-- Posted Friday, 12 June 2009 | | Source: GoldSeek.com
By R. D. Bradshaw
While many people following the precious metals markets have known for ages that there is a unique correlation between the price moves of gold vis-à-vis silver, not many persons are aware that such a linkage could change. It seems like as one of them goes up or down, the other quickly follows suit. The purpose of this Goldsmiths is not to review history and show the parallel moves since almost all of us are already aware of this phenomenon and need no proof or encouragement to accept that thesis.
Instead of looking at the past on this question, this goldsmiths will look at the future and offer some ideas on why this historic relationship may begin to somewhat unravel in the coming days. Already, there are a number of analysts, investors and procrastinators who have allowed a decoupling between the two metals but in the context that silver will do much better than gold since it is in critical short supply and must go up in price.
But the disconnection being addressed in this Goldsmiths is in the other direction. I would just suggest that instead of silver breaking out and decoupling from gold that there is a far greater chance that it will be gold which disconnects from silver and starts a huge rise on its on which will not be followed equally well by silver. I will now present the case for this decoupling in the next several months.
The Backdrop on Silver
Of course, most of us perfectly well know the history of silver in America where it enjoyed a monetary status almost equal to gold, at least in the post Civil War days up to the 1960s when the once common US currency known as silver certificates began to be phased out. For ages, silver coins and silver certificates were the backbone of the US economy. Silver survived as a monetary metal far beyond the moves of the clever, conniving Franklin Rosenfeldt/Roosevelt who confiscated gold from the Americans and ended its monetary role in the 1930s.
Despite this excellent history of silver and its survival attributes far beyond gold, there was a coming day when silver would slowly began to be removed from the American money system. It happened under Lyndon Baines Johnson in c1965. At that point, there was some developing evidence to suggest that silver had little or no future except for silverware cooking/eating utensils and jewelry.
But there was another development on the scene which completely changed the outlook for silver. By the time of the Johnson phase out of silver in the US money system, there was a growing industrial demand for silver in all kinds of manufactured products. This industrial demand soon began grabbing up the US stockpile and output of silver.
Obviously, with the increasing new industrial uses of silver, silver prices began going up. And for the last several years we have heard the numerous reports of silver shortages and the need for silver prices to explode up. As I had invested some money in silver over the years, I too was anxious to see silver prices explode on the upside—primarily because of the huge demand for silver in its industrial capacity.
But there are now developing reasons why this optimistic outlook for silver could enter a downturn, instead of an acceleration up, and why the historical linkage between silver and gold may slowly drift apart as gold will do far better proportionally in the future than silver. And this is not to say that silver won’t do well. It will do well. But it is to suggest that gold will do better proportionately. Here’s my case for this turn of events.
The impact of Depression and a Collapsing World Economy.
The United States is now in a depression/serious recession along with much of the rest of the world. This economic downturn will not change for the immediate future despite the optimistic forecasts being made by Bernanke and the Fed in conjunction with the politicians. Things will get worse and not better in the coming days. The reason for this future has been explained in prior Goldsmiths.
Perhaps the biggest reason is that the Rothschild Cabal banks are still holding vast sums of toxic assets—perhaps to the tune of $100 trillion. While they have deferred any new bail out sums for a few days, they are quietly waiting until they can strike again and further transfer taxpayer monies to their banks once the rebellion and anger in America simmers down. The Cabal players have not abandoned their plans of stealing the last vestiges of American wealth and transferring it to their big banks. All that they have done is to slow the process down temporarily.
Amerce is so far in debt and confidence and hope of the American people have been dealt such a horrific blow that the future is in peril as I write these words. While the big banks are socking the bail out funds away into US treasuries and dollar savings accounts at the Fed, they are certainly in no mood to start lending out their funds. So all the hype about the banks resuming lending is a bunch of nonsense. It will be no way Jose/Hose!
The depression/recession can only get worse—not only here but around the world. In such a dismal economic situation, manufacturing will plummet even further. Actually, American manufacturing was on the way out before the latest trouble. But the present slowdown can only make it worse. While China and parts of Asia will fare better than the US, even those nations will face serious cut backs.
The point is that the industrial demand for silver is going to go down fast. Actually, we probably are already facing such a pull back. And all the talk and hope about a recovery is simply deception. It won’t happen. Instead what will happen are more curtailments in manufacturing which must translate to some impact on the future for silver.
The Contrary Position for Gold
Despite the falling demand for silver in the near term future, gold is in a much better position—not because it has any future as an industrial metal (although there has historically been some such usages for gold); but rather gold is still in demand as a monetary reserve in many nations of the world. True the Cabal has walked a mile to demonetize gold. But they have so far failed.
Even all of the pap about the Special Drawing Rights has not reduced the role of gold as a national monetary reserve (although there may be resurfacing of this argument from time to time to drive gold prices down; but if so, it should be temporary and not permanent). For sure, Russia, China and many Middle Eastern states still want to hold gold in their national reserves.
It has only been the idiots in the US, Britain and a few other countries which have been anxious to get rid of gold in their monetary reserves. Even now, the US claims to be holding a large amount of gold in its reserves at Fort Knox (some of which may now belong to certain foreign states which now want their gold back). Frankly, I think the US data on gold holdings is all lies as I have written to describe the situation in the Goldsmiths, part XVII.
Can we foresee what will happen to the price of gold when the world finds out that the US has lied and deceived almost everyone about the status of its gold supply? And all the while the idiots in Washington are getting rid of US gold (as the idiot Brown and his colleagues did in Britain years ago); the Chinese, Russians and Middle Easterners are acquiring and holding gold in their reserves. When this paradox finally sinks in on the public, can you see where the price of gold will go?
I think it is useless to talk about $1,500 or $2,000 an ounce for gold (except in the short term) because gold is going into the sky when reality returns to the understanding of the public. I have said before we could easily be talking about gold at $5,000 an ounce or more; not at $1,000 an ounce. There is only one drawback to the long term future for gold. It is the fact that our loving, thoughtful politicians will confiscate it from the American people just as FDR did back in the 1930s. That’s why thinking people have to be thinking about how they can own some gold and get it to a safe haven.
The Bottom Line
I’m sorry to say that it is probably about time for some divergence between the price lines of gold and silver. While silver should be in an upturn channel in the coming days, it will fall behind the rise in gold which will eventually take off like a rocket.
Gold is now and will continue to be desired as a monetary reserve by more and more countries. For sure, Russia and China are showing that they want more gold. Silver simply does not enjoy this demand. True, we have heard stories of silver shortages for days and days. But the problem here is primarily due to industrial uses and not monetary uses. With the world in an economic slow down, the industrial demands for silver will decline.
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-- Posted Friday, 12 June 2009 | Digg This Article
| Source: GoldSeek.com
