Not only can silver provide a hedge provide a hedge against inflation, it also helps you add asset allocation and diversification to your portfolio, owning silver is easy, convenient and affordable, and thanks to the US governments pro-inflation policies, it’s going to be much more valuable in the near future.

This from Investors Daily Edges’  Ted Peroulakis:

I’m bullish on precious metals in general and silver is a nice compliment to your gold holdings.

Now keep in mind that silver can be quite volatile as industrial demand fluctuates. Silver often tracks gold prices although the ratio can vary.

I suggest you hold silver in your portfolio and here are some common ways to invest in silver:

Buy Silver Bars

An established way of investing in silver is by purchasing actual bullion bars. Physical silver can be stored in your home safe or at a bank safety deposit box. You can even have a dealer store your silver for you.

Buy Silver Coins

Buying silver coins is another easy way of physically holding silver. For instance, you can just buy American Silver Eagle bullion coins or Canadian Silver Maple Leaf coins.

Buy Options and Futures Contracts on Silver

Silver options and futures, currently trade on a number of exchanges around the world. Using options and futures as an investment strategy is usually reserved for the more experienced investor because this type of trading is quite speculative. You could multiply your potential profit several fold, giving you huge leverage on silver by investing in options and futures.

Buy Silver Mining Companies

Many investors buy silver mining stocks. Silver mining companies are leveraged to the price of silver and since they have millions of ounces of silver, every time the price of silver goes up, the value of their reserves increases. As the price of silver rises, the stock price should rise along with it. Some investors prefer to diversify by investing in precious metal mining mutual funds.

Buy Silver Exchange-Traded Funds

Silver Exchange-Traded Funds represent a quick and easy way for an investor to invest in silver. ETFs are a liquid, cost effective and a secure way to invest in silver. My favorite is the iShares Silver Trust (SLV). I see tremendous upside with this silver investment.

Source: Invest in Silver!

Gold slipped from a three-month high on Friday after data showed the U.S. economy had contracted by less than expected in the fourth quarter, taking some of the heat out of safe-haven buying.

Spot gold climbed 2 percent to $926.90 an ounce, its highest since Oct 10. It was quoted at $918.90/920.90 an ounce at 1406 GMT, up from $906.75 in New York late on Thursday. In the immediate wake of the data it slipped to $916.60.

Gold priced in euros hit a record high of 720.53 euros.

“On first glance the (GDP) figures are generally good, so they should be negative for gold,” Calyon analyst Robin Bhar said. “Growth is better than expected, but deflation is also stronger, so it is a bit of a double whammy for gold.”

The U.S. Commerce Department said fourth-quarter gross domestic product fell at a 3.8 percent annual rate, the lowest pace since the first quarter of 1982.

Analysts had forecast GDP contracting 5.4 percent in the fourth quarter.

Gold is still being supported, however, by interest in the precious metal as a haven from risk.

U.S. gold futures for February delivery on the COMEX division of the New York Mercantile Exchange were up $15.80 at $920.80 an ounce.

Market talk of China taking an interest in gold as an alternative to U.S. Treasuries, and of a European fund buying bullion, also helped support prices.

Gold has risen around 3 percent this week as investors have scrambled for the safety of gold and bullion-backed assets such as exchange-traded funds.

“The ETFs were up another 15 tonnes yesterday,” Simon Weeks, director of precious metals at the Bank of Nova Scotia, said, adding safe haven demand was driving the market.

The world’s biggest gold-backed ETF, New York’s SPDR Gold Trust , said its holdings jumped more than 10 tonnes on Thursday to a record 843.59 tonnes.

SPDR’s holdings have risen more than 63 tonnes or 8 percent since Dec 31.

European equity markets and U.S. stock index futures turned higher after the U.S. GDP data, showing a better appetite for assets such as stocks and shares.

The dollar also pared gains against the euro. A new wave of risk aversion hit the currency markets earlier on Friday, with the yen and dollar edging higher as investors worried about risk.

Although gold usually moves in the opposite direction to the dollar, the negative correlation between the two has broken down in recent weeks as both assets gained on risk aversion.

INDIAN GOLD HITS RECORD

Jewelerydemand remains hamstrung by high prices. In India, the world’s biggest bullion market, gold futures touched an all-time high of 14,448 rupees per 10 grams, deterring buyers.

