While the fundamentals for silver continue to get better and better, prices remain within a wide trading range and are likely to continue consolidating for some time to come before making an upward move.
This is the view of Resource-Investor.com founder, David Morgan, who told Mineweb.com’s Metals Weekly podcast that the world is currently facing a liquidity squeeze which is forcing investors into cash.
According to Morgan, silver performs very well in an inflationary environment, and even better under a hyper-inflationary one but, while there has been a massive amount of money pumped into the global financial system of late, currently prices are fairly muted.
” Now silver and gold are the ultimate cash but that’s only known by probably 1% of the world’s population. The other 99% of the world’s population looks at pieces of paper with presidents’ pictures on them [as] the ultimate liquidity.”
As a result of this he says, “there’s a rush from any asset – real estate, stocks, bonds, even metals, and especially paper metals, into the monetary base or the ultimate monetary base which is the currency.”
And, he says that is currently putting upward pressure on currencies like the US dollar which are perceived to be the safest and, downward pressure on gold and silver.
At the same time as the liquidity squeeze, global markets are also experiencing a freeze up in the credit markets because, for the most part, those that are considered “safe bets” don’t want to borrow money and, few other loans are being made
So, Morgan says, “the metals are fundamentally getting stronger, and yet there’s fear in the market – there’s a rush to cash – and the metals are going to take, I think, more time before they start to move upward in paper prices over the longer term.
Looking into 2012, Morgan expects some increase in prices but, ” not nearly the seasonality that we usually expect.”