Back up the Truck on Gold and Silver, says James Turk

The slow summer months for the precious metals market will be anything but slow this year, according to precious metals expert, James Turk.

In an interview with Eric King of King World News, the founder of bullion storage firm, Goldmoney.com, said he expects gold and silver to rally strongly this summer, bucking the 30-year established seasonal trend of softness in metals prices during the summer months of July and August—the time of year when gold and silver typically put in lows for the year.

However, Turk believes the lows were already made in May during the cascading sell off in silver from its perch of nearly $50, taking the white metal to the $32 level and the yellow metal to $1,480 in a sell off—triggered by some profit taking and multiple, rapid succession, and controversial futures margin hikes instituted by the Chicago Mercantile Exchange.

“What we are seeing right now is a double-bottom in silver with gold staying strong near $1,500,” Turk said to KWN.  “With options expiration on both exchanges now behind us, we can expect a bounce from here.”

Turk cites growing tensions among populations around the world as politicians increasingly shift the burden of bad loans made by banks onto the public books.  Greece’s spectral will prove to be only the beginning of civil unrest in Europe this summer, Turk predicts.

“We’ve got civil disobedience growing in different countries,” said Turk.  “People are becoming fed up by bad decisions made by politicians that favor bankers rather than taxpayers.”

“People just have not come to grips with the fact that governments are running out of money,” Turk added, “which brings to mind my favorite Margaret Thatcher quote, ‘The problem with socialism is that eventually you run out of other people’s money.’  There is also a great deal of non-union tension as rising costs are continuing to erode people’s living standards.”

In sharp contrast to predictions made this week by Swiss money manager Marc Faber, who said on CNBC TV12 on June 29 that all asset prices will sink from a lack of Fed “stimulus” from its QE programs this summer and early Fall, Turk sees a rerun of the summer of 1982, instead.

It was then that the government of Mexico failed to make interest payments on its dollar-denominated sovereign notes during Paul Volker’s (the, then, chairman of the Federal Reserve) punishing interest rate increases of both the federal funds rate and discount rate.  Through several currency devaluations, which ensued through to the end of the year of 1982, the Mexican government  kicked off a run on the peso to the safe haven of gold.  Gold soared to more than $520 by the first quarter of 1983, from approximately $290—the low set at the start of the crisis in July of 1982.

Turk expects another run to gold, but this time the people of Europe’s peripheral PIIGS (Portugal, Ireland, Italy, Greece and Spain) will trigger another golden summer of 1982.

“In fact, with bankruptcies of governments becoming more and more likely, the reasons for owning gold and silver have become even more pronounced,” Turk continued.  “Summer has only just started, but I still see this as a summer that will be like 1982, one for the history books.”

Additionally, Turk points out that the gold/silver price ratio has widen significantly since the 31:1 print reached on April 28.  The ratio has since moved back sharply to levels not seen since the 45:1 ratio was taken out to the downside in February during the silver price breakout above the closing high of $30.84 set on Dec. 31, 2010.

“I actually like the action of the gold/silver ratio; yesterday it closed at 44.5 so it is back at support,” said Turk.  “This is a further indication to me that the correction has reached its nadir.  The interesting thing about corrections like this Eric is how rapidly bullish sentiment evaporates even while the fundamental factors driving the metals higher this past ten years remains very favorable.”

Jim Rogers: What now for Commodities?

Jim Rogers said the commodities bull market is still on track to higher prices, but he isn’t buying anything right now.

In an exclusive interview with IndexUniverse.com, the commodities king said the downdraft in commodities the markets experienced in June isn’t unusual. “It’s the way the world works.”

“If you look at oil, for instance, it has gone down over 50% three or four different times since 1998,” added Rogers.  “That’s what markets do, and they will continue to do that.”

When asked whether the commodities bull market that he envisioned more than a decade ago and about which he wrote in his book, “Hot Commodities,” is still intact, Rogers said, “yes.”

Close followers of Rogers know he likes agriculture more than any commodity, longer term.  Populations are growing in size and prosperity in Asia, bringing with that growth an upgraded and voluminous diet—the demand side of the price equation.  On the supply side, Rogers notes the aging of farming personnel will pose challenges to the restocking of qualified talent.

