Hi Darleen, here are some turkey's thoughts on metals I've entertained last couple of days:
As one might be well aware of, metals and alloys thereof such as silver,
gold, copper, zinc, palladium, platinum, etc. have been sitting
unprettily at multiyear lows and for some time. Adjusted for inflation,
many metals are barely above their pre-inflation '60's to '70's trading
ranges and some are well below.
Here's a look at the pros and cons of biting on some of them.
Platinum...Jan. contract close today at 352.40. Last year, disruptions
in deliveries of supply from Russia sent the price well over $500 an oz.
More is being used than mined at current consumption levels. Source
countries of greatest production are in unstable, unreliable regions.
Best replacement metal for industrial uses: palladium, gold.
Probable future outlook: retest of recent highs.
Palladium...starting to replace platinum in such industrial uses as
catalytic converters. Price has swung wildly over the last couple of
years spiking double it's current level of about $280.
Russia a major source.
PFO: Could double again but remains a thinly traded commodity and very
volatile.
Gold...periodic sales by governments of producing countries such as
Russia, Australia, and Canada have kept prices soft. European Central
Banks selling in their jockying to set up the new Euro currency have
also pressured the price of gold. Price has fallen from $400 just a
couple years ago to under $300 now.
Industrial use growing, mining production lagging--a yearly shortfall
exists here. Huge quantities of gold have been leased out--the resulting
money's in various other world markets. At some point these leases will
have to be repaid in gold. Where is the gold to do this? Probable
government manipulation by numerous countries ongoing to keep price
stable as any significant move might spook world stock markets.
PFO: A short squeeze resulting from unforseen events could send prices
sharply higher.
Silver...price sitting at 4.89 an oz. World stockpiles at the end of WW
II reached 10 billion oz. So much silver the US coined nickels out of
silver to preserve vital nickel for manufacture of armored vehicles.
This stockpile occurred because for thousands of years it was mined
worldwide with no significant industrial use. Uses such as silverware
allowed for high % recycling. Change in fundamental? Industrial use and
uses growing rapidly. Current yearly world production/demand deficit is
190 million oz. Any significant economic recovery in the third world
will cause this deficit to soar.
Probable timeline of interruption of supply--two years. Possible
termination of supply by end of year 2000.
There has been talk that India will dump silver if the price hits $8.
Two things. First, even if true, that is a 60% increase in price from
present levels. Second, the silver dumped will be used up. And another
thing, most silver used is not usage sensitive in the case of higher
silver prices--switchplates, film, cow mastitis treatment, etc, are only
pennies here and pennies there. The shortage will likely get worse even
at $8 an oz. New mines take years to gear into production. Platinum also
is a good speculation because of its industrial demand. Most brokerages
offer a metals contract where you send in money for so many oz and the
brokerage invests the money elsewhere but promises you the cash or
delivery at any point you so choose. There may be a $500 or $1000
initial investment requirement.
For silver, circulated Canadian "junk" silver coins from the '60's or
'50's are good. They are 60% silver in composition. And they sell pretty
close to melt value. Kennedy 40% silver halves are also good. Some
places sell them below melt value of their silver. In a shortage that
melt value will come out.
PFO: Price could do an Amazon.com. Speculation could spike the price
well above old highs at some point in the next few years.
Copper...price has fallen nearly in half since last fall. Asian
contagion and subsequent falling demand are culprits. Current interest
rate cuts have worked to turn around fundamentals as building in US will
draw on copper stocks.
PFO: Asian recovery necessary to validate hopes for new bull run.
Zinc...smelting capacity running near peak while demand rises. Price
rising.
PFO: Fundamentals encourage rosy outlook.
Lead...environmental laws making mining of lead unprofitable due to
stringent smelting regulations. Mining stocks of properties with heavy
lead credits have been badly hurt.
PFO: At some point the bearishness caused by government edict may
boomerang but for now the smelting dirtywork done for us in Mexico
post-NAFTA should fill the gap. Stay away.
At any rate, considering all the bad news for metals in recent months/years, the outlook for much of the complex is rather positive I think, especially as we approach 2000. Gobble gobble. |
