Silver expert David Morgan, of the Morgan Report, discusses his silver outlook for 2010.
(audio interview follows excerpts and commentary)
I believe we’re going to get a big pull-back, which we’re witnessing as we speak. And then I think it will level off and build at some point. I think we’re actually going to see a big run up into the first quarter of 2010.
I’m looking for gold to be in the $1300 level, probably $100 at least over where it finished so far this year. And silver we’re looking for the $25 level to breached in 2010. Twenty five is my key number. Twenty five is the number that, based on my work, is the profit zone, meaning that once silver hits $25 against the US Dollar everybody that’s owned silver holds it at a profit.
I won’t speculate too much here on the actual price targets or timing, because Mr. Morgan is the expert and we’ll leave that work for him, though $25 and higher does sound reasonable considering the state of the economy and the events (commercial real estate crash, dollar devaluation, residential resets, more unemployment) that may play out in 2010.
In my view silver and gold remain closely tied to the dollar, and any strong rebound in the dollar can easily lead to a significant correction in the price of not only precious metals, but broader commodities and global stock markets. I’ve said in the past that the long-term trend for precious metals is up, and I still hold to that forecast, but short-term moves could be deadly for “traders.” If you are an investor with wealth preservation in mind and a longer holding time frame, than you should do just fine, no matter how violent a move is in either direction.
If we see the Christmas Crash that Gerald Celente and others have talked about, then you can expect at least an initial decline in precious metals as global investors, traders, hedge funds and even governments offload assets and move back into the safety of short-term US treasuries (at 0% interest or lower!). The Christmas Crash, if it were to occur, should start some time in late January and February, so Mr. Morgan’s call of a run-up into mid-February makes sense in this context. Once the “crash” starts, PM’s should fall right along with other assets (unless the crash is initiated by a terror attack or military strike in the mid east).
There will be a floor, though. As mentioned, I’ll leave the technicals of that to the experts like Mr. Morgan and Dr. Faber. Marc Faber has suggested that any break under $1000 could lead to very rapid technical selling, potentially driving the price of gold, and subsequently silver, back to the $800 – $900 range. At some point, whether it is $900 or $1000 (or higher), the buying should resume.
Gold and silver are assets that are accumulated by savvy investors during times of economic distress and uncertainty. It can be argued that we are living in this type of an environment. If this is the case, then gold and silver should continue to see an upward trajectory as confidence in the public sector’s (government) ability to mitigate the crisis deteriorates.
My personal strategy is to utilize free capital to continue to move in to precious metals assets on a monthly basis, regardless of the price. Please note that this is not investment advice, so please do your own due dilligence before buying any precious metals assets, be they bullion, stocks, ETFs or government issued coins.