“We know that there are huge shortages of agriculture developing,” he said.  “I don’t know if you knew this, but the average age of farmers in America is 58 years old. In 10 years, they’re going to be 68, if they’re still alive. Throughout the world, we have serious, maybe even catastrophic developments in agriculture, which is going to hurt us all over the next couple of decades.”

In the oil market, Rogers sites the lack of meaningful new discoveries to offset Asia’s insatiable demand for crude, reminiscent of the days post WWII in the United States as industrial growth jumped into overdrive to supply a war-torn world with everything from household appliances and automobiles to military and commercial planes.  China isn’t selling air force fighter planes yet, but it sells just about everything else that can fit into a big box store.  Nevertheless, China has overtaken the U.S. in oil imports.

“I do not see any major new sources of supply [of oil]. We know that the known reserves of oil continue to decline worldwide,” Rogers explained.

And as far as the hottest commodity since the summer of 2010, silver, Rogers likes it for the rest of the decade and wants more of the poor-man’s precious metal on pullbacks.  He had said early in May that the moonshot move to $50 in April didn’t look healthy and hoped for a pullback to kill the froth.

“Well, I’m long silver, and if it goes down more, I hope I’m smart enough to buy more,” he said.  “I didn’t particularly like seeing it spike, because anything that turns into a parabolic move has to be sold. And I don’t want to sell my silver. I want to own it 10 years from now. Fortunately, that spike did break, and I find that encouraging and bullish.”

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).

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)

Jim Rogers’ latest on Gold, Dollar and Commodities

Jim Rogers, commodities and currencies trader extraordinaire, said he will sell dollars during the current dollar rally, reiterating his view of the Chinese Yuan as the “safest investment,” the Associated Press reported.

He characterized the commodities trade as a “big bubble,” although the prices of materials and agriculture have a long-term run ahead, suggesting investors wait for a pullback in gold before purchasing the yellow metal.

“Don’t put all your eggs in the U.S. dollar,” warned Rogers at a conference in Singapore.

“I happen to own some dollar at the moment, but only because it is so beaten down … If everybody is negative on it, including me, it’s time to rally. If the dollar rallies, I suspect I’ll sell all my U.S. dollars and put my money in other currencies.”

Rogers anticipates demand for the Yuan with the next few years. “The Chinese Yuan has been too low, either artificial or not. It doesn’t matter. In fact I’m buying some renminbi (Yuan) this afternoon.”

He also likes commodities-based currencies which have stable central banking policies such as the Aussie dollar and Canadian dollar.

The 68-year-old founder of the Rogers Holdings said he expects U.S. bonds to enter a long-term bear market, cautioning against any dollar holdings.

Rogers, a long-term commodities bull, holds commodities and currencies in his portfolio, and has shorted emerging markets and U.S. technology equities.

Commodities, he said, will rise in prices as supplies remain difficult meeting growing demand, especially from Asia, where population and income growth are expected to grow rapidly.  Rogers expects the bull market in commodities will extend to between 2018 and 2020.

“Raw materials is a big bubble, but it still has a long way to run,” Rogers said.

On the gold price, Rogers sees a consolidation, and maybe a decline, from current price levels.  On pullbacks in the precious metal, he said he will be a buyer.

“I would expect gold will need a little rest. If prices go down, I will buy more gold,” he said. “I expect gold to go much, much higher in a bull market over the course of the next 10 years. Everything is going much higher because currencies are being debased everywhere.”

Jim Rogers says to Expect Currency Crises

Jim Rogers, Quantum Fund founder and former partner with George Soros, told Russia Today he forecasts turmoil in the currency market within two years.

“Well, I would expect to see more crises in the currency market, maybe as soon as this fall, or certainly by the fall 2012-13,” Rogers said.  “And you’re going to see serious turmoil in the currency market, which is going to force the world and force America to do something about it.”

