to Greece’s sovereign debt problems and the potential flight out of the euro experiment.  When did that crisis get resolved?  And how does the U.S. (indeed, the world) come out smelling like a rose if the euro collapses while U.S. and untold other foreign banks, who are joined at the hip with European sovereigns and banks, become insolvent?

Peter Schiff: We are on the Precipice

In his typical candid style, Peter Schiff said he believes the U.S. is again on the brink of another banking collapse—this time the crisis will be worse than the scary swan dive of 2009.

“The stimulus is wearing off and the much anticipated hangover is starting to set in.  The economy is now in worse shape because the government stimulated it,” Schiff told King World New’s Eric King.  “The stimulus merely interfered with the corrective process.  So instead of resolving some of our economic imbalances, the government has made them worse.  Now we are on the precipice of a bigger economic decline than the one the stimulus interrupted back in 2009.”

The irascible president of Europacific Capital, Schiff (known for his no-nonsense responses to interviewer questions), is well-liked by investors who cherish forthrightness amid the legion of perma bulls paraded on financial television programs throughout both bull and bear markets.  The stock bulls of 2000 and 2008 as well as the housing bulls of 2006 still regularly appear on those financial programs.

Schiff has stated many times that he wonders why those who have gotten it consistently wrong are still asked to appear on television in front of a mass audience, while on the other hand, he, who’s gotten it right, is periodically browbeaten for their “fear mongering.”

Schiff, like many independent investors, doesn’t trust the Federal Reserve and the Treasury to come clean on articulating the core problematic issues surrounding the reasons for the precipitous decline of the U.S. dollar against nearly all Forex currencies, commodities and precious metals. Schiff has not only offered blunt assessments when asked about the dollar, he’s been spot on the mark with his predictions, too, which in turn has steadily increased the size of his flock of Schiff disciples.

Those fortunate enough to have followed Schiff’s commentary prior to the collapse of Bear Strearns, Lehman (LEHMQ), AIG (AIG), Fannie and Freddie (FNMA, FMMC)—or have read his book, Crash Proof: How to Profit From the Coming Economic Collapse, weren’t taken by surprise by the dramatic swings and crashes that followed the Bear Stearns fiasco.

So what’s Schiff saying about the U.S. dollar at this juncture?

He told Eric King, Monday, “It’s going lower, last Friday the U.S. dollar closed at a new low against the Swiss Franc.  You need a $1.18 to buy a single Swiss Franc.  I think you are going to see much more of the safe haven money going into other currencies or precious metals and the dollar is going to lose that bid, especially if the Fed launches QE3.”

Schiff continued, “… If you look at the economic relapse that’s going on right now, look at Friday’s abysmal job numbers, look at the housing numbers, understand that all of this is taking place with record monetary and fiscal stimulus.  What happens if we remove those supports?”

Schiff told KWN he believes the Fed’s actions to bailout the banking system throughout the years 2009 and 2010 have made the initial problem of highly leveraged banks vulnerable to a downturn in the economy more acute, so the next crisis will result in a bigger problem for the Fed and less options to cope with bank and broker/dealer insolvencies.

“I think it’s a certainty,” said Schiff in his response to KWN’s question on the chances of another banking system meltdown.  “The financial crisis in our future is bigger than the financial crisis in our past.  We are more vulnerable as a nation, we are more heavily leveraged now than we have been at any other time.  We are more vulnerable to an increase in interest rates or a run on the dollar and either of things or both of things could happen soon.”

Just as Schiff predicted before the crisis began in 2008 that the Fed would fight a U.S. economic collapse with massive money printing, Fed chairman Ben Bernanke will print again if the U.S. economy cannot grow on its own, Schiff warned.

“It [the Fed’s balance sheet] just hit a record size on Friday.  It’s $2.77 trillion, almost $2.8 trillion,” he said.  “We’re approaching a $3 trillion balance sheet, but the thing is in order for the Fed to keep this phony economy on life support that balance sheet has to continue to grow.”

He continued, “Once that happens we can build a lasting and sustainable period of prosperity.  The one we have now is doomed, it’s an abomination, it can’t survive.  It depends on ever and ever greater injections of credit so that we can keep on borrowing to consume and import.  If we try to do that indefinitely we will destroy the economy completely because we will destroy the currency completely.”

Schiff predicted gold’s ascent well before the debt crisis became apparent to everyone in 2008, and he again expects more bullish moves in the monetary metals in the months and years to come as the beginning of “Act II” of the global crisis—as George Soros described the volatile financial markets in March 2010 (during the Greece sovereign debt crisis)—plays itself out around the globe.