Scrap sales are booming, however, as consumers cash in on the price rise.

Russia’s gold output rose by 13.3 percent to 184.49 tonnes last year, chiefly on the back of improving mine output, the Russian Gold Industrialists Union said.

Silver prices tracked gold, rising to a peak of $12.57 an ounce, their highest since Oct 1. It was later quoted at $12.44/12.50 an ounce against $12.31.

Silver ETFs have also risen sharply this year, with the largest, the iShares Silver Trust , up 660 tonnes or 10 percent in the year to date.

Among other precious metals, platinum and palladium were little changed. Platinum was at $980/985 an ounce against $972.50, while palladium was at $193/198 an ounce, against $191.50.

The world’s biggest palladium producer, Russia’s Norilsk Nickel , said its palladium output was 2.821 million ounces in 2008. It previously reported 2007 output at 3.113 million ounces.

A Reuters survey of 56 precious metals analysts and traders showed most expected the platinum group metals to post significant losses this year as the global economic slowdown pressures demand.

LONDON, Jan 30 (Reuters)

Silver followed a similar path until New York opened. The price spike that ensued quickly got extinguished…and silver got sold off for about 50 cents right into the Comex close. From there the price recovered somewhat.

Volume in gold trading on Monday was still pretty light…but three times heavier than Friday’s volume. The HUI tacked on another 3% to the upside. Considering that the U.S. dollar came within an eyelash of gaining two full cents yesterday, I guess we should be thankful that both metals did as well as they did.

As far as changes in open interest go, Friday’s price spike in gold resulted in an increase of 4,300 contracts…up to 295,065. In silver, open interest actually fell 107 contracts…to 85,554.

The Commitment of Traders report came out yesterday. For whatever reason, the boyz at the CFTC used last Monday as a cut-off date, rather than the usual Tuesday at the close of trading at 5:15 Eastern, so the changes in open interest only tell a four-day story. As was expected, there was further deterioration in the Commercial position in both gold and silver once again, as JPMorgan et al sold longs and added to their short positions in both metals. In a nutshell, their positions deteriorated by 1,500 contracts in silver and about 9,700 contracts in gold. As I said last week, and it applies even more this week…this is a “same old, same old” type of rally…as JPMorgan takes the short side of every long trade.

What it means is that unless JPMorgan gets overrun…or stops going short against everyone…this rally will end in the same way as they all have. They will get as many mice in the trap as they think they can…and then they’ll pull their bids, and we’ll have another waterfall decline in prices in both gold and silver. They could do it now (to paint the tape for year-end…or the beginning of 2009). Or they could wait for many more months….as we are nowhere near the old record highs in total open interest in either metal.

In silver and gold news, I note that the U.S. Mint has released its figures for December production in both gold eagles (161,500 one oz. bullion coins) and silver eagles (2,085,000). The mint used 846,000 troy ounces of gold in its gold eagle program in 2008. It’s been a lot of years since the mint went through that much gold in a twelve-month period. Of course for silver, the 19,510,000 one ounce silver eagles produced is almost double whatever the previous record year was.

I see that the silver ETF, SLV, added 987,000 ounces to its stash…and the Swiss silver ETF added another 300,000 ounces as well. There are also rumblings about the Central Fund of Canada adding to its position as well. We’ll find out soon enough if there’s any truth to that.

Over the weekend I see in a yahoo.com news story that Chavez in Venezuela is making more noises about seizing gold concessions “that previous governments granted private operators, in a bid to supplement fall in oil prices with proceeds from state-controlled gold.” And in a similar vein, I noted in a story in aljazeera.net on Sunday that after the military coup in Guinea “Guinea’s coup leader has frozen the country’s numerous mining contracts and gold extractions as part of what he called an anti-corruption drive. In a speech on Saturday, Moussa Dadis Camara said he would execute anyone who embezzles state funds. ‘We have blocked the mining sector. There will be a renegotiation of contracts,’ he said. ‘In gold mining areas, the decision has already been taken: no more extraction until further notice’.” (On Monday…less than 24 hours later…he recanted and said that mining could continue until a final decision was made. – Ed)

