Many investors see silver as a cheaper ‘safe haven’ than gold right now. Silver looks set to target $40/oz and in the longer term, many investors see gains above the record highs of nearly $50/oz.

Importantly, backwardation continues with spot silver for immediate delivery is at $37.80/oz while futures set to expire in December 2013 (Dec13) are trading at $37.00/oz. The continuing backwardation suggests tightness in the small physical silver bullion market continues and there is the increasing possibility of a short squeeze of banks holding concentrated silver short positions.

The eurozone debt crisis shows signs of entering a new phase with Portuguese and Irish debt under significant pressure again today. There are real concerns about both countries defaulting and this has seen the euro fall from  €1,000/oz to €1,016/oz against gold since Tuesday. 

Gold in euro terms has seen a period of significant consolidation since June last year. Prices remain below the levels seen at the height of the crisis in July last year (€1,040/oz). This consolidation may be on the verge of leading to a break out above the record high of €1,072/oz with €1,100/oz than becoming psychological resistance.

The gold silver ratio has broken support and looks set to fall lower. Given the small size of the physical bullion market and increasing physical demand, the ratio is likely to revert to below the mean seen in the 1970’s which was at 30:1. Indeed the 1980 low of the gold silver ratio was 17:1 (850/50) and long term silver should revert and exceed this ratio as silver remains cheap versus gold.

NEWS
(Bloomberg) -- Gold Nears Record on Libya, Debt Concern; Silver at 31-Year High
Gold fluctuated near a record in New York as fighting in Libya and concern about Europe’s debt crisis spurred demand for an alternative investment. Silver climbed to a 31-year high.

U.S. and allied warplanes carried out further strikes against Muammar Qaddafi’s ground forces as Libyan government forces increased their attacks on cities. Portuguese Prime Minister Jose Socrates tendered his resignation, pushing the country closer to an international bailout. Engineers at Japan’s damaged Fukushima Dai-Ichi nuclear plant were evacuated from one reactor after three men suffered radiation burns.

“Gold and silver are justifying their reputation as safe havens,” Carsten Fritsch, an analyst at Commerzbank AG (CBK) in Frankfurt, said in a report. “In addition to the war in Libya, the unrest in the Arab region and the disaster in Japan, the debt crisis in euro zone periphery countries has also returned with a vengeance. Gold and silver are likely to profit further.”

Gold futures for April delivery rose $1.30, or 0.1 percent, to $1,439.30 an ounce at 7:57 a.m. on the Comex in New York. Prices swung between a gain of 0.3 percent and a drop of 0.1 percent and reached a record $1,445.70 on March 7. The metal for immediate delivery in London was up 0.1 percent at $1,439.18.

Bullion rose to $1,441.25 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,439.50 at yesterday’s afternoon fixing.

The international coalition is “pressurizing Qaddafi’s forces” by targeting government tanks, artillery, supply lines and communications points, said Rear Admiral Gerard Hueber of the U.S. Navy. Libyan government forces killed 16 people yesterday in Misrata in the west of the country and six in the nearby coastal town of Zentan, an opposition spokesman said.

Radiation Leaks

Tokyo authorities began handing out bottled water to families after radioactive iodine levels measured two days ago at a treatment facility were double the recommended limit for infants. Restoring power to the Fukushima Dai-Ichi plant is key to restarting cooling pumps and preventing further radiation leaks sparked by the March 11 earthquake and tsunami.

Portugal’s Socrates tendered his resignation after plans to cut the budget were rejected by parliament. Moody’s Investors Service cut the ratings of 30 Spanish banks by at least one step after Spain’s downgrade to Aa2, it said today.

Gold will rise to $5,000 an ounce in the next three to four years as governments across the globe fuel money supply and raise the prospect of currency debasement, Robert McEwen, chief executive officer of U.S. Gold Corp., told Bloomberg Television.

Financial Uncertainty

Gold is in for a “big cycle,” McEwen said. Portugal’s debt problems and the possible bailout by the European Union “means more uncertainties for financial markets and is positive for gold prices,” he said.

Silver for May delivery in New York traded at $37.75 an ounce after rising as much as 1.8 percent to $37.88, the highest level since February 1980. Futures that year reached a record $50.35.

Silver’s gain is due to “continuing strong industrial and investment demand and tight supply,” analysts at GoldCore Ltd. in Dublin said in an e-mail. “Many investors are seeing silver as a cheaper safe haven substitute than gold. Silver looks set to target $40 an ounce and in the longer term, many investors see the record highs as a very viable price target.”

Palladium for June delivery was up 0.4 percent at $752.50 an ounce. Platinum for July delivery was little changed at $1,763.20 an ounce.

(WSJ) -- Silver Reaches 31-Year High as Gold Inches Up
LONDON—Spot gold traded just below its all-time best in Europe as fears over the continent's problems with sovereign debt fueled demand for the metal, often seen as a safe asset in times of uncertainty.

Wednesday, Portugal's Parliament rejected proposed austerity measures, raising speculation the country will be forced into accepting a bailout from the European Union and the International Monetary Fund.

Spot silver performed strongly again, trading at a fresh 31-year high and moving closer to $40 a troy ounce.

"Silver is investors' clear choice at the moment, not least because of its relative cheapness and hopes for increased industrial use in the future," said Andrey Kryuchenkov, an analyst at VTB Capital.

In mid morning, spot silver traded at $37.613 an ounce, up 0.7% on the day. Spot gold was 0.1% higher at $1,439.48 per ounce, only a few dollars below its Mar. 7 record of $1,445.05 per ounce.

Mr. Kryuchenkov said that for gold, he expects the market to consolidate below $1,450 per ounce, unless macroeconomic or geopolitical surprises drive it higher.

Technical analysis firm FuturesTechs said it remains cautious regarding the volatile silver trade.

"We have been concerned about the sustainability of this latest push higher of late, and we still have these concerns," it said in a daily report.

In the platinum-group metals, the market was mostly flat. Spot platinum was 0.2% higher at $1,754 per ounce and spot palladium was 0.1% higher at $746 an ounce.

UK Chancellor Speech Regarding Foreign Exchange Reserves and Gold
The House will also know that last week I authorised for the UK to take part in a co-ordinated G7 currency intervention in support of the Japanese yen. Our hearts go out to the Japanese people – and this is one way we can help. It is still too early to say what lasting impacts the earthquake and tsunami will have on the world economy.

But this is an opportunity for me to report that we had already decided to rebuild the UK’s foreign currency reserves, which are at a historically low level. We will purchase a range of high-quality assets – though unfortunately, with the price of gold now at record highs, we will not be able to replenish the gold reserves sold at record lows.

(Editors Note: Gold is at record NOMINAL highs - the record real high (adjusted for inflation) as the good Chancellor Osborne should know is over $2,300/oz.

http://www.goldcore.com/

-- Posted Thursday, 24 March 2011 | Digg This Article