“The more mistakes the Fed makes, the more stimulus the government pours into the economy, the brighter gold and silver are going to shine.  Since I am optimistic that the government will keep doing the wrong thing, I’m optimistic that gold and silver prices will keep rising.”

London Gold Market Report: Dismal Jobs Data good for Gold

An unexpected bad print in Friday’s Labor Department’s non-farm payroll report for May is gold bullish, according to premiere bullion storage service BullionVault.

After successive months of hobbling, yet hopeful, job creation in the U.S. (though many economist doubted the overall quality of the new jobs added from the depths of the initial shock to the U.S. economy), the Labor Department laid an egg for May when it was revealed that only 54,000 jobs were created, far less than the mean estimate range of 150,000 to 190,000 by analysts.

Those investors, believing that the Fed may pull off a slow recovery, could be rethinking that premise and instead begin fretting about the possibility of a double-dip recession, while others—who never believed that the U.S. economy ever emerged from recession in the first place—may fear an all out 1930s-style depression and food and energy price inflation to make matters worse.

But for gold and gold stocks investors, the latest data are good news, according to Swiss precious metals firm MKS.

“Speculations of a generous third quantitative easing (QE3) package will grow” if a string of subsequent depressed data come in, MKS told BullionVault. “Expectations in the market suggest that gold prices will benefit in the short term by the belief that slowing growth in the U.S. will prompt the Federal Reserve to maintain favorable monetary conditions.”

That means some form of QE3 by the Fed could be inevitable by as early as the third quarter some economists speculate, which will result in a further expansion of the U.S. monetary base and put a strong bid under the yellow metal.

“This is gold-friendly data,” said Credit Agricole analyst Robin Bhar. “In the worst case scenario, we could have a double-dip in the U.S. economy and possibly deflation, which would also help gold.”

The showdown in Greece over its failure to achieve budget metrics attracted safe haven buying of the metal throughout the past two to three weeks, taking the Euro from the high of 1.49 in May to approximately 1.41 against the dollar as well as providing ammunition for firming gold prices above $1,520.

Following the Labor Department’s disappointing jobs number on Friday, however, the euro soared against the dollar to a one-month high of $1.46, or a 2.3% again, before retracing some of the day’s earlier gains.

“The turning point was Greece, and we can suggest Greece is out of the way for the short term,” said Kurt Magnus, executive director of currency sales at Nomura Holdings, referring to reports that the European Union (EU) and the International Monetary Fund (IMF) have agreed to extend the next installment of last year’s €110 billion bailout to Greece.

Now the focus among traders has shifted to the dollar and its lingering problems accentuated by Friday’s dismal economic data and the partisan stalemate in Washington regarding the U.S. federal budget deficit and debt ceiling.

At 11:40 a.m. in New York, gold trades at $1,552.03, up $10.43.

Jobs Data seals QE3

It’s getting ugly out there, and fast.

The debt crisis in Greece (now spreading ever so insidiously to the Portuguese bond market); China’s slowdown brought on by lower global demand and tightening by its central bank to quell speculation in the country’s housing market; stubbornly high oil prices; civil unrest in more than a dozen countries surrounding the Mecca of black gold, Saudi Arabia; three openly waged wars; and, now, the realization that the Fed’s effort to revitalize a dying U.S. economy is not working are scaring a lot of people from New York to Beijing.

Today’s release of the U.S. Labor Department’s non-farm payrolls, which showed only 54,000 jobs were created in May, not only printed below consensus of 165,000 (lowered from 244,000) but was lower than the lowest estimate of 56,000.

It gets worse.

Remove the 206,000 jobs created by the Labor Department’s bogus Birth/Death model, one of the favorite components to massage data, jobs in the U.S. actually contracted by at least 150,000!

“Take away the Birth/Death adjustment of 206,000 and the Real NFP is: -150,000,” stated zerohedge.com’s Tyler Durden (fictitious name) minutes following the U.S. Labor Department’s release. “This is the biggest monthly B/D adjustment in over a year. And if as all the pundits claimed last month, demanding the McDonalds addition of 62,000 janitorial, part-time jobs be added to the May number, the economy really lost over 200,000 in May.”

If there’s any doubt left that pundits of the Fed’s easiest of easy monetary policy won’t remain standing through the pressure exerted from all sides to raise the Federal budget debt limit, today’s jobs data should leave no doubt, as fortuitous as the timing of such a bad report appears.

“Time to price in QE 666,” Durden writes.

So the dilemma the Fed and policymakers in Washington are left with are:

1)    Allow the deficit to soar further and deal with soaring inflation, kicking the can down the road just a little bit more.

2)    Default of the debt and bring on the riots.