The legendary 68-year-old commodities trader doesn’t foresee a smooth end to the U.S. dollar as the premiere reserve currency, noting in previous interviews that Congress’ inaction to cut spending or raise taxes to stem the tide of $1.6 trillion annual budget deficits is evidence of the policy of kicking the fiscal can down the road.

“But that’s the way it’s going to wind up,” Rogers said of the disastrous course charted for the U.S. dollar, “because nobody is taking any serious action except talking about it.”

When asked why he thinks no meaningful action has been taken to reign in federal spending, especially this fiscal year, Rogers began to lay blame on the American press as a contributing factor.

“I am stunned by how little there seems to be in the American press about it,” Rogers opined.  “The American press seems to be more worried about wish TV star is divorcing which TV star more than anything else.”

Moving onto one of the root causes of runaway federal spending, the Pentagon, the American turned Singaporean resident faults U.S. wars in three foreign countries—presumably to mean the wars in Iraq, Afghanistan and Libya—as an example of America’s lack of resolve on the fiscal front.

“We have wars going on in three different countries right now. We’d like to have wars in four or five more if we could figure out a way to do it,” Rogers said.  “We’ve got troops stationed in 120 countries around the world that aren’t doing anything except making enemies for us and costing us a staggering amount of money.  This is all going to come to an end.”

Monetary history is replete with counts of superpowers falling from power through a steady debauching of their nations’ currencies, with France’s franc and Great Britain’s sterling during the 18th and 19th centuries, respectively, as the most recent past examples of what happens to countries that engage in overreaching foreign entanglements.

“Unfortunately, no country that’s gotten itself into this kind of situation gets out of the problem without a crisis or a semi-crisis.  We’re rapidly, more and more rapidly approaching a crisis that’s going to be bad for all of us,” he said.

“2008 was bad,” Rogers concluded.  “But wait until the next time around, it’s going to be even worse.”

 

 

 

 

Marc Faber again Calls for a Drop in Dow

Marc Faber told American news outlet Newsmax he expects stocks to tumble in May.

Following his call for a 10% decline in stocks—first, on Oct. 26, then, reiterated on Jan. 25, the Dow has refused to succumb to countless clues of an ailing U.S. economy failing to respond to herculean monetary stimulus from the Bernanke Fed.

The rally in the DJIA, following the post-crash March 9, 2009, low of 6,440.08, has since  taken the 30-stocks average to 12,928.45—or, a double—set on May 5.  Faber, the publisher and editor of Gloom Doom Boom Report, told Newsmax that the long-awaited 10% correction in the Dow is upon us.

Today, Faber said he’s troubled by several symptoms of fatigue appearing in the “internals” of the broader market, including a decline in the number of stocks reaching new 52-week highs, according to Wall Street Pit.

Another warning sign comes from metals prices, which have dramatically plunged in recent days, among them copper, also referred to as Dr. Copper for its highly correlated price pattern to equities.

While the Dow reached new intermediate highs earlier in the week, the price of copper failed to confirm the rally in stocks, lagging the Dow noticeably prior to Monday’s kick off to a commodities complex sharp reversal lower during the remainder of the week, further buttressing Faber’s case for an imminent continuation of the decline in stocks.

Confirming evidence of a reversal of global risk-on trades can be traced to both sharp declines in the U.S. Treasury 10-year note yield as well as a meaningful one-day 100+ pip rise in the USDX.

However, Faber’s recent call for a correction in stocks doesn’t make him a devout bear on the major indexes in the long run. With his overall underpinning thesis that a weak dollar encourages risk-capital flight into equities and commodities, Faber sees the Fed’s zero interest rate policy (ZIRP) lifting equities in nominal terms as long as real interest rates after inflation remain below zero.

In a Bloomberg interview on April 27, 2009, at a time of heightened fear in global equities markets, Faber cautioned, “Don’t underestimate the power of printing money,” arguing that a Fed in want of higher asset prices can achieve its objective through the proverbial printing press.

“The more things will go bad, the worse things become, the more the money printer at the Fed, Mr. Bernanke, will print,” added Faber. “He will print endlessly. Even if things go bad economically, you could have no revenues at companies and no earnings and stocks will go up because of money printing.”

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.