FWIW **************************************** A Review of Silver Q&A
Dear Mr. Sinclair:
Q: You have done a good job at covering the gold market, which I find of enormous value, but I would like to know what you think of silver, because you have such good insight, and I would like to ask you a few questions too.
Given the developments you see unfolding with the "Five Fundamental Elements" of a long-term Bull market in gold, the bullish gold implication of remonetization via the Gold Dinar and potential reinstitution of gold in a modernized, revitalized Gold Cover Clause controlling M3, what is the impact on silver?
A: The answer is that the impact is clearly positive. However, just as platinum is a separate issue, silver is a separate issue from gold. I do not believe the extreme predictions being made for silver such as $100 have merit at this time, nor should they be considered as a criterion for buying silver now. It is my feeling, speaking as a Commercial Metal Dealer since I have been one in my past career, that the figures being relied on to compute the size of the short position are not correctly understood by the most vocal silver bulls.
These figures are skewed by a tactic to take advantage of hedger margin privilege and therefore may be leading some analysts astray in their honest effort to report to their clients. That being said there is a significant short interest in silver. That short interest is based on the industrial ingredient of the silver price, which in a serious recession or depression does silver no good. Silver is not money now and will not become money.
Silver's not poor man's gold but it does have a precious metals ingredient to pricing.
Silver, therefore, now has a price objective of $5.50 along with gold over $400 as silver's objective on this first Wave of the gold Long Term Bull Market.
Q: Does silver tend to have more volatility than gold?
A: I assume you are referring to this time around. If now, my answer is NO.
Q: In light of the fact that silver is now entering its 13th year of supply deficits, shouldn't this situation eventually lead to a dynamic bull market.
A: My answer depends on what you call a dynamic bull market. My answer to you is that silver is in a bullish phase that could turn into a bull market once silver starts over $5.60. However, this is the first wave of the gold bull market and gold's influence on silver here seems to me maximized at $5.50. Why not take these things one step at a time? I do and that is one reason for my success.
Q: If the economy begins to improve in June of 2004 as you have indicated, possibly along with gold remonetization, would not growing demand from industry for silver have an effect?
A: If the scenario unfolds with the revitalization of a modernized Federal Reserve Gold Certificate Ratio aka Gold Cover Clause then I suspect gold will trade in a range of $100 and silver would take the front running position.
Q: Would you agree that with supply limited that a substantial shift must take place in price in order for supply and demand to equalize?
A: That scenario is a top scenario for a commodity when under-supply meets equilibrium with demand because of price in a perfect world. I would not rely on deficit to equilibrium scenario in a commodity that has been in bear market for many years while in supply deficit.
Q:What is the best scenario for silver?
A: That is simple. Gold being positive with an expanding economic environment and modest inflation is the best case scenario, IMO, for silver.In conclusion, I agree with you that silver is beginning a bull phase but I disagree that a proven bull market exists in silver. Take a look at a 30 year silver chart.
Q: Historically doesn't silver trade with gold as a precious metal, therefore, does not a bull market in gold as it moves towards money also move silver towards money?
A: Gold energizes silver in the same direction as gold but in answer to your specific question, NO.
Best Regards, Jim **************************************
