Silver needs gold's coat tails to rise further
According to David Morgan, while silver prices are likely to move higher over the rest of 2012, a move up in gold will be needed as a catalyst.
Posted: Tuesday , 31 Jul 2012
GRONINGEN (MINEWEB) -
The bottom for silver prices looks to have been reached recently says, David Morgan, but, in order for prices to start moving upwards, gold is going to have to lead the way.
Speaking to Mineweb.com's Metals Weekly podcast, the author of The Morgan Report and a silver specialist, Morgan explained that the current consolidation phase is likely to continue for a while longer but added, "the sentiment right now is for safe haven status and gold holds a much higher place in investors mind than silver does, so to get silver moving again I think gold is going to have to lead us up out of this basic pattern in a rather significant way and I think then silver will probably follow it up."
While he admits this is not always the case, Morgan told Mineweb this time around silver is going to need to move significantly before new investment money comes into silver.
Much of the reason for this, Morgan says is that although close on 5,000 years of history has proven gold and silver's ‘ultimate currency' status "probably 99% of the population doesn't even consider gold or silver to be an investment and so everything is settled in some kind of currency which is US dollars primarily... the fact is that the dollar is a settlement vehicle that is used throughout all commerce and because of that it's going to continue to have some merit for who knows how long."
But, he adds, when investors experience lulls like the one that the gold market has been going through for about a year, some buys begin to question their convictions and "once that takes place you then you have to have new buying come into the market.
For Morgan, that buying is likely to come in before year-end because, "the more the dollar depreciates, and it will, the more it will wake people up to go into something that's working well against it and that would be the metals markets."
This, he believes will be beneficial for silver prices, especially because the silver market seems to have more of a safe haven status than it did a few years ago, he says.
"More and more people are waking up to the fact that silver has every quality that gold has only it sells for a much cheaper price. As people get squeezed more and more but still want to protect what they have left, the tendency is in the latter stages of a major bull market, like we are experiencing, more and more money moves into the silver market rather than the gold market because gold is so expensive that most people by-pass it even though they might prefer to own gold."