In the ‘terrible news’ department came the following. Firstly, a Barclay’s comment posted at Bloomberg saying that “Japan’s economy may shrink 12.1% this quarter.” And in another Bloomberg story the headline read…”Holiday Sales Drop to Force Bankruptcies, Closings”. The first paragraph said…”U.S. retailers face a wave of store closings, bankruptcies and takeovers starting next month as holiday sales are shaping up to be the worst in 40 years. Retailers may close 73,000 stores in the first half of 2009, according to the International Council of Shopping Centers.” In a story out of Charleston, S.C., it appears that the “giant ocean shipping company Maersk will begin pulling business out of the state starting in January and will be gone entirely out of the port by 2010. The shipping company accounts for 20% of all container volume in the port, and if lost would be an estimated $1 billion impact statewide, and thousands of jobs will be cut in Charleston.” And lastly, on the west coast, I read in a commentary on the Internet that “ship bookings for the Marine Exchange…which covers our two busiest ports in Los Angeles and Long Beach…are reporting a 30% fall in ship bookings for the first 6 months of 2009 compared to 2008. If that holds, kiss your ass good bye.” (Maybe that’s an indication of the 12.1% drop in Japan’s economy…plus the drop in Chinese exports. – Ed)

click to enlarge

On Friday I mentioned a story about Russia’s Gazprom cutting off gas supplies to the Ukraine on January 1st over an unpaid $2.1 billion gas bill. Putin has decided to weigh into the fray in this Bloomberg story entitled “Russia’s Putin, Ukraine’s Timoshenko, Discuss Energy” and the link is here.

In an essay excerpted from the latest issue of the Freemarket Gold & Money Report, of which he is editor, GoldMoney founder and GATA consultant James Turk offers his predictions for the precious metals markets for 2009. Turk’s essay is headlined “Gold and Silver in 2009″ and you can find it linked here.

In another life, your humble editor spent a considerable number of years in atmospheric research in the high Canadian Arctic. I know more than a thing or two about both meteorology and climate…and still have many close contacts working in that field. I saw Al Gore’s little documentary “An Inconvenient Truth” and was aghast at how it played to the emotions of the audience with both half-truths and obviously skewed data. Most people I knew in the industry felt exactly the same way…and since then, I’ve seen more and more stories coming out that have debunked the so-called “scientific consensus”. Here’s the latest one that’s shown up…this one’s from The Telegraph out of London, and is entitled “2008 was the year man-made global warming was disproved”…and the link is here.

I see that I’ve carried on quite enough for one day, so I’ll end it here. My last report of 2008 will be tomorrow morning and I’ll see you then.

Source: And Then There’s This… Tuesday, December 30th, 2008

But there is a silver lining to all this. First, the HUI put in a very impressive day despite the horrendous price drops in both metals. When I see this sort of counterintuitive action (either at the top…like in March, or at the bottom…like about now) in the shares, it’s my opinion that this is not the ’smart money’ investing…it’s the insiders buying…the guys who really know what’s going to happen next. Let’s see if this turns out to be the case in the next few days.

Secondly, in a couple of e-mails from Ted Butler, he advised me that “sometime in the past week, the Swiss silver ETF added close to 600,000 oz. and the London silver ETF added close to 400,000 oz.” In the second e-mail he had this to say…”GLD dropped another 17 tonnes yesterday (542,000 ounces). That’s 27 tonnes in last two days, 37 tonnes in last 6 days. 90 tonnes from the top in latter part of July, or 2.9 million ounces ($2.5 billion) and 12.75% of total holdings. There was no liquidation in SLV yesterday, but some liquidation might be reported today especially after yesterday’s 18.4 million share volume.” I await that SLV number with great interest, because despite the almost 50% haircut silver has had since March, the SLV inventory just keeps climbing higher.

I see that the usual NY commentator had an interesting tidbit yesterday…”These premiums are completely unprecedented in the 11 years of so I have been tracking them. India’s imports of gold in September will be stunning.”

In a Bloomberg story yesterday…”The cost of hedging against losses on US treasuries rose to a record on concern the U.S. government faces higher liabilities because of its rescue of mortgage companies Fannie Mae and Freddie Mac, credit default swaps show. The bailout of Freddie Mac and Fannie Mae is weakening the balance sheet of the U.S. and that is causing a deterioration of creditworthiness. The market is anticipating there might be more bailouts.” More bailouts??? Really??? Count on it.

