2017 - A Sterling Year For Silver?
I have spent most of my life watching, writing, speaking, trading, investing, and listening to almost any and everything to do with the silver market. Given this, there are several insights that you (the market) have provided me over and over again, at a level rising to conviction about many retail silver market participants.
Although what is written from this point forward will be opinion only, some readers might interpret it to be factual - or at least based upon much experience. Silver Investors - just like the metals themselves - are far more volatile than gold investors. To some people, silver can become a religion. The conviction of a true silver-bug is often comparable to that of a pit-bull. Being open-minded is not always the most highly-rated quality for this type of person.
Something far too many people are serious about, but which should really be taken with a grain of salt, is the annual price forecast for the precious metals. In my journey, it seems there is always someone who claims to have hit the annual forecast number within a few percentage points every year...five years in a row! This kind of “hearsay" floats over the precious metals' market like a fine mist.
Well, I too have once again been asked to forecast the silver price for 2017, giving me the questionable privilege of putting it down in writing for all to see. Trolls who haven't done well on their own can use it as an excuse to become resentful, and others are afforded the "cost free" opportunity to either dwell upon my guess, or dismiss it out of hand. But regardless of how seriously a reader takes this information, he or she needs to realize that markets are dynamic - that they “know” more than any one firm, software program, or analyst.
True insights into the market are almost always based upon the laws of probability. Predicting human behavior anywhere close to 100% of the time is virtually impossible. High frequency traders using highly complex algorithms, as well as some market participants who are adept at day trading or playing video games for money, can sometimes predict price action within different time-frames.
Mexican Silver Libertad (Courtesy Hugo Salinas Price)
What I believe is NOT likely this year...
Let's examine what, in my considered opinion, is unlikely to take place in the silver market this year. First, I do not believe that silver will make a new intermediate term lower print - which means that the dip just below $14 basis the spot market near the end of 2015, was the intermediate term low. There are many out in Internet-land who disagree with this statement. If you are one of them, and believe that my “conviction” is in error, by all means consider this a “freebee” to post your counter-point comments in the public forum.
Silver evokes such emotion in people! I still don't know why, but it has been obvious to me that on the one extreme are silver haters who shout out that silver is worth about as much as fertilizer, while others insist as an article of faith, that silver will trade at parity with gold - meaning that silver would have to outperform gold by a factor of seventy times!
Some prophets, with excellent followings, have predictive linguistics showing an eventual price of $600 per ounce silver. What makes this forecast so darned interesting, is not only how long it has appeared in the data, but that the real, so far unidentified driver would need to be industrial, given that a new important and significant essential use would demand such quantities, that silver would suddenly become “too valuable” for monetary purposes.
This is not a point I wish to belabor, but to partially validate their thesis, the qualities that silver possesses really do intrigue the imagination as to what the future could hold for its use in the electrical or battery area, not to mention some use(s) presently unforeseen.
A few others have forecast, and have made their respective arguments for a silver price of even $1000 or $10,000 per ounce. In a world of digits where adding a “ten bagger” to an account is simply done by attaching an extra zero, we really cannot rule out any “number.”
My take is simple… Before we get to a thousand dollars an ounce, let's get to $100! Yes, my bold prediction in print so many years ago has not been achieved—YET!
And while you're waiting, take a serious look at the newest book which David Smith and I recently published, titled Second Chance: How to Make and Keep Big Money during the Coming Gold and Silver Shock-Wave. Many books talk about how to make a lot of money. But we also take the time to give you a plan - and a unique portfolio setup to use - about how to keep a large chunk, rather than giving it all back like most people will end up doing down the line. Our recommendations align with human nature, not against it. You may have missed the first moon shot to 2011. You may have held on until 2015. Or you may have sat out the big 2016 run. But it's not too late. Whether you're a Boomer or a Millennial, our book offers you a Second Chance to sit at the Winners' Table.
Second Chance: The Book
But we did get half way to the three digit mark - and because so many indicators which I follow pointed in a single direction in mid-2011 - I did call that top, making many website members very happy that they had agreed with me and had chosen to exit their positions soon thereafter.
Some got all the way out, many decided to take partial profits, and a few did so by hedging...all the while, at that time, almost everyone else was convinced that silver was going to print a new all time nominal high. One hundred U.S. dollar silver an ounce seemed like an absolutely sure thing! But unfortunately, it was not to be.
Our Proprietary Alert! saved subscribers a 50% loss on open positions below $26
Those who stuck with us have always been given our best efforts. After silver had spent approximately a year’s worth of trading near the $30 level, it started to break down again. Over a period of many months, the $26 US level initially held against four intermediate term bear assaults.
Shortly beforehand, we sent out a huge alert to all subscribers (via a proprietary Alert! software installed for instant communication on our readers' desktops) that silver was going to break down through the twenty six dollar level...and it did just that! Many in the managed money community (Futures traders, Hedge Funds, etc.) whom we count as some of our most loyal subscribers, were extremely grateful for that call. My habit to Premium members has been to constantly remind them that all markets go up - and DOWN.
When we put out the alert about silver breaking below that level, it was obvious to me that the decline had a lot longer to go, and much heartache was ahead for silver investors. The most important factor was that the last of the prevailing bullish psychology had been broken! Check Gann, Elliot, Fibonacci, or whomever your favorite market analysis legend happens to be…Once we hit the 50% retracement and then go lower—people will give up, throw in the towel, blame others, and generally go into a state of denial. They seek an explanation, and market manipulation is always a favorite. For those who really want my view on this topic, simply read the entire chapter I dedicated to it in The Silver Manifesto.
