Hello Claude,
As a Cafe member, you already know my thinking on my call for $9.78 silver, but I thought I would come to this thread and post my www.lemetropolecafe commentary, to draw out any info that some of the followers of this thread may have.
I came out with this price forecast as silver was crashing last Monday and said "the market is sold out". It just appeared to me that way after many years at this game. My big hunt is to try and find out if Martin Armstrong is covering yet.
Bill
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Speaking of silver, the Midas camp thinks the price of silver will double in 1999 and reach $9.78 by the end of the year. Our thinking:
To a great degree, silver is a psychology kind of market. Known official U. S. inventories ( Comex warehouse stocks ) have dwindled for years and now stand at a very low 76,596,00 million ounces. If one had been told years ago that the stock number would be this low, we all would have expected the price of silver to be substantially higher because of the tight supply.
The price has not responded to the upside however, as one would have expected due to future price expectations and inventory accumulation factors. With gold continually failing to stay afloat above the $300 level and commodity prices in general dropping sharply during 1998, producers and hedge funds have been encouraged to sell silver rallies- always expecting the spec rallies to fail. Purchasing managers have relied on " just in time inventory buying" for their silver purchases. With the dismal outlook for precious metals prices, there has been no reason to forward purchase in size and accumulate large silver inventories. Eventual supply has never been in doubt so far and purchasing managers have cut down their capital costs by reducing their silver on hand.
It is also a psychological market for speculative investors. Many remember what happened to the price of silver in the inflationary 70's when the price went to $50 per ounce. Nothing could be farther from the late 70's scenario than the late 90's one. Commodity prices have been trending down, not shooting up. We have seen dishoarding, not hoarding. This negative psychology has severely dampened speculative commodity fervor and hard asset investing.
As a result of this present day thinking, it is our opinion that silver inventories are critically low all over the world and that pent up speculative demand for silver could be unleashed at any time. It is not atypical to see Reuters news releases such as this morning's-" Indian silver firm on low supply". The Indian silver premiums have been strong for many months which also indicates that silver inventories are low. In a sense, silver is a "sold out" market in a big picture way and that is why the price has rebounded from sell offs. A "sold out" market is a recipe for a price explosion - "sold out" meaning those that want to be short, are so. Therefore, we have run out of forceful sellers.
This opinion, by the way, contradicts the Martin Armstrong camp ( Princeton guru group ) that thinks the price of silver is headed for $2.80. They say the silver inventories in the U.S. have been moved to London to hide them from regulatory authorities. Others say that the Arabs have huge silver inventories in London, accumulated from the oil hay days, and will dump them on the market. Well, Brent crude has been trading below $10. Why have they not dumped this mysterious silver? If there ever was a time for Arab silver dumping, it is now. They know that most commodity prices have swooned. Why hold on? Why not at least start shipping the silver to India. The silver premiums in that country have been running 10 to 12%.
The other tidbit of information that is out there that indicates that this market is "sold out" is the contango ( forward prices ) continues to trade at less than full carry ( the interest costs plus storage and insurance ). This unnatural, pricing condition of silver suggests that the silver market is actually very tight. The spot price of silver is almost the same as the March futures contract. A change in psychology could unleash a super bull market in a blink.
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