Taken from the svl thread:Following comments from Dr Alex Cowie...

Taken from the svl thread:

Following comments from Dr Alex Cowie from Diggers and Dealers.

Very bullish for silver ("the new gold").

Enjoy

TTG
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Next year is looking ripe for small cap mining stocks.

Commodity prices could take a knock and still be strong. However, I think they will keep rising next year on the back of a weak dollar, strong Asian demand, improving US demand, and ongoing supply problems. I reckon coal, copper, tin, gold and silver will be the star performers out of the whole commodity spectrum. I'm looking forwards to adding some other commodities to the mix, and have a few aces up my sleeves ready for January and February.

Helping the cause for small cap miners is also an increased risk appetite in the market. Companies are getting access to equity and debt markets without any problems. The mood is more bullish, and investors are comfortable getting into stocks that they wouldn't have touched at the start of 2009.

I'm pretty excited about all the companies that I've tipped this year, as well as the commodity story behind each one. But right now the silver market is going through some big changes which should drive the price much higher. Our first silver tip is up around 90%, and I have just tipped a second one for Diggers and Drillers readers.

The silver price took nine long months to crawl from $18 to $20. It then jumped by 50% to hit $30 in just three months.

It now looks like it will finish up by about 70% for the year, leaving other commodities for dead. This is not normal! If you haven't been keeping up with silver lately, a lot has been happening. There is a huge move in silver which could continue into 2011. What's behind it?

Compared to gold, the silver price had been pretty flat for a year. Then a good old-fashioned scandal got things moving. A few months ago, Bart Chilton of the Commodity Futures and Trading Commission (CFTC) said he: "believes that there have been repeated attempts to influence prices in the silver markets"

JP Morgan and HSBC now potentially face class action lawsuits alleging that they forced silver prices down for their own benefit. Once Chilton blew the whistle, it was game-on. The silver price started playing catch-up without fear of getting crushed by the big players. The price may be jumping like a kid on red cordial, but I reckon it still has a long way to go yet.

But how further can silver go? Well, for the last few thousand years the gold price has been fifteen times more than the silver price on average. This wasn't by design, and was probably just because gold is fifteen times rarer than silver in the earth's crust.

This fifteen-to-one 'gold-to-silver price ratio' stayed true through history right up to start of the start twentieth Century. Then as Central Banks grew in power, silver was kicked off the podium and lost its importance. It soon became a shiny financial relic from a 'less educated' time.

So the relationship between the gold and silver price changed completely. So much so, that silver has been around seventy times less valuable than gold for the last few decades.

This belittles silver. It's like seeing an old mate queuing up at the soup kitchen. But all this is changing. Paper money's value was based purely on the bond of trust we have in Central Bankers. But this bond has been broken.

I believe that the market is now witnessing one of those once-in-investment-lifetime events.

A whole asset class is suddenly re-valued on a different basis. Precious metals functioned as money for thousands of years, and after forty years off-duty are returning to this role. They are 'remonetising'.

Silver is coming out of hibernation, and is now back on its feet and fighting. Money is pouring into the silver market, as investors rush to allocate funds into what little silver is still available.

So as the silver price races to catch up with gold, the gold-to-silver ratio is falling like a stone. Silver's price jump means it is now just fifty times less valuable than gold.

But the silver price would still have to triple to more than $90/ounce to get this ratio back to its historical average of fifteen to one.

Is this really possible?

Because, as you should know from our financial advice disclaimer, 'previous performance does not guarantee future returns'. Mullets were cool once upon a time. Just because something happened in the past, it doesn't mean it will come to pass again....

But if you take a quick look at the silver market today, it's coiled like a spring waiting to pop.

There are only 1.2 billion ounces of silver bullion in the global 'stockpile'. At $30 an ounce, there are only $33 billion worth of silver available. I'll put that in context.

The value of the entire global silver stockpile is less than Woodside Petroleum's market cap.

Considering how many buyers there are worldwide, this is tiny!

Silver is being bought by the ute-load with each paragraph you read. Coin sales have gone through the roof. The US Mint, Canadian Mint and Perth Mint are all setting new record silver sales each month. I'd say our own Perth mint is doing well pretty well. This urgency of the demand means that a one kilo silver bar is now going for a 10.6% premium to the spot-price of $945.

But the real game-changer is the money going into Exchange Traded Funds (ETFs). Incredibly these hold about 60% of the world's silver stockpile already.

There's really not much silver out there left to buy, and the ETFs are quickly buying what's left. They snapped up another 1.5% of the global stockpile in November alone.

It would take less than two years to mop up the rest at that rate.

Silver also an unusual supply problem, which keeps things tight. Eighty percent of silver supply comes as a by-product from mining companies producing other metals. Silver is not their main concern, or source of revenue. When demand increases, these producers don't give a monkey's.

It won't increase the silver supply.

Huge investment demand pouring into a tiny market?
Only two years left of spare silver?
Mine supply that doesn't give a rat's?
These fundamentals will only push the price one way in the long term! Up.

But more than any of this, what is driving the price up is that it silver has just had the brakes taken off, and it can now get back to turning into money.

It is getting back onto its podium and is 'remonetising' once again.

The silver price may yet pull back briefly after such a big run, but even after a 68% rise, it still looks cheap!

It may have had a big 2010, but my money's on it this continuing next year.

Silver? It's the new gold.