Silver Stock Report
by Jason Hommel, Feb 7, 2006
I’m beginning to think that there are several kinds of money creation inflation that we need to pay close attention to:
First, there is the inflation that started with banking in general, and accelerated in 1913 with the creation of the Federal Reserve. This is the inflation we see in total accumulated M3, the measure of money in the banks, which exceeds $10 trillion now, which, if you divide by the gold held by the U.S., shows that the gold price can exceed $38,000/oz.
For more on that, see my article:
Future Gold & Silver Prices –December 21 email.
Second, there is the inflation that increased in the mid 1990’s with an acceleration of the increase of M3 from a plateau of about $5 trillion, which also started with the rigging of the gold price through central bank selling. This inflation should take the gold price towards $2000/oz., as mentioned in the recent Cheuvreux report that endorses GATA’s work. (see below).
Third, there is the more recent inflation in M3, which is now increasing at a rate of about 20% annually, which should help propel the gold price up another 10-20% within months. In this category of shorter term events driving gold prices up such as, such as terrorism, mid-east tension & the Hurricanes leading to rising oil prices, a declining dollar against other currencies, etc.
Fourth, the trade deficit (whereby we send U.S. dollars to China that they are using on developing their infrastructure) is causing the immediate rise in price of many commodity prices, such as in copper, zinc, lead, steel, molybdenum, uranium, oil, and such.
So, what will be the impact of GATA’s work and the Cheuvreux report? When it first came out last week, I was ecstatic! This is what GATA has worked so hard for: to get the world to recognize the gold leasing scam of the last ten years, that the central banks have about half the gold that they claim to have. This means that when the 1500 tonnes of central bank selling ends, in a gold market with a mine supply of 2500 tonnes and a demand of 4000 to 5000 tonnes, the gold price will take off. GATA has also long maintained, for the last 7 years, that when the investment community recognizes this (through others acknowledging what has happened as in the Cheuvreux report), then the gold price will really move!
But suddenly, I’m more pensive. The Cheuvreux report, endorsing GATA’s evidence of central bank selling, is just about as bullish as the Silver User’s Association report that endorses the silver shortage feared if a mere 130 million oz. of silver were bought up by the Silver ETF.
Since then, silver has risen 27% in the last three months from about $7.75/oz. to a peak of $9.91/oz.
So, perhaps gold will rise about 30% in the next three months, from about $550 to about $700 due to the Cheuvreux report???
Yes, the central bank selling, once revealed, and once it comes to an end, is bullish for gold. Yes, the silver shortage is extremely bullish for silver. But perhaps the entire world will wake up to the reality of precious metals (and head to $36,000/oz. for gold) slower than I would have thought? Perhaps it will be the continuing rise in commodity prices that will wake up more people and have a bigger impact on rising gold prices (than things like the Cheuvreux report)?
After all, the whole world will not read some report by some big brokerage house, but the whole world sees world commodity prices soaring!
I don’t know which will have more of an impact on investor’s decisions to buy gold and silver. I do know that if less than 1% of the world’s paper money moves into gold and silver, that gold prices will likely exceed $2000/oz., and silver will likely exceed $100/oz. But that still is not happening.
Central banks may still sell some gold. Silver investors who inherit silver and know nothing about it may still dump it to the coin dealers to “get their money’s worth” out of the silver. Or, maybe more of the public is now dumping silver to take advantage of the recent nominal price gains?
Yes, at any time, it appears if only one billionaire bought a billion dollars worth of silver, that silver prices could be driven to $25/oz. perhaps by tomorrow?
Regardless, gold, silver, and commodity prices are all screaming upwards in price, and will continue to do so. And anyone looking for a significant dip in price does not know the full story.
So, with that introduction, here’s The 56 page Cheuvreux report, followed by many links showing that this is a huge news item, showing part of the story on why gold will soon head to $2000/oz.
Cheuvreux Metals & Mining Report: January 2006
Remonetisation of gold: Start hoarding
GATA’s press release:
Credit Agricole’s Brokerage Says: GATA is Right, Start Hoarding Gold
Thursday February 2, 8:30
Gold spike predicted to follow Central Bank Lending
Gold Bugs Eye $600, $850 and Far Beyond
By Nick Godt, 2/6/2006
Credit Agricole’s Brokerage Declares “Start Hoarding” Gold!
By Jon A. Nones, 02 Feb 2006
Gold: About Central Banks, And Liquidity
February 06 2006 – Australasian Investment Review – (AIR)
Broker Cheuvreux Ponders $2,000/oz Gold
By: Dorothy Kosich ’05-FEB-06
Gold Prices May Rally From 25-Year High on Iran, Survey Says
Feb. 6 (Bloomberg)
Here’s a quote from the Bloomberg article:
“Even a small transfer of money into gold from other assets would be enough to boost prices, analysts said. One percent of the value of U.S. equities and bond markets is equivalent to $350 billion, or 19,800 tons of gold, Credit Agricole SA analyst Paul Mylchreest said in a report on Jan. 31.”
That quote is shockingly similar to one I’ve made in many of my reports. The implications are huge. 1% of world finance (worth 19,800 tons of gold) is about 4 times current annual gold demand, and nearly 8 times world annual gold production.
Thus, the gold price must go upwards tremendously, and anyone telling you any different is selling you something.