The first story today is a follow-up to a story that I brought to you attention in my Saturday morning commentary. It was about Donald Coxe’s audio comments about “the biggest political intervention in the financial markets since Roosevelt in 1933.” I note an error from Saturday…he’s not with the Bank of Montreal…he’s with Harris Investment Management in Chicago. This story was in the Toronto Globe and Mail’s Report on Business yesterday and is entitled “The real reason commodities are tumbling”. The link is here.

The second story is about a debate that occurred yesterday at the Hard Assets Investment Conference in Las Vegas between the non-believers represented by Tim Wood of Resource Investor…and the Grand Poo-bah of the Gold Anti-Trust Action Committee, Inc….Mr. Bill Murphy. The GATA release of the results of that debate is linked here.

As I put the finishing touches on this report, I see that the US$ is now sitting over the 80 cent mark. Maybe it’s time to cash in our precious metals and buy the greenback? Not bloody likely! But having said that, despite the pain and the blood in the streets, these are the bottoms that should be bought. I think the HUI gave us a sign yesterday.

See you tomorrow.

Source: And Then Theres This Thursday, September 11th, 2008

Silver was flat right up until the gold price took off just before the NY open…and both metals rose together. Silver’s advance ran into resistance a couple of times during New York trading and the top came about an hour after the London p.m. fix. From there, it was taken down 20 cents and spent the rest of the session trying to gain it back.

Volume was pretty decent on the Comex (AMEX:IAU) in New York yesterday…but the price managers are still lurking about. However, the precious metals shares soared, with the HUI up 5.01%

As expected, gold open interest on Thursday was up considerably…it rose 7,561 contracts. As has been the case more and more frequently, silver o.i. went the other way…down 1,488 contracts.

The Commitment of Traders for silver showed that the traders in the Non-Commercial category went long an additional 2,681 contracts, plus they added 1,032 contracts to their short position. The bullion banks in the Commercial category only added 47 longs, but went short a rather substantial 3,281 contracts. In gold, the Non-Commercial (tech funds) only went long 1,506 contracts and covered 417 shorts; while the bullion banks in the Commercial category went long 7,889 additional contracts…and they went short another 9,532 contracts. The numbers indicate that volume was very light during the period. With prices rising the way they’ve been doing since the Tuesday cut-off for the COT, we should expect more deterioration as the tech funds have started to come in on the long side and the bullion banks are going short against them. Same old, same old. Can the price go higher from here? Absolutely! But, as of this writing, the bullion banks are still running the price show. The link to Friday’s COT is here.

Yesterday I received a most interesting e-mail from silver analyst Ted Butler. It’s well worth the read….”GLD added the largest one-day increase in metal today, I believe, with 46 tons (almost 1.5 million ounces or $1.4 billion). An increase was expected, but not of this magnitude. Funny thing is, I think the metal deposit increase reflects yesterday’s (Thursday) high volume of 16 million shares and not today’s (Friday) enormous 25 million shares. Today’s GLD volume was the highest upside volume in my memory (there have been a few bigger volume days, but always to the downside). We’ll see if more comes in Monday. Since June 11, GLD is up 108 tons, or almost 3.5 million ounces, and over $3 billion…versus no growth in SLV. SLV had pretty big volume yesterday (Thursday) and today (Friday) and is still due much metal to come in. This (activity) seems to confirm a flight to quality buying in metals…and further, that they have the gold to deposit, but silver just ain’t available.”

In a comment in his early Friday morning report, Bill King had this to say…” A last hour 21-handle SPU rally saved the stock market on Thursday. With insolvency fears of major financial institutions running very high, and Lehman tanking to 17.30, it’s not surprising to see impact trading in the SPUs because many people have a vested interest in keeping an appearance of calm.” That probably happened on Friday in the markets as well.

It’s the weekend, and with so much happening, I’ve got three stories for you. All of them are from The Telegraph in London, and two of them are from their international business editor, Ambrose Evans-Pritchard.

The first one has to do with G. Dubya. George had an unusual way of saying his final goodbyes to his compatriots at the just-ended G8 summit in Japan. You can sure tell he’s not running for re-election. The story is linked here.