My Biggest Mistake
My biggest mistake was thinking the bear retracement after such a large parabolic move would only last two years, maybe three at the most. I never dreamed that the silver (and gold) markets would continue to decline for almost five long years! Many lost faith in my long term fundamental analysis and who could have blamed them? Halfway through the decline, a couple of the biggest names in the business - traders who had been at it for decades, uttered the words "Gold will never decline below $1,500 again in my lifetime."
The USD$ to become a "Zim dollar"? Close, but no cigar.
Today, some well-known personalities state that 2016's impressive rally was nothing more than a bear trap, and that lower prices (below ~$14USD silver) are still ahead.
Additionally, the idea that the U.S. “dollar” will go the way of the "Zim dollar" (Zimbabwe) is impossible in such an advanced capital system -which means, not while the global debt market is still dominated by that most trusted piece of paper, the U.S. Bond - be it of 30 year, 10 year, or shorter duration.
There is so much debt in the world, that moving any significant amount of it into the physical precious metals' market as a safe haven is preposterous. Just one percent of the 20 trillion current U.S corporate debt is 200 billion, and dividing that by the purported 147 million ounces of gold said to be in Ft. Knox, yields a gold price of roughly $1300 an ounce. Sure, this is something close to the current price, but it would cover only one percent of the liability that U.S. citizens owe their government.
Zim $: Available on eBay for US$55 apiece.
Here Is The Prediction
So what is my wild as* guess for this year’s silver market? How about $22 per ounce? Of course, you should realize that as the market gives us additional, hopefully less contradictory signals, I'll be "drilling down" into the statistics to refine my "guess" based upon what the market is trying to tell me. Market action - not religious belief - is what drives the philosophical approach - and the suggested actions of The Morgan Report. That's what our subscribers pay us for, and I can tell you that I don't just casually put out my very best thinking on these things by blowing smoke...however, I do pay close attention to the signals from the market itself - and inform website members of my updated thinking accordingly.
Last year silver moved up forty percent in round numbers and my guess for this year is it that it may do about the same - perhaps thirty percent or so. However, it must be understood that if a true physical silver shortage were to occur, then watch out as the fireworks would begin. Many think that silver is still in a deficit and we use more than we mine. This is only partially true, as silver inventories declined from 1990 to 20016 by about 1.5 Billion ounces. Inventory of above ground silver has been BUILDING ever since, yet the price peaked (so far) in 2011 fully five years after the silver inventory was down to a very low level. For those serious students of the silver market, total mined supply does not cover total demand—but adding in the recycling of silver provides a “surplus” to the silver supply and thus inventory is back up to 1990 levels of about two billion ounces of investment grade silver (bars and coins).
Once silver works its way back through the $25-26 level on the upside - even as some will be selling as they get "back to break-even" - bullish psychology and new buyers will appear, supporting the market. As silver made the huge move into 2011, I noted several times in the public domain that more silver would be bought by the public above $30 than below it. I predict that the same thing will happen again this time. An important facet of investing is how emotion overrides good judgment. People just love to run with the herd, especially one led by a silver bull.
People just do not buy bottoms. It is very rare for a person to not only realize, but also take action during a bottoming process. Unpopular things are just that—unpopular! Silver is not very popular these days, although it certainly has many more followers than during the early Internet days when Ted Butler, Charles Savoie, and yours truly were about the only ones devoting our public missives to the silver story. Since those early days, many writers have and come and gone, though some relatively well-known ones are still around. During the next few years, as silver's resurgent bull run takes off once again, many others will step forward seeking the limelight.
Relative Value of Real vs. Financial (Paper) Assets (Courtesy Sources Listed)
The silver story's" true power is told only through the Big Picture.
In order to place this discussion in full context, please consider the following statements I made last year, during one of the many times I was interviewed.
At certain times in history, owning money is the best available "investment" because all other investment classes have become so corrupted and distorted that having money is the only sensible choice. We are at such a point today, which means that people who are the best informed choose to place a portion of their wealth into precious metals....There is no doubt that the monetary system is in the process of failing. Every time more news verifies that the global economic system is failing further, the mainstream will either ignore the data or spin it into a propaganda piece. What happens, is the market will determine the winners and losers by means of re-pricing everything. Those who have money exempt from political control will be rewarded above and beyond all others. This is because, not only the currency wars, but also the (actions of the) global elite, are quite predictable over the long term.
Investing, like life, requires balance if you are to remain truly free and happy. Tip the scale too far one direction and there is a price to be paid. Too much food can equal discomfort; a steady habit and a new wardrobe is required. As far as I am concerned, many retail silver investors become "unbalanced" when they allow holding too large of a position to begin adding stress to their lives. How much is enough? When it lightens your “load” in life as a hedge against financial uncertainty ahead, however you define it. When your days are consumed by watching and thinking about the price of silver, then you may have too much. Whatever the correct amount is, carefully decide and then obtain what fits your particular circumstance, so that it "feels right" for you.
It is because of this view, that at the close of every issue of The Morgan Report, I sign off with the following - which in gratitude to you the reader of today's essay, I would like to impart.
Until next month (and beyond), wishing you health above wealth, and wisdom beyond knowledge.
The Morgan Report: Building and Preserving Wealth. TMR is one of the pre-eminent reports on how you can succeed investing in the natural resource sector. Obtain your Riches in Resources Report. Go to www.TheMorganReport.com–How to Cash Flow Gold and Silver- Get Paid Silver for Stacking Silver!
David Morgan (Silver-Investor.com) is a widely recognized analyst in the precious metals industry; he consults for hedge funds, high net-worth investors, mining companies, depositories and bullion dealers. He is the publisher of The Morgan Report on precious metals, the author of Get the Skinny on Silver Investing, and a featured speaker at investment conferences in North America, Europe and Asia. You can receive a free 30 day trial subscription here http://www.silver-investor.com/joinfreelist.html