By Patrick A. Heller
Commentary on Precious Metals Prepared for CoinWeek.com …..
On August 7 I wrote my company’s latest monthly newsletter (titled Liberty’s Outlook). The headline read "The Wait Is Almost Over". As I write this early Tuesday morning, the price of gold is up more than 10% and silver over 25% in the past 20 days.
I didn’t necessarily anticipate that prices would start rising to this degree in August. But I was expecting some excitement by the middle of September.
There are a lot of people now wondering if they “missed the boat” because they didn’t buy physical gold and silver at the recent lower levels. They are paralyzed into inaction because......
- They fear that prices could once more drop sharply and somehow remain suppressed for a long time, or,
- That prices could keep rising from current levels and they shouldn’t wait any longer to jump in and buy.
The basic fear is that whether they buy or hold off from buying right now, it will turn out to have been the “wrong” decision.
I have some good news. You can relax.
There are shortages of physical gold and silver popping up everywhere. Inventories at the COMEX and in exchange traded funds are plummeting. Virtually all the major gold mining companies have closed some of their mines because they could no longer profitably continue operations.
On the demand side, orders for physical precious metals are pouring in. One London trader reported filling one order for $1 billion in physical gold and another for $4.6 billion in gold. These orders came from New Zealand and Australia, but the trader is convinced that these were ultimately purchases to go to China. This same trader also reported that, after several months of waiting, his pile of orders for physical silver has now been executed. India’s botched attempt to curtail gold imports has resulted in a massive demand for physical silver—so much so that total imports of both metals combined are now at all-time high levels.
Physical supplies are declining quickly at the same time that demand is reaching record levels. The US government and its trading partners and allies will no longer be able to suppress prices. They can only slow down the coming enormous price increases.
Prices will not rise in a straight line. There will be pauses and dips. Is it possible that gold could again fall below $1,200 and silver under $20? I don’t expect it, but there is a remote possibility. In my judgment, buying gold or silver at today’s prices has a limited downside, about 20% at the most. On the plus side, I anticipate that gold could easily rise at least 35% and silver might double from current levels within six months—even if there is one more major price drop.
And—if I’m wrong about the six months’ time frame (and I have been known to be too early in my timing in the past)—I’m confident about those price targets being achieved not long afterwards. Why am I so optimistic that $1,900 gold and $50 silver will be reached? Because—I do not expect prices to settle at those levels. Instead, I predict that gold and silver prices will blow right through these levels and reach multiples of those levels within three years.
With that perspective, don’t beat yourself up because you didn’t buy at $1,200 gold and $20 silver. If (when) gold reaches $4,000 and silver tops $150, even today’s price levels will prove to be tremendous bargains.
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) and at CoinInfo. 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. He is also the financier and executive producer of the forthcoming movie “Alongside Night” (trailer posted at http://www.youtube.com/watch?v=sTZ8vn45Cds).