Tue, Jan 3, 2012
Subject: $1,000 Silver Possible before Hyperinflation
2011 was both an amazing and disappointing year for silver investors. The most disappointed of all are those who bought in during the April highs, when silver almost reached $50. However, what these investors need to remember is that not too long ago, people were fretting over changes in prices of ten cents or less. Not too far down the road, the difference between $29 silver and $50 silver will also seem rather minimal.
A look at some of the fundamentals which underpin the silver market will help remind our readers why G.I. Metals DMCC holds that silver will ultimately outperform gold, and what type of highs we might eventually see in an inflationary – and not hyperinflationary – environment. With current levels of central bank intervention to solve sovereign debt problems, we expect to see more economic contraction for the first part of 2012, followed by even more excessive money printing which will lead to inflationary, and eventually hyperinflationary,conditions. This only requires a greater level of velocity to occur, along with a loss of confidence in the world reserve currency, which we expect will begin to happen when bond speculators' attention is moved from Europe to America.
A revision of these fundamentals will also help remind us that physical ownership of silver should not be viewed as much as a short-term investment, but rather, a mid-term form of wealth preservation and growth. We see these types of scenarios most likely playing out within the next 1 to 3 years.
Silver as a Hedge and Multiplier of Wealth
Silver, like gold, has historically been recognized as real money and a store of wealth. The opportunities expected to arise from investing in silver now, however, are even more pronounced than those of gold. Because silver has not received the same attention as gold in the media, fewer investors know about it. This is beginning to change, but silver is still very early on in its bull market as compared to gold, which has progressed further in the second phase of its bull market. Presently, the silver spot price is largely dictated by the movements of derivative-based vehicles such as ETFs, futures and options, which are highly leveraged and cannot accurately track the true value of their underlying asset. Expressed simply, lots of paper is being exchanged, but little physical silver is actually even held by these institutions responsible for distributing these paper promises.
Stealth Silver Depletion will Mean Eventual Greater Gains
Because of the suppression in price that naturally results from these derivative based financial vehicles, investors are currently able to purchase larger amounts of physical silver at exceedingly low prices. This is causing the already small global silver inventory to be depleted at an alarmingly fast rate. The fact that silver has remained as undervalued as it has in the face of bottlenecking, backwardation and the appearance of physical shortages (in certain regions) only testifies to the evident disconnect that exists between the physical silver market, and the paper silver market. Eventually, a more complete disconnect is expected to transpire in which a flight to physical silver will occur to the detriment of the paper market.
Tags: 000, Drockton Bullion, Gold Price Manipulation, Paper Silver Market, Physical Silver Market, Real Gold, Real Silver, Silver $1, Silver Fundamentals, Silver Out Performs Gold, Silver Price Manipulation, Silver Shortage, Stealth Silver Depletion