“Next year is going to be pretty miserable,” FX Concepts president John Taylor told CNBC on Thursday.  “QE 3 will start or not? No. No more? Well, eventually it will start I would argue. I think the Fed has to really see the economy printing minus numbers first.”

Well, we just saw a negative number.

Silver Inventories Dangerously Low; 3 Stocks to Consider

One would think that as prices dropped sharply in the silver “market” during the month of May, the Comex would contain more silver in inventory as big players fearing some form of run on the Comex soon lost their appetite for the precious metal amid the mini-crash of a more than 30% in price in the first week of May and wouldn’t stand for delivery.

Well, one would think incorrectly.  As the silver price dropped, the rate of depletion of available silver dropped as well, but the rate of depletion still remains at a near free-fall rate.

In fact, according to the Comex’s Metal Depository Statistics report, just released, registered silver bullion at the Comex has dropped again to a record low of 29.6 million ounces in May, a drop of 3.5 million ounces in one month.  That drop comes off the heals of a 8 million plunge in inventories in April, from February.

At today’s silver price of $37, the value of total Comex silver available for delivery equates to a miniscule $1.1 billion.

Compare the 29.6 million ounces with the Comex’s inventory of registered silver reading of 86.6 million ounces in July of 2008, or a decline of 1.7 million ounces, on average, each month.  So, the raid on the silver stock has escalated markedly during the last two reporting months of April and May.

At the present rate of offload, the Comex stores approximately six months of inventory of silver bullion.

Click here for a graph of the trend in Comex silver inventories since August 2008.

Rick Rule, founder of Global Resource Investor, told Eric King of King World News that the paper market in silver is a tool for institutions to trade the white metal, but the underlying physical shortage available to fabricators and retail investors continues at prevailing prices.

“Yeah I think there is absolute shortage in the physical market,” said Rule.  “There has been some softness (in the price) which I think is mostly a function of two things, generally a sort of risk off trade as institutional investors in particular have found credit conditions more difficult, and of course the tightening of the margin requirements in the futures markets.”

Rule added, “But I don’t think that has obviated the near-term physical shortage, which has come about from very, very strong retail end user investment demand and a shortage of coin strip.”

3 Silver Stocks to Watch

Pan American Silver (Nasdaq: PAAS)

Coeur d’Alene Mines (NYSE: CDE)

Hecla Mining (NYSE: HL)

Richard Russell says get back into the Silver Pool

Hi-ho silver!  The coast is clear; it’s everyone back into the silver pool for more profit fun in the sun, Richard Russell recently stated.

Richard Russell, the octogenarian publisher of the 53-years running Dow Theory Letters, wrote in his newsletter last week that the silver market will benefit from the currency crisis playing out in Europe.  Investors are now looking past the hopeless situation in the smaller nations of Europe to some of the much bigger member states of the European Union—those members that will overwhelm the ECB and IMF money hole-plugging efforts.

“Europe — Aside from France and Germany, Europe appears to be falling apart. First it was Portugal, Ireland, Greece that were in trouble, and now you can add Italy, Belgium and Spain,” Russell wrote.  “Wait Spain? Spain is the fourth biggest economy in Europe. Thus the U.S. dollar and the euro are perched on a see-saw, juggling back and forth, first one is up and the other is down, then it’s vice versa.”

When the crisis in the three weakest nations, which make up the PIIGS (Portugal, Italy, Ireland, Greece and Spain), surfaced in March 2010, the precious metals, instead of softening in the wake of a strong dollar began its remarkable rise of a near triple in a one-year period—from $17 in March 2010 to $50 in late April 2011.

Threats of another collapse in GDP around the globe has some silver investors wondering if a replay of 2008 is in the offing,  taking all assets cascading in a heap of horror, including gold, and especially, silver.

Silver’s historical R-squared correlation runs approximately 0.9, with 1.0 as a perfect correlation to the gold price.  So, as gold goes, silver goes, history shows.  Both are monetary metals, while silver enjoys the added feature as an industrial metal, but the silver price isn’t as highly correlated with copper—the quintessential industrial metal.

Russell expects the crisis in the euro will favor gold, taking silver up with it. And as the euro weakens, the prospects for the U.S. dollar now looks bleaker than ever, as well, because of the globally interconnectedness between European and American banks.  Further Fed intervention beyond QE2.5 is nearly assured, which could further play out the “see-saw juggling” of currencies that Russell points out.

“Remember I said that during recessions, silver is treated as an industrial metal, but during periods of inflation silver is treated as a monetary metal,” explains Russell.  “With inflation built into America’s future, I see silver following gold to higher levels. And I see the public once more rushing in to buy silver as a safe-haven currency against a shaky dollar.”