The first Ambrose Evans-Pritchard piece warns of a deflationary collapse, as the money supplies in Britain, Europe and the US, plunge. Over the past year, global deflation has overwhelmed central banks’ attempts to reflate. In the meantime, the skyrocketing prices of the necessities of life have squeezed the world’s consumer, creating political problems throughout the globe. The article is entitled “Monetarists warn of crunch across Atlantic economies”. The link is here.

The second item by Evans-Pritchard is a warning from Bill White, chief economist of the BIS. White says that “The current market turmoil is without precedent in the post-war period…and the magnitude of the problems yet to be faced could be much greater than many now perceive.” (Memo to White: Bill, you have a keen grasp of the obvious. – Ed) The article is entitled “BIS slams central banks, warns of worse crunch to come”. The link is here.

There are disturbing trends…huge imbalances, disequilibria, risks… Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot. – former Fed Chairman Paul Volcker, 2005

This weekend’s blast from the past is one of the first C&W songs to ‘cross over’ to the pop charts…a long long time ago. RIP Patsy. Click here.

Without doubt, Hank & Ben’s Guardian Angels were looking out for the equity markets yesterday…as the Dow was only below 11,000 briefly. But, in my opinion…it no longer matters. I will pick this past week as the ‘point of no return’…the crossing of the Rubicon, if you like. Now it’s a death spiral. Hyperinflation of paper financial assets no longer seems possible, as the credit contraction really starts to bite…and the smart (and big) money has begun moving to the hard asset side of the street. A deflationary implosion appears to be gaining momentum. Could this be the first sub-zero blasts of the dreaded Kondratiev Winter?

Monday should be interesting. Enjoy the rest of your weekend, and I’ll see you on Tuesday.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.

Source: And Then There’s This…Saturday, July 12th, 2008

Gold began rising immediately and hit its NY high at the close of Comex trading. In Far East trading this morning, gold has been selling off slowly and quietly up until now…which is 10 p.m. NY time as I write this.

Silver followed a slightly different path. Although it sold off as well…shortly after London opened…its low of the day was shortly before the Comex open. It rallied for a couple of hours and then got sold off going into the London close and rallied strongly from there…following the same path as gold from that point on.

As of this writing, gold is down about $30 from its highs of last Thursday. The open interest changes for Thursday showed no sign of short covering…just an increase in open interest. I expected some big declines in o.i. for Monday…but it didn’t happen…for either gold or silver. Instead, o.i. for gold was up another 406 contracts and silver o.i. went up another 728 contracts. It’s either new shorts being added, or the bullion banks are going long instead of covering their shorts…which only they (for whatever reason) are allowed to do. Both have the same effect of increasing open interest. I had a most excellent question about open interest and the Commitment of Traders from a CDR+ reader the other day…and if you’re a Casey Research subscriber, you can read the question (dated 2008-07-08) and my fairly detailed answer, by clicking here.

Some headlines of note…(CNN) Falling stock markets and the credit crunch are putting the pension funds of some of the largest US companies into deep financial holes. (AP) The Fed is considering extending emergency loans to Wall Street banks into 2009. (Earthtimes.org) Global financial crisis could lead to losses of $1.6 Trillion to financial institutes (It will be at least 5 times that amount before the smoke clears at least five years down the road – Ed)

And in The King Report last night was the following comment….”regulators effectively took control of IndyMac but didn’t declare an official seizure in order to prevent public panic at other depository institutions. Perhaps we have witnessed the new paradigm that regulators will employ when taking over troubled institutions.”

Two stories today…as usual. The first has to do with gold and real estate in Vietnam. It appears that the VND (Vietnam dollar) is being debased so badly, that another medium of exchange has been revived by the vendors. The article is posted at vietnamnet.vn and is entitled “Selling land for gold, not VND”. The link is here.

The second article is silver analyst Ted Butler’s latest weekly commentary. In it, Butler argues that the silver exchange-traded fund SLV is being heavily shorted because the silver necessary to back the new shares issued by the fund is simply not available without exploding the price. The essay, which is well worth the read, is entitled “The Sole Silver Price Depressant” and is linked here.

The issue which has swept down the centuries, and which will have to be fought sooner or later, is the people vs. the banks. – Lord Acton

Well, everything came up roses for the President’s Working Group yesterday…oil, US$, the Dow, gold, silver. I hope they enjoy their small victories when they get them, because it ain’t going to last.

