By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com
This past week there were two investment conferences held simultaneously—the decades-old New Orleans Investment Conference and the 10th Annual Silver Summit. I flew to Spokane, Washington to make a presentation to the attendees at the Silver Summit.
There were a number of speakers at the Silver Summit reviewing the state of the US and global economies and the supply and demand factors for silver and other precious metals. I heard several common themes repeated by just about all of these analysts.
First, the speakers expect the US dollar to suffer from hyperinflation within three years, with the result that the US dollar will fail as a circulating currency.
Second, as the dollar continues to drop, look for gold and silver prices to soar and trade at multiples of current levels.
Third, the commodity exchanges trading paper contracts in gold and silver will fail because they simply don’t have sufficient inventories to cover their liabilities. The coming crash will result from a “commercial signal failure.”
Fourth, people who thought they held a position in gold or silver because they own commodity futures contracts, shares of exchange traded funds, or certificates for physical metal stored elsewhere are at high risk of finding out that they don’t own any precious metals.
Fifth, other major currencies around the world, with the possible exception of the Chinese yuan, will also be inflated to compete with the destruction of the US dollar.
There was also a common omission among the speakers that really stuck out to me. These same experts avoided making any short-range price forecasts. In years past, several of them would throw out their short-term price forecasts for gold and silver, but I don’t recall any who did so at the Silver Summit.
I can understand why analysts would be leery of forecasting prices over the next few months. There are so many major uncertainties hanging over the market that could lead prices to soar or drop at almost any time that these experts don’t want to risk being off the mark.
For instance, Spain’s economics minister recently stated that there is no solution to the debt problems facing Spanish banks. Politicians just don’t admit truths like this unless the circumstances are so dire that a crisis and crash is imminent.
Then there are the horrendous problems facing Bank of America. Three weeks ago, the Bank agreed to pay $2.43 billion to settle suits filed by shareholders over the bank’s acquisition of Merrill Lynch. Last Wednesday federal prosecutors disclosed that it is charging Bank of America for participating in a mortgage fraud program known as “The Hustle” or “High Speed Swim Lane.” This charge is added to the federal prosecution of the bank for more than $1 billion of mortgage fraud in transferring toxic mortgages from the bank to Fannie Mae and Freddie Mac. Then, last Thursday, The Wall Street Journal reported that Bank of America has been subpoenaed for documents in the LIBOR interest rate manipulation scandal. In addition to the nearly billion dollars that Bank of America has paid to settle other recent suits, this new combination of legal problems could threaten the survival of this bank.
These are just two examples of the number of crises swirling around the financial markets that make any short-term forecasts treacherous. While all this calamity can make it difficult to make accurate predictions for the next few months, they unfortunately make it easier to forecast longer term events.
Patrick A. Heller was honored with the American Numismatic Association 2012 Harry J. Forman Numismatic Dealer of the Year Award. He owns Liberty Coin Service in Lansing, Michigan and writes Liberty’s Outlook, a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Numismaster (under “News & Articles) . His award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 AM Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com.