NEW JERSEY (Commodity Online): The pull-back in silver prices is over and it would make another move towards $50 an ounce and instead of pulling back, this time silver will break $50 resistance and reach new all time nominal highs, according to an assessment by National Inflation Association. It said that silver is a much better bargain than gold because the gold/silver ratio is currently at 42 amd during periods of high inflation it always declines to 16.
NIA has published the following questions that investors may have on the metal and its views:
QN: I bought silver when NIA declared it the best investment for the next decade at $17 per ounce. Should I get out now while I am still up big? For my friends who don't own silver, should I tell them it is too late to invest? What is your outlook for silver in the second half of 2011?
NIA: It is dangerous not to own gold and silver. Although the U.S. dollar seems like a safe haven to most Americans because it has a number on it that always stays the same, the U.S. dollar is a fiat currency with no real value because it is no longer backed by gold. The only reason the U.S. dollar still has any purchasing power at all is due to the public's perception that it will always be accepted as money. Gold is the world's most stable asset and silver possesses all of the same monetary qualities as gold, but is a lot more volatile than gold.
We believe silver is a much better bargain than gold because the gold/silver ratio is currently 42 and during periods of high inflation it always declines to 16, which is where the Coinage Act of 1834 defined their values until silver was demonitized in 1873. Ever since silver was demonitized, America has been a fiat country gone insane with Americans being brainwashed into believing silver is only an industrial metal and paper dollars are money. Bernanke's devastating inflationary monetary policies will soon wake Americans up to the truth and we will see a decline in the ratio back to 16 or below permanently, which means we will see at least a 2.625 times increase in purchasing power for those who own silver vs. gold from their current levels. We are 100% confident the gold/silver ratio will at least decline to 16 this decade.
Because silver has been so undervalued for so long with a gold/silver ratio averaging north of 50 for the past century, most silver produced in recent decades has been consumed by industrial purposes and there are actually much larger inventories of gold available above ground today. Most likely we will probably see the gold/silver ratio overcorrect to the downside, possibly down to 10 or lower. Only 10 times more silver has been produced in world history than gold so a gold/silver ratio of 10 is actually a very realistic possibility. This means those who own silver will likely more than quadruple their purchasing power from current levels this decade, while Americans with savings in U.S. dollars lose all of their purchasing power.
COMEX registered physical silver inventories have declined 30% over the past six weeks down to 28.8 million ounces or just $1 billion worth of silver. A major shortage of physical silver is developing. A COMEX default is likely coming in the near-future as those holding futures contracts demand physical delivery and COMEX can't deliver. This could cause an explosion in silver prices, possibly to $100 per ounce overnight.
Silver prices rose too far too fast during the month of April. When we announced silver as the best investment for the next decade at $17 per ounce, we never thought silver would nearly reach $50 per ounce in early 2011. We were looking for silver to reach $50 per ounce in late 2011 with a decline in the gold/silver ratio this year to 38.
When silver reached a new all time nominal high of near $50 per ounce in April, the gold/silver ratio temporarily declined as low as 30.5, far below NIA's outlook for 2011 of 38. Silver prices were due for a natural pullback, but because COMEX raised margin requirements on multiple occasions right when silver began to dip, we saw a very rapid and steep pullback in silver prices due to forced liquidations, profit taking, and panic selling. The timing of COMEX's margin requirement increases can be described in no other way than manipulation.
COMEX has been manipulating down the price of silver in order to help their friends at JP Morgan, who have a huge silver naked short position. The manipulation has allowed JP Morgan to decrease its silver short position to just about its lowest level since it was acquired in 2008 from Bear Stearns with the backing of the Federal Reserve. Without this manipulation, it is possible that after a brief pullback, JP Morgan would be covering its silver short position today above $50 per ounce.
Although the pullback in silver was steep, this was not unexpected. It is something that NIA has warned about on countless occasions. We believe the pullback in silver is now over and most of the silver sold by speculators is now owned by stronger hands that are holding for the long-term. In our opinion, silver will make another move towards $50 per ounce and instead of pulling back, this time silver will break $50 per ounce and reach new all time nominal highs. We don't see much downsize risk for silver, because there are many investors who are waiting to buy as much silver as possible on any kind of dip from these levels.
QN: What do you think about the new Utah money where people will be able to pay taxes and each other in gold and silver coins? Do you think this will pass the U.S. Senate and what will that do to silver?
NIA: Utah just legalized gold and silver as a currency, which is something that NIA strongly supports. Gold and silver will now be exempt from state capital gains tax in Utah. However, Utah doesn't have the power to exempt it from Federal capital gains tax. We support Ron Paul for President in the 2012 election because he will eliminate Federal taxes on gold and silver. After all, when gold prices go up you actually aren't making money. You are simply retaining your purchasing power as the U.S. dollar goes down. Ron Paul is the only candidate who understands this and understands that the U.S. constitution mandated only gold and silver to be used as legal tender. Fiat currencies are unconstitutional. Ben Bernanke is a criminal who is stealing the wealth of all Americans through inflation and NIA will not stop until all Americans understand the truth.
QN: At the price of gold and silver now, is it safe to continue to purchase these metals? When do you plan to sell?
NIA: We are still buying gold and silver, and we will hold our gold and silver until the Dow Jones/gold ratio at least declines to 1, the median U.S. home/silver ratio at least declines to 1,000, and the gold/silver ratio at least declines to 16. Only when these ratios are met will it be a sign that it is time to diversify from precious metals. However, we will never sell precious metals in order to buy a fiat currency. We plan to use our precious metals to buy dirt cheap Real Estate in the U.S. once the market has completely bottomed, which is still many years away from happening.
