The bottom is probably in for silver – Morgan

http://www.mineweb.com/mineweb/view/mineweb/en/page96990?oid=156132&sn=2010+Detail&pid=110649

GEOFF CANDY:
Hello and welcome to this week’s edition of Mineweb.com’s Metals Weekly podcast. Joining me on the line is author of the Morgan Report, David Morgan. If we look at where the silver market is at the moment we are effectively in terms of prices at least in dollar terms, roughly where we started the year but concerns about macro economic pressures in Europe and the US have gone up if nothing else. Where do you see the silver market placed at the moment?

DAVID MORGAN:
We’re still in a long consolidation or basing pattern right now and I feel it will probably continue for a little longer. I think that perhaps the bottom is actually in for, not only the mining equities (I called that bottom probably in the middle of May or so and so far I am right, but barely, it looks like we might retest it) but also, it looks like the metals themselves probably bottomed very recently, it is too early to count that because time will tell but I think that we will actually work our way further up over the next several months and, by year’s end, I am looking for the silver to probably be in the $35-$40 range and gold will probably be well up $1750 – $1850 is my best take at this point in time.

GEOFF CANDY:
If we look at the factors driving the market, there was an interesting report out of HSBC saying that investor sentiment is clearly going to be the swing factor given perhaps the slowdown that we’ve seen on the physical side from industry and from jewellery as well. What is your take in terms of particularly the investment side of things? What would likely derail investment demand for silver at this stage?

DAVID MORGAN:
First of all let me say that I agree that investment demand is the driving factor of both gold and silver and, on the industrial side, I agree that it has fallen off measurably. However, I just put an alert out to our membership and there was a recent report coming out of Japan that they were going to increase their solar activity a great deal – so solar may pick up more in the upcoming years than perhaps was projected earlier. But, having said, the sentiment right now is for safe haven status and gold actually holds a much higher place in investors mind than silver does, so to get silver moving again I think gold is going to have to lead us up out of this basic pattern in a rather significant way and I think then silver will probably follow it up. It’s not always the case. Usually when these markets base and start moving back up it accelerates relative to gold; that could happen but I think gold is going to have to give a big push before new investment starts coming into the silver market.

GEOFF CANDY:
In terms of that investment demand – that sentiment, particularly the safe haven element of it, the query that has been raised a couple of times in recent weeks and months is the notion of the US dollar as the safer or perhaps the better term is preferred safe haven over gold and silver which has surprised a lot of people especially given the amount of liquidity that is being pushed into the system. What is your view of silver and perhaps gold’s role as a safe haven and is that likely to become more of a safe haven than the dollar in months to come?

DAVID MORGAN:
Excellent question. The ultimate currency is gold and silver there is no doubt about it. We have four or five thousand years’ history that proves that. We also know from history that every fiat currency that has ever been attempted has failed. but, as a practical person probably 99% of the population doesn’t even consider gold or silver to be an investment and so everything is settled in some kind of currency which is US dollars primarily, or any other currency on the planet (even a gold bug or silver bug if they had to meet a margin call or some kind of emergency medical expense or whatever would have to basically cash out of that position or some of it rather and get dollars or yen or whatever and pay that) so the fact is that even though the dollar has gone down from the time of inception of the Federal Reserve in 1913 basically, the fact is that the dollar is a settlement vehicle that is used throughout all commerce and because of that fact it’s going to continue to have some merit for who knows how long. Regardless of that the ultimate currencies are the metals, and it doesn’t take much more of a percentage of the population to wake up to that fact. In other words the more the dollar depreciates, and it will, the more it will wake people up to go into something that’s working well against it and that would be the metals markets. When you get these lulls like we’ve had for about a year in gold it makes people question their conviction. It was true then but maybe it’s different this time or it was true then back a year ago but now it has stopped. With the bull market over they started questioning their conviction and once that takes place you then just have to have new buying come into the market and I believe strongly that it will probably by years end.

GEOFF CANDY:
In terms of the manner in which people are buying silver we saw an interesting report from ETF Securities stating that interestingly silver ETFs did particularly well in June and saw net inflows over the second quarter. Is this a market that you think is going to continue expanding or are we likely to see a move back towards gold bullion, coins and bars?

DAVID MORGAN:
I think that the silver market is much tighter than most people believe. Most people just look at the price and based upon the price they get a feeling that silver is plentiful or what have you. The fact is that Sprott Asset Management came in with their Silver Physical Trust and bought approximately $200 million physical silver very recently. I think that’s another factor to my thinking and others that perhaps the floor is in and perhaps the bottom is in. Sprott is extremely savvy about the silver market, he is extremely bullish about the silver market and the last time that they made a purchase of that quantity it moved the price up about $2.50 over a rather short period of time. I don’t know if it’s going to happen this time or not. I am watching the market carefully. The point is that the silver market seems to have more of a safe haven status than it did, let’s say a few years ago. More and more people are waking up to the fact that silver has every quality that gold has only it sells for a much cheaper price. As people get squeezed more and more but still want to protect what they have left, the tendency is in the latter stages of a major bull market, like we are experiencing, more and more money moves into the silver market rather than the gold market because gold is so expensive for most people that they by-pass it even though they might prefer to own gold they move in the silver market. So what you said about the ETF is not a surprise to me at all.

GEOFF CANDY:
To close off with one would be remiss at the moment to talk about the silver market and not talk about what’s been going on in the US with regards to the CFTC report, the probe into perhaps or the likelihood of silver manipulation. We’re now expecting a report in September and October. There are few people that are sceptical to whether or not we are likely to see an actual report coming out then, but what are your views?

DAVID MORGAN:
My views are that there will be a report, if it happens on time or not I don’t know. My opinion is that the report will probably allude to some misbehaviour. I think it will be extremely watered down – there will be some position limits changed that have absolutely no meaning in reality, in other words that certain banks or certain hedges are allowed that really disrupt the market still and so – excuse my scepticism – but I have been studying this stuff for over four decades and I’ve looked at politics, government, money. Monetary history, what happened at the end of these great fiat systems and on and on and I just can’t see anyone standing up and telling the absolute truth that so much has been manipulated that banks have been doing it and we are really going to go after them. I don’t see that at all. I see some kind of watered down version that appeases the public and people that are in the mainstream media mostly will look at it and say this is really interesting – silver was manipulated or whatever word they choose to use and wow, we’ve correct that problem and move on while, in reality, it’s basically a whitewash. That’s my strong opinion on it.

GEOFF CANDY:
We’ll have to look out and see what happens when the CFTC does release that but as you heard from David it’s not necessarily going to be what some people are hoping for.

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