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Bringing you news and views from both sides of the
debate, here’s what Kitco analyst Gary Wulf has to say: (My comments are in purple)
(Kitco News) - Silver bulls should have cause to celebrate once again in 2012, even
though supply/demand hangovers caused by an intoxicating run to early-year
record highs actually has them swallowing small losses for 2011.
Many experts predict silver prices will end 2012 at
double or triple their mid-December level of around $29 an ounce, although a
few bearish holdouts believe the market could lose another $10 from here.
I don’t disagree with that assessment.
DEMAND
"I see $60 silver by the end of 2012,"
said David Morgan, independent precious metals analyst with
Silver-Investor.com. "Demand from investors will pick up, as we see
continued deterioration of the world financial system."
HSBC Securities also foresees renewed investor
interest and a 7% expansion in global demand in 2012, to an unprecedented 968
million ounces. TD Securities looks for an even greater 9% gain, to 1.021
billion ounces.
HSBC predicts possible spikes to $40/oz "or even higher," in 2012 and a
season-average price of $34/oz.
Remember, David Morgan is a DEALER and it is in HIS
best interest to sell silver. I am more apt to go with the HSBC prediction
although I despise them for being in bed with JP Morgan on the price
suppression scheme so often talked about here and on other sites.
"Silver acts like a precious metal on the way
up and an industrial metal on the way down," said Gijsbert
Groenewegen, managing partner of Silver Arrow
Capital Management in New York. "Silver will move contrary to the trend
of the U.S. (dollar)."
Several analysts believe collapse of the euro is now
all but inevitable; a watershed event which will send EU investors fleeing to
the relative safety and liquidity of the huge U.S. bond/dollar market.
“Metals have mutated from 'safe haven' assets
to 'risk' assets," said Spencer Patton, founder of Steel Vine
Investments, who predicts 2012 will end with silver quoted around $18.
"I expect 2012 will present some major changes in the eurozone," that will lead to weaker silver prices.
Groenewegen concurred, but warns that strength in the dollar -- and accompanying
weakness in demand for silver -- may be very short-lived, however.
"The financial situation in the U.S. is not
much better than the EU. If politicians fail to reduce the U.S. debt,
interest rates will skyrocket and paper money will lose all
credibility," potentially sending silver spiking to stratospheric levels
as high as $200-400.
SUPPLY
Several leading research firms and banks expect a 1%
to 6% increase in the global silver supply during 2012, as scrap redemptions
accelerate and mine production grows.
"Silver mine output has been rising notably for
years. Silver prices are multiples above the costs of production," said
HSBC. "The result has been an acceleration in
silver output that would have been almost unimaginable, just a few years
ago."
HSBC expects total world supply to exceed 1.1
billion ounces in 2012, representing a 24.4% increase over levels seen as
recently as 2008.
"TDS models are suggesting that the silver
market will be oversupplied this year and over the next two years, as
production grows," said the Canadian-based firm, which predicts a 109
million ounce surplus for 2012.
"In the past, silver’s industrial side
has generated deep corrections for the white metal and we don’t expect
it will be much different this time around, with a correction to materially
below $25/oz entirely possible," TDS said.
Still, Patton said that long-term supply/demand
factors remain relatively positive for silver.
"Every cell phone in the world has a little bit
of silver in it--and once
silver is used, it is gone. We should see tremendous
expansion in the handset world for the foreseeable future," he said.
"Thus we are seeing an infinitely declining amount of silver on the
planet...but in 2012 we may see more supply entering the market, as many
silver speculators sell."
Yes … ONCE
SILVER IS USED IT IS GONE …. BUT NOT NECESSARILY. You see, companies
are wise to recycling electronics now that silver has a greater value
attached to it. In my view, we will see more recycling of silver currently in
the industrial world. The views of this piece almost echo the sentiments for
my LONG TERM FUNDAMENTAL outlook of silver (link), which in my view haven’t changed,
despite my INTERMEDIATE BEARISH STANCE.
OVERVIEW
In summary, most analysts feel the strong underlying
fundaments which lifted silver to new heights in 2011 have not changed, even
though April's record has since been slashed by more than 40%, leaving values
languishing $1.85 lower versus where 2010 ended, around $28.78/oz.
"We are still using fiat money and (sovereign)
debt levels are still extremely high. The debts have to be paid or defaulted
on. Either way, that means significantly reduced economic activity world-wide,"
said independent analyst Hubert Moolman. "That
likely also means another big stock market crash. Before this happens, it
would be foolish to talk about a top in precious metals," because these
conditions are precisely what will drive silver prices significantly higher
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