All of us at Casey’s Daily Resource Plus will see you here tomorrow.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.

Source: And Then There’s This…Wednesday, July 9th, 2008

Gold and silver were heading in the right direction during London trading, but moments after the Comex (AMEX:IAU) opened in New York, the not-for-profit sellers instantly dropped gold nearly $18 and silver about 42 cents from their highs in London less than 30 minutes before that. From the bottom, both gold and silver rallied, but gold’s attempt to regain any ground got squashed the moment that the LBMA closed for the day. Silver did a little better.

And in Friday’s trading, except for a dip in early Globex trading in the Far East, prices didn’t do much of anything until after the Sydney market closed. Then selling pressure showed up in both metals…which ended in mid-morning trading in London. From there, prices drifted very gently higher. Because Friday was a big holiday in the US, and everything was (supposedly) closed, I was surprised to see that there was trading in the Globex even after London had closed for the weekend. The questions would be…why was the Globex open…and who was doing the trading?

Open interest for Wednesday showed an increase of 4,771 contracts in gold o.i. In silver the increase was 2,980 contracts. A well known NY gold commentator had this to say on Thursday…”in four business days…open interest has risen 30,423 lots – 94.63 tonnes or 7.45%, during which time gold has risen 3.25%.

“The implication of this divergence was seen this morning (Thursday a.m.), with gold being ambushed immediately after the 8:30 AM (NY time) data ( US jobs) release. Gold fell some $18 in ten minutes: estimated volume of over 71,000 contracts was 51.3% of the whole day. A reasonable $10 rally attempt was turned back, although gold finished above the early morning lows.

“A contributor to LeMetropolecafe.com predicted this yesterday (Wednesday):

“ ‘Bill…the Cartel is so obvious and blatant in their illegal activities. The ECB rate announcement is due tomorrow and any increase will be dollar bearish. The US payroll data is also due. With gold making its way higher today but swimming with concrete boots on, supplied courtesy of the Cartel, the HUI has turned massively negative even with the USDX about to make a new ALL time low! Could it be any more obvious that they will attempt a gold raid tomorrow?

Cheers…Adrian’ ”

And it came to pass exactly that way…as it has done so many times in the past.

A couple of things in gold and silver that are noteworthy.

First…Australia’s largest gold miner, Newcrest Mining, announced that it had paid out the rest of its 4M ounce hedge book at a cost of US$1.6 billion. Would this move make Newcrest a take-over target? Secondly, in a lengthy phone conversation with Ted Butler on Thursday afternoon, he informed me that since June 12th there were about 2 million ounces of gold that had been purchased in the gold ETF…GLD. The fund is now almost back to the amount of gold it had in it before the March price ‘correction’. But silver is the jaw-dropper. You may remember that zero ounces of silver were sold out of the silver ETF…SLV…during the big $5 smack down in mid March. The amount of silver that has come into the silver ETF…SLV…since June 12th is zero, zip, zilch, nada, none…not an ounce!!! Ted says (and I agree) that the reason that no silver is coming in, is because a) there isn’t any to be had, or b) none is available at anywhere near current spot price, or c) a combination of both. Butler wrote an essay on this issue about three weeks ago where he felt that Barclays’ silver ETF (SLV) was short between 25-60 million ounces. Ted now feels that total owed has now risen to between 40-75 million ounces (that SLV should have backing all its shares, but doesn’t). Just to jog your memory, his essay on this issue (which I’ve posted before), is linked here.

Two stories for your reading pleasure today. The first is from the International Herald Tribune. In it, Russia’s new president, Dmitri Medvedev, said that “an America in ‘essentially a depression’ was in no position to lecture other countries on how to conduct their affairs.” The story is linked here.

The second story is about the future gold price. It’s from The Telegraph out of London and is entitled “Gold: the precious laggard that will hit $2,000″. The link is here.

And while recent market tumult has not had the intensity of March’s acute de-leveraging, the ramifications of recent developments are more problematic. For one, the markets are now coming to grips with the reality that much of the massive apparatus of various types of Credit insurance is insolvent and with little chance of recovery. While the nature of these companies’ obligations may not require bankruptcy filings in the near term, the market nonetheless recognizes that much of the future protection guaranteed by these companies/financial players has become worthless. – Doug Noland, prudentbear.com – 04 July 2008

I cannot overemphasize the catastrophe waiting in the wings, as all global markets continue to unwind. Old alliances that were solid in good times will disintegrate…as mass panic overcomes the major financial, economic and monetary players world-wide. It will be everyone for themselves in the fight to survive. And it will not be limited to just companies…but to nations and their currencies as well. The currency crisis in Vietnam, and the downgrade of Citigroup (C) by Goldman Sachs (GS), are the most recent examples…and last week’s comment that GM could go bankrupt, is another. There will be more…lots more. It’s going to be a really ugly summer.

I hope your weekend was great….and I’ll see you here tomorrow.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.

Source: And Then There’s This…Monday, July 7th, 2008

Right now some metals are poised to reach new all-time highs because of production deficits (aka lack of supply), while other metals still remain hostage to an onslaught of new supplies – so their prices are dropping.

Silver falls in that “too much supply” camp. More than any other precious metal this year, silver’s prices will be put to the test. We’re all waiting to see if silver’s price can hold up under the growing bombardment of new production.

Over the last five years, silver prices have surged more than 250% to just under US$17 an ounce at the moment. On May 20th, my Commodity Trend Alert (CTA) service, turned “neutral” on silver, after my CTA subscribers earned big profits on several existing open silver positions since 2003.

But the tides have turned. And now rising supplies are forecasting a sizable silver correction.

Meanwhile, gold is still soaring. Gold production peaked in 2001 and continues to decline this year, which is VERY bullish for gold prices. But that’s certainly not the case for silver and to a lesser extent, palladium.

Could Silver Break Away from Gold?

Gold and silver generally track each other in a bull or bear market. When gold goes up, silver goes up and vice versa. But in this case, a divergence might be possible, if only temporarily.

In the base metals arena, a similar price divergence has already happened after seven years of generally spectacular gains for the complex. These include namely copper, lead, tin, nickel, iron-ore (steel), aluminum and zinc. Over the last 18 months, nickel and zinc prices have crashed while tin, lead and copper prices have posted gains. It’s not impossible for metals to break away from the primary uptrend if supplies begin to saturate individual fundamentals.

Over the last 12 months, gold prices have risen 37% while silver has gained 31%. Both metals continue to track each other on a total return basis.

But thus far in 2008, gold prices have risen just 8% while silver has rallied 15%. The fundamentals, however, don’t support silver’s higher returns this year.

Will Investor Demand Support Silver?

Gold is rapidly approaching its first year of net supply deficit while silver is increasingly becoming a net surplus commodity. And according to textbook economics, rising supplies eventually dilute a rising price trend and drag prices back down.

Considering the demand for both silver jewelry and silver industrial supplies is waning, the bulk of global demand for silver will have to come from investors going forward. This will come mainly from exchange traded funds like SLV or the iShares Silver Trust in the United States and other silver ETFs traded in London and Zurich.

I have serious doubts investor demand will continue to support silver at these levels without suffering a major correction first.

The iShares Silver Trust has already seen a massive increase of silver accumulation since 2006 – over 180 million ounces. Silver supply has surged since 2001, according to GFMS, a precious metals consultancy firm, rising to 670.6 million ounces. Unless investor demand consumes this rising supply – and more is projected in 2008, then prices will decline. That’s because industrial demand has probably peaked.

Last year, industrial demand for silver increased 7.2% to a record 455.3 million ounces, according to the 2008 World Silver Survey. That offset the long-term decline in demand for traditional usage, mainly in photography, jewelry and silverware.

But another survey by Barclays Capital points to alarm bells for the silver market. The survey shows new supplies just hit the market this year. Barclays believes mine production will grow by 6.5% in 2008 and faster than last year’s increase of 3.6%. That could create possibly the largest surplus of silver in over 20 years.

A disappointing initial public offering (IPO) in London is another bearish signal for silver bulls.

Mexican silver company, Fresnillo PLC, went public in London earlier this month and declined 7.5% on its debut – that’s a bad sign. Despite stronger silver prices this year, the IPO was not received well in the markets.

Gold and Platinum: Precious Metal Kings

Though I’m not predicting a long-term silver decline, I think it’s time to reduce your exposure during current price strength. The big picture for sister metals, gold and platinum, however, remains incredibly bullish because supplies continue to tighten.