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Gold and Silver Supplies Are Getting Tight, Says Analyst

Written by Gary North on January 23, 2012

Stephen Leeb has been analyzing the markets for over 30 years. His recent comments are worth considering.

“What people don’t realize about silver is how illiquid silver is, and how little physical silver that is available in the market.  Now you have the Canadian, (Eric) Sprott, who has really been spot on for more than a decade, Sprott has just raised money and needs to take delivery of another 10 million ounces of silver.  My question is, from whom?  That’s the question.”

“Who is he going to buy it from?  The Chinese, who need it for solar?  It’s not around.  10 million ounces doesn’t sound like such a big number, but when you have such illiquid markets, it is a big number.  In reality, it’s a very big number, especially when you already have shortages.  People are already hoarding silver.  The Chinese are also hoarding silver.

When you have a situation like that, you haven’t seen anything yet in the way of a bull market in silver.  There’s no way of saying how high silver is going to go, but this is going to become an exceptionally scarce commodity.

This is likely, assuming that central bank inflation continues. But silver is far more volatile than gold, as we saw last year. Silver fell by a far greater percentage than gold did. That was true in the 2008 collapse, too. Investors need to understand this.

When asked about gold, Leeb stated, “Historically, when you see gold starting to act apart from other currencies, and not following the dollar, that tends to be extremely bullish for gold.  That means people are reaching out and looking for another currency.  These entities, which are buying, do not care whether the dollar is up or down.

Gold is no longer competing with any particular currency, it’s just sort of competing with itself.  The long-term outlook for gold is extremely bullish, there’s no way around it. What surprises me is that there is no belief in this uptrend in gold.  As an example, there was a report this morning that gold was going to top out at $2,000 and then enter a bear market.  This is crazy….

Silly, but not crazy. How can anyone know the top in advance? How can anyone know when central banks will cease inflating?

These kind of bearish reports are common and what it’s telling savvy investors is that the bull market in gold and silver has not really started.  Meaning, we haven’t seen anything yet.  All we’ve had so far is the appetizer.

When the bull market really gets going you’ll see everybody talking about this.  You will see targets of $10,000, $12,000, $14,000 for gold, and $200, $300, $400 for silver, as being commonplace.  Right now (in the mainstream media) you can’t get anyone to say gold will go much past $2,000.

His projection is radical.

I’m going to tell you right here that I think gold will end the year close to $3,000.  Silver will end the year at all-time highs.  My guess is the price of silver will end 2012 at $60, $70 or $80, and that will surprise a lot of people.”

It would surprise me. But if commercial banks do start lending, price inflation will return. Precious metals should rise. But bankers may not lend much money. The recent uptick in lending may flatten out. The banks have been in paralysis mode for four years. So have small businesses that usually borrow. They are not